Seth Bergey

Seth Bergey questioned if the Quixote impairment is a final true-up or if there's a risk of further write-downs, and what led to the shift in break-even expectations from Q1 2026 to year-end. He also asked if 95 show counts remains the key performance indicator for break-even and about CapEx expectations for this year and next, given the anticipated leasing pickup.

Answer

CEO Victor Coleman clarified that the company never stated Q1 2026 for break-even, always targeting year-end 2026, and that the guidance is conservative on show counts. He noted that goodwill has been effectively taken to zero, and the company will evaluate the business's status in 6-12 months, confident it will be at worst flat by year-end. President Mark Lamas suggested a quarterly CapEx run rate of approximately $31 million for TILC and recurring expenses in 2026, acknowledging it can be lumpy.

Seth Bergey asked if the Quixote impairment is a final true-up or if there's a risk of additional impairment if utilization and show counts fall below expectations. He also inquired about the shift in the break-even timeline from 1Q 2026 to year-end and if 95 show counts is still the KPI for break-even. Additionally, he asked about CapEx expectations for this year and next year given the leasing momentum.

Answer

Victor Coleman, CEO and Chairman, clarified that the company never stated 1Q 2026 for break-even, always aiming for year-end 2026, and nothing has changed. He noted that goodwill has effectively been taken to zero, and while not ruling out further write-downs, they will evaluate the business's status in 6-12 months, confident it will be at worst flat by year-end. Mark Lamas, President, suggested a quarterly CapEx run rate of roughly $31 million for TILC and recurring expenses for 2026, acknowledging it can be lumpy.

Seth Bergey of Citi asked for the key variables that would drive results to the high or low end of the third-quarter FFO guidance and whether any of the later-stage leasing pipeline was for the Washington 1000 development.

Answer

CFO Harout Djerimariam identified the performance of the studio business as the biggest variable for Q3 guidance, with higher activity pushing results toward the high end. EVP of Leasing, Arthur Suazo, clarified that while the later-stage pipeline is healthy at nearly 600,000 square feet, none of it is currently for Washington 1000, though the asset is seeing increased tour activity.

Seth Bergey asked for more color on Cushman & Wakefield's exposure to the office sector, particularly given its perceived vulnerability to AI disruption, and later questioned how AI might change headcount needs across the organization.

Answer

CFO Neil Johnston detailed office exposure as roughly 55% of leasing and 21% of capital markets, over 40% overall. CEO Michelle MacKay clarified they primarily avoid Class B office space, which is most impacted, and noted that increasing delinquencies could be a net positive by driving more transactions. Regarding headcount, MacKay views AI as a tool to empower employees and build the platform without massive white-collar job reductions, creating operating leverage.

Seth Bergey from Citi inquired about the mindset of clients regarding their leasing and transaction decisions, particularly how they are factoring in macro uncertainties like tariffs and potential Fed rate cuts.

Answer

CEO Michelle MacKay explained that business leaders are continuing to make long-term strategic decisions despite the macro noise. She emphasized that strong pipelines for the second half of the year indicate that clients are making decisions 'through the noise' and that tariffs, while disruptive, have not yet caused a material disruption in activity.

Seth Bergey from Citigroup asked about the anticipated impact of AI on office demand and requested a quantification of office exposure within JLL's overall business. He also inquired whether AI-driven efficiencies would affect headcount needs or put pressure on top-line advisory fees.

Answer

President and CEO Christian Ulbrich stated that office markets are currently strong, with demand boosted by return-to-office mandates and a 'flight to quality,' and he does not foresee AI significantly impacting JLL's focus on prime office assets. CFO Kelly Howe clarified that approximately 40% of JLL's consolidated portfolio is exposed to office, including 60% of leasing and 50% of project management. Ulbrich also explained that AI has enabled robust top-line growth in 2024-2025 without significant headcount increases, a trend expected to continue, and that no AI-related pressure on advisory fees has been observed, with Kelly adding that AI enhances producer productivity for transactional growth.

Seth Bergey asked about the anticipated impact of AI on office demand and the proportion of office exposure within JLL's overall business. He also questioned how AI-driven efficiencies might affect headcount and potentially pressure top-line fees.

Answer

Christian Ulbrich, President and CEO, noted office demand is recovering, with AI currently boosting demand in key markets and expected to primarily impact lower-grade buildings. Karen Brennan, CFO, quantified JLL's consolidated portfolio exposure to office at approximately 40%. Christian Ulbrich stated JLL achieved robust top-line growth in 2024 and 2025 without significant headcount additions due to AI, expecting this trend to continue, and has not observed AI-driven pressure on advisory fees.

Seth Bergey asked about the impact of AI on JLL's current and future headcount needs across the business, and sought clarification on the growth expectations for the Real Estate Management Services (REMS) segment, specifically distinguishing between Work Dynamics and overall REMS.

Answer

Christian Ulbrich (CEO) explained that overall headcount continues to grow, driven by on-site colleagues and shared service centers, while front office headcount is more stable due to technology-driven productivity gains. He clarified that the high-single-digit/low-double-digit growth expectation was for Work Dynamics, and with the Property Management restructuring, overall REMS growth is now trending towards high-single-digits, impacting the rate by 1-1.5%. Kelly Howe (CFO) reiterated that intentional contract churn is specific to Property Management, not Project Management.

Seth Bergey asked how AI changes JLL's current and future headcount needs across the business. He also sought clarification on the Real Estate Management Services (REMS) growth, specifically if the high single-digit/low double-digit revenue growth expectation, and the impact of Asia Pacific contract churn, applied to project management revenue or the overall REMS business.

Answer

CEO Christian Ulbrich explained that overall headcount is still growing, driven by on-site colleagues and shared service centers, while front office headcount development is more flattish due to technology-driven productivity gains. Regarding REMS growth, Ulbrich clarified that the high single-digit/low double-digit growth historically referred to the work dynamics business, and with property management now in the REM segment, the overall growth is closer to high single digits. He noted that property management's restructuring impacts overall growth by about 1-1.5% but is expected to recover in the second half of next year and not be dilutive long-term. CFO Kelly Howe clarified that the intentional contract churn is in the property management business, not project management.

Seth Bergey of Citigroup Inc. followed up on M&A, asking if more opportunities are emerging with improving macro clarity, and also inquired about how clients are underwriting the current environment of 'cautious optimism' and potential macro risks.

Answer

CEO Christian Ulbrich responded that while M&A opportunities exist, the risk-return profile of investing in JLL's own platform remains superior to acquisitions. Regarding client sentiment, he noted a growing acceptance among business leaders that global disruption is a constant, leading them to focus on their own business execution. This has resulted in a good trading environment as clients move forward despite the macro 'noise'.

Seth Bergey asked for a breakdown of the $240 million in awarded transactions between skilled nursing and SHOP. He also inquired about how the investment landscape, competition, and Sabra's return requirements are evolving, particularly with more REITs entering the SHOP space.

Answer

CIO Talya Nevo-Hacohen clarified that the $240 million in awarded transactions is significantly weighted towards SHOP, with only $20 million for skilled nursing. She acknowledged increased competition but stated Sabra continues to find high-quality, newer vintage assets at good yields. CEO Richard K. Matros confirmed that Sabra's IRR return expectations remain unchanged at low double-digits.

Seth Bergey asked about the breakdown of the $240 million in awarded transactions between skilled nursing and SHOP. He also inquired about changes in the investment landscape, including whether Sabra's return requirements are evolving and how the acquisition pipeline is changing with increased REIT involvement in the SHOP space.

Answer

Talya Nevo-Hacohen (EVP, Chief Investment Officer, and Treasurer, Sabra Health Care REIT) stated that the $240 million is significantly weighted towards SHOP, with only $20 million for skilled nursing. She noted increased competition and cap rate compression but affirmed Sabra's ability to find high-quality, newer vintage assets at good yields. Richard K. Matros (CEO, President and Chair, Sabra Health Care REIT) confirmed that Sabra's IRR return expectations remain in the low double-digits.

Seth Bergey of Citi asked about Sabra's selection criteria for new operators and for an update on the competitive landscape for SHOP asset acquisitions, referencing a prior comment about a smaller pool of buyers.

Answer

CEO Rick Matros explained that the selection process involves extensive due diligence on an operator's processes, market choices, and quality outcomes, with a focus on finding partners eager to grow. CIO Talya Nevo-Hacohen stated that the buyer pool has changed very little over the past year, consisting mainly of REITs and private capital, with consistent players remaining active.

Seth Bergey of Citigroup Inc. asked about Sabra's selection criteria for new operators and how the buyer pool for SHOP assets has evolved with the improved sector outlook.

Answer

CEO Rick Matros explained their criteria involves a deep dive into an operator's methods, market choices, and quality outcomes, with a key focus on finding partners that want to actively grow. CIO Talya Nevo-Hacohen stated that the buyer pool has changed very little, still consisting mainly of REITs and private capital, with consistent players like Harrison Street remaining active.

Seth Bergey of Citi asked about Sabra's selection criteria for new operators and how the buyer pool for senior housing assets has evolved with the improving sector outlook.

Answer

CEO Rick Matros explained their criteria involves a deep dive into an operator's processes, market selection, and quality outcomes, with a preference for operators that want to actively grow. CIO Talya Nevo-Hacohen stated that the buyer pool has changed very little, consisting mainly of REITs and private capital, with consistent players like Harrison Street remaining active.

Seth Bergey of Citigroup asked if there have been any changes to Sabra's underwriting criteria or return expectations for its pipeline given the improving SHOP outlook and potential for more competition. He also asked for an update on the operator watch list.

Answer

EVP Talya Nevo-Hacohen stated that underwriting has not changed, remaining focused on cost of capital and accretive deals. She noted the buyer pool has actually shrunk and Sabra is being selective, prioritizing strategic relationships and future opportunities. EVP Lukas Hartwich gave a concise response that there were no changes to the operator watch list.

Seth Bergey asked about CBRE's headcount needs, balancing the accelerating advisory services business with long-term AI efficiency gains. He also inquired about the factors driving the top and low ends of the 2026 guidance range.

Answer

Bob Sulentic (Chair and CEO) clarified that CBRE is adding, not reducing, broker headcount, especially in Americas leasing, leveraging AI for more effective data delivery to support recruitment and retention. AI-driven savings are in research and data costs, not broker headcount. Emma Giamartino (CFO) explained that the 2026 guidance range is primarily driven by the timing of data center land site monetization, which depends on securing power, with the high end assuming most of the pipeline converts and the low end assuming minimal conversion.

Seth Bergey asked about CBRE's headcount needs, balancing the accelerating advisory services business with potential efficiency gains from AI over the longer term. He also inquired about the specific factors that would lead to the top end versus the low end of the 2026 guidance range.

Answer

Bob Sulentic, Chair and CEO, clarified that CBRE is adding, not reducing, broker headcount, as talent drives the advisory business. AI efficiencies are focused on areas like research, data costs, and data delivery to brokers. Emma Giamartino, CFO, stated that the 2026 guidance range is almost entirely driven by the timing of data center land site monetization, which is uncertain due to the long lead times required to secure power. The high end assumes nearly all pipeline conversions, while the low end assumes very few.

Seth Bergey asked about the data center development sites, specifically if they have access to power, and the challenges associated with power availability. He also sought details on office leasing activity, inquiring if it was broad-based or concentrated in specific gateway cities or office classes, and insights into current pipelines.

Answer

CEO Robert Sulentic confirmed that power access is a critical constraint for data center development, explaining that Trammell Crow Company's strategy involves acquiring, entitling, and improving land to position users for utility authority engagement. He described office leasing growth as broad-based, with a resurgence in gateway markets in Q3, and noted a 'return to the mean' post-COVID, emphasizing real estate's increased strategic importance to occupiers.

Seth Bergey asked about CBRE's data center development sites, specifically whether they have access to power, which is a known constraint. He also inquired about the nature of office leasing strength, asking if it's broad-based or concentrated in gateway cities, Class A properties, or if lower-class assets in secondary markets are driving growth.

Answer

CEO Robert Sulentic confirmed that power access is a significant constraint for data center development, explaining CBRE's strategy to acquire, entitle, and improve land to position users for utility access. Regarding office leasing, Mr. Sulentic noted broad-based growth with a resurgence in gateway markets (New York, San Francisco) in Q3 2025, and a trend of Class A buildings filling up, conversion of lesser quality buildings, and new development emerging, indicating a "return to the mean" and real estate becoming a more strategic asset.

Seth Bergey from Citigroup Inc. inquired about client behavior in capital markets regarding interest rates and tariffs, and asked if the raised outlook would lead to changes in hiring plans.

Answer

President, CEO, and Chairman Robert Sulentic responded that clients are not waiting for rate cuts and are 'powering through' the current environment. He also stated there are no major changes to hiring plans, though he noted that technology is creating efficiencies that may moderate future headcount growth relative to revenue growth.

Seth Bergey asked about the size, scope, and funding needs for Douglas Emmett's additional residential development sites, and also inquired about any changes in the mix of new versus renewal leases in the pipeline and broader tenant behavior.

Answer

Jordan Kaplan (President and CEO) described the new residential projects as ranging from 250-500 units, with early stages typically funded internally and potential for partners during construction, expecting high yields (at least an 8% cap rate, excluding land cost). Stuart McElhinney (VP of Investor Relations) clarified that the pipeline primarily refers to new leasing, with renewals consistently around 70%, and noted that expansions have outpaced contractions in recent quarters.

Seth Bergey asked for more information on the size and scope of the newly mentioned additional residential development sites and their funding strategy, and sought insights into any changes in the mix of new versus renewal leases in the pipeline or shifts in tenant behavior across industry groups.

Answer

President and CEO Jordan Kaplan described the new residential projects as ranging from 250-500 units each, with early stages typically self-funded. He noted that bringing in partners for construction funding is straightforward due to the high-yielding nature of these deals. VP of Investor Relations Stuart McElhinney clarified that the pipeline primarily refers to new leasing, with renewals consistently around 70%. He also observed that expansions have generally outpaced contractions in recent quarters.

Seth Bergey of Citigroup asked how leasing rates at Studio Plaza compare to initial underwriting and the typical build-out time before revenue recognition. He also inquired about the impact of California's entertainment tax credits on tenant demand.

Answer

VP of IR Stuart McElhinney confirmed that rental rates at Studio Plaza are in line with expectations, with revenue timing dependent on tenant size. CEO Jordan Kaplan added that they have little visibility into the direct impact of film tax credits, as their portfolio primarily serves administrative and support functions for the entertainment industry, whose presence in LA is stable.

Seth Bergey inquired about the company's preference for future acquisitions, asking whether they would be pursued with JV partners or fully owned, and whether the focus is on multifamily or office properties.

Answer

CIO Kevin Crummy stated the current opportunity is 'definitely on the office side,' where pricing has corrected more than in the residential market. He mentioned that their recent acquisition has attracted significant interest from partners, and the strategy is to find high-quality office buildings where their operating platform can add value.

Seth Bergey asked about the expected timeline for realizing the elevated long-term growth rate from capital recycling, specifically whether it's a 2027 story or further beyond, in the context of the 2026 guidance. He also inquired about the demand for the remaining leasing on the development pipeline, given the 78% pre-lease number.

Answer

Brendan Maiorana, EVP and CFO, explained that the $0.09 one-time impact in 2026 from recycling goes away in 2027, and nothing since October should affect the 2027 outlook, with asset recycling being neutral to modestly accretive. Ted Klinck, CEO, noted continued good demand for the development pipeline, with progress from 56% a year ago to 78% currently. He highlighted strong prospects for Glenlake III and Midtown East to reach mid-90s% occupancy, while Granite Park VI is expected to be a slower lease-up with smaller prospects.

Seth Bergey asked about the expected timeline for realizing the elevated growth rate from capital recycling and the current demand for leasing the remaining development pipeline.

Answer

Brendan Maiorana, EVP and CFO, clarified that the 2026 impact is one-time, with 2027 FFO expected to be neutral to modestly accretive. Ted Klinck, CEO, noted continued good demand for developments, with strong prospects for Glenlake III and Midtown East, and steady progress for Dallas projects.

Seth Bergey of Citi asked for an update on expectations for leasing concessions and tenant improvement (TI) allowances following the leasing activity in the quarter.

Answer

CEO Ted Klinck responded that leasing CapEx is leveling off after having peaked. He noted that while concessions vary by submarket, they have generally peaked, and with market rents rising, the outlook for net effective rents is positive.

Seth Bergey asked for an update on 350 Park Avenue, specifically quantifying Citadel's potential appetite for additional square footage beyond their initial commitment and inquiring about any other pre-leasing conversations for the building.

Answer

Steven Roth, Chairman and CEO, Vornado Realty Trust, stated that conversations with Citadel regarding their exact space requirements are ongoing and will be disclosed once firm. Glen Weiss, EVP, Vornado Realty Trust, highlighted excellent energy and excitement around the project's spec office space, with presentations to many tenants, including those expiring in 2031-2033, underscoring the market's recognition of 350 Park Avenue as a premier building.

Seth Bergey inquired about Citadel's potential appetite for additional square footage at 350 Park Avenue beyond their initial commitment and any other ongoing pre-leasing conversations for the building.

Answer

Steven Roth (Chairman and CEO) stated that Citadel's exact requirements are still being finalized. Glen Weiss (EVP) noted strong market excitement for the spec office space at 350 Park Avenue, with presentations being made to many tenants, including those seeking as little as 50,000 sq ft and tenants with expirations as far out as 2031-2033.

Seth Bergey asked about the split of the 1.1 million square foot leasing pipeline between Penn 2 and other properties, and where Penn 2's occupancy is expected to land by year-end. He also inquired about the permitting process for Madison Square Garden's relocation and potential additional opportunities for Vornado from the Penn Station transformation.

Answer

Glen Weiss, EVP, Vornado Realty Trust, clarified that the 80% occupancy goal is specific to Penn 2, and the leasing pipeline is generally split 50/50 between the Penn District and other properties. He reiterated that MSG relocation is unlikely and Vornado is a 'cheerleader' for Penn Station improvements, expecting Metro North service to begin in 2027.

Seth Bergey from Citi asked if Vornado could potentially exceed its 80% occupancy target for PENN2 by year-end, given the strong leasing momentum and pipeline.

Answer

Chairman and CEO Steven Roth stated he doubted they would exceed the target. Glen Weiss, EVP of Office Leasing, elaborated that the company is being patient and 'choosy' to secure the right tenant mix and credit profile for PENN2, prioritizing long-term value and pricing power over short-term leasing velocity.

Seth Bergey from Citigroup asked about COPT Defense Properties' 2026 tenant retention assumptions, specifically regarding the 20% of tenants not retained and whether the estimate is conservative.

Answer

Stephen E. Budorick, President and CEO, explained that non-renewals typically involve smaller tenants relocating due to space needs, often non-defense, or asset managers reconfiguring inventory for larger defense tenants. He emphasized the company's consistent 80% retention rate over the past decade.

Seth Bergey asked about the development pipeline, specifically if opportunities from the Golden Dome Initiative and new defense appropriations are starting to materialize, and also inquired about the leasing assumptions for tenant retention, particularly for the 20% not retained.

Answer

President and CEO Stephen E. Budorick and EVP and CFO Anthony Mifsud explained that Golden Dome opportunities are both trickling in (initial footprints) and still on the come (larger requirements), with efforts to fast-track contracting. Regarding tenant retention, President and CEO Stephen E. Budorick clarified that non-renewals typically involve smaller tenants seeking right-sized space, sometimes non-defense, or asset managers accommodating larger defense tenants, noting a consistent 80% retention rate over a decade.

Seth Bergey from Citigroup asked for clarification on how the 'One Big Beautiful Bill Act' would translate into leasing and investment opportunities, seeking historical context. He also inquired about the potential pricing for the planned $400 million bond issuance.

Answer

President & CEO Stephen Budorick highlighted that the bill would directly benefit programs like 'Golden Dome' at Redstone Gateway and increase the intelligence budget, driving demand. EVP & CFO Anthony Mifsud provided current market estimates for a bond issuance, quoting spreads of approximately 140 basis points over the 10-year Treasury and 115-120 basis points over the 5-year.

Seth Berkey asked about the hurdle for Brandywine Realty Trust to pull forward bond refinancings, given the potential $0.10 interest expense savings, and the allocation of the $125 million earmarked for debt reduction versus share repurchases.

Answer

Gerard H. Sweeney, President and CEO, explained that the primary focus is executing the sales program to improve credit metrics and reduce the overall cost of debt capital. He clarified that the $125 million is primarily for debt reduction, with share buybacks being an opportunistic consideration after achieving deleveraging objectives. Tom Wirth, Executive Vice President and CFO, added that the company does not have bond pull-forwards in its 2026 business plan.

Seth Berkey asked about the company's hurdle for refinancing bonds, specifically those with coupons north of 8%, and the allocation strategy for capital earmarked for debt reduction versus share repurchases.

Answer

Gerard H. Sweeney, President and CEO, explained that the primary focus is executing the sales program to generate liquidity and improve credit metrics, with no immediate plans to pull forward bond refinancing in 2026. He clarified that debt reduction is the top priority for asset sale proceeds, with share buyback optionality considered once other objectives are met.

Seth Bergey from Citi inquired about the detailed timing and process for Brandywine Realty Trust's development project recapitalizations.

Answer

President and CEO Jerry Sweeney provided a comprehensive roadmap for recapitalizations, explaining the strategic intent behind preferred structures and outlining specific plans for 3025, Solaris, 1UPTOWN, and 3151 JFK. He detailed the cost of capital, potential refinancing savings, and target timelines for each project, including the elimination of preferred charges for 3025 in 2026 and a target recap for Solaris in the first half of 2026.

Seth Bergey asked about the detailed timing and process for Brandywine Realty Trust's development project recapitalizations.

Answer

President and CEO Jerry Sweeney explained that preferred structures were bridge capital designed to preserve upside and would be paid out of capital events. He detailed the status and recapitalization plans for 3025 JFK, Solaris, 1UPTOWN, and 3151 JFK, outlining goals to bring NOI onto the P&L, recover capital, and pursue lower-cost financing or joint ventures. He provided specific timelines and financial impacts for each project.

Seth Bergey inquired about the appetite from capital providers for the recapitalization of Brandywine's development projects and asked about the long-term ownership strategy for the new hotel development.

Answer

President & CEO Gerard Sweeney stated that investor appetite for recapitalizations is strong, particularly from high-quality private investors. The goal is to harvest value, potentially sell some assets, or convert to pari passu JVs to return capital and reduce leverage. Regarding the hotel, Sweeney explained that while it was a challenging call, strong liquidity and an outstanding real estate opportunity justified the project. He added that Brandywine is open to bringing in partners, forming a joint venture, or executing an early sale upon stabilization to reduce capital exposure.

Seth Bergy asked about any early indications of demand for the 346 Madison Avenue development site, especially in the context of a peer's pre-leasing activity across the street.

Answer

Marc Holliday, Chairman and CEO, SL Green Realty Corp, mentioned the recent unveiling of the design and excitement for the project. Steve M. Durels, EVP and Director of Leasing and Real Property, SL Green Realty Corp, highlighted significant large tenant demand in the market, with 250 tenants tracked (26 million sq ft), including 32 tenants requiring over 250,000 sq ft and 37 tenants needing 100,000-250,000 sq ft. He noted a dearth of supply for high-quality, large block spaces, particularly in the best-of-the-best market segment with a 3.7% availability rate and no 100,000 sq ft blocks available.

Seth Bergey inquired about any early indications of demand for the 346 Madison Avenue development site, especially in light of a peer's pre-leasing activity for a nearby site.

Answer

Marc Holliday, Chairman and CEO, SL Green Realty Corp, and Steve M. Durels, EVP and Director of Leasing and Real Property, expressed excitement for the recently unveiled 346 Madison Avenue project. Steve Durels highlighted strong demand, with 250 tenants tracked (26 million sq ft total), including 32 tenants needing over 250,000 sq ft and 37 needing 100,000-250,000 sq ft, noting a 'dearth of supply' for high-quality, large block spaces in the best part of the market.

Seth Bergey inquired about SL Green's projected leasing activity for the remainder of the year, given the 1.9 million sq ft signed to date, and the overall portfolio's mark-to-market position.

Answer

Marc Holliday, Chairman and CEO, indicated that SL Green expects to vastly exceed 2 million sq ft of leases by year-end, potentially reaching 2.25-2.5 million sq ft, significantly ahead of original projections, with a 1 million sq ft pipeline. Steve M. Durels, EVP and Director of Leasing and Real Property, stated that a precise portfolio-wide mark-to-market calculation was not readily available, but noted that rents in active buildings across the portfolio have generally increased by 10%-20% over the last 10 months.

Seth Bergey from Citi asked about the company's confidence in exceeding its 2 million square foot annual leasing goal and how a potential rent freeze would affect the underwriting for office-to-residential conversions.

Answer

EVP Steven Durels expressed high confidence in meeting and likely exceeding the leasing goal, citing the strong pipeline. Chairman & CEO Marc Holliday clarified that any proposed rent freeze would apply to rent-stabilized units, not SLG's assets, and would have a 'negligible to none' impact on their business or conversion plans.

Seth Bergey inquired about leasing activity for the remainder of One Madison and demand in Midtown South. He also asked for details on the Summit observation deck's visitor demographics.

Answer

Executive Steven Durels reported a 'marked change' in activity at One Madison, with more qualified large prospects touring recently than in all of last year. For the Summit, Marc Holliday received a real-time update that foreign visitors accounted for about 50% of attendance in 2024, and he emphasized the attraction's strong repeat business and sustained demand.

Seth Bergey asked about the regional variations in cash mark-to-market, the overall portfolio mark-to-market, and when pre-COVID rent rolldowns might turn into a headwind.

Answer

President Douglas Linde stated that the overall mark-to-market on currently occupied space across the portfolio is in the high 4s to low 5% range, a meaningful jump from a year ago. He noted significant improvements in Boston's Back Bay, Manhattan, and top floors on the West Coast, but stability in rental rates (excluding concessions) in West Coast bases and Washington D.C. He emphasized that BXP's focus for 2026-2027 is on occupancy gain, which is expected to have a more meaningful impact than mark-to-market.

Seth Bergey asked for a broader understanding of the overall mark-to-market in BXP's portfolio, considering regional variations in cash mark-to-market (Boston up 10%, NY/DC flat, West Coast down 10%), and when COVID-era rent rolldowns might become a headwind.

Answer

Douglas Linde, President, stated that the mark-to-market on currently occupied space across the entire portfolio is in the high 4s to low 5% range, a meaningful jump from a year ago. He attributed this to improvements in Boston's Back Bay, Manhattan, and the tops of West Coast buildings, while noting stability in the bases of West Coast buildings and Washington D.C. He emphasized that occupancy gain, rather than mark-to-market, will be the more significant impact for 2026 and 2027.

Seth Bergey asked about the composition of the existing pipeline, specifically if it's primarily with existing operators and Trilogy, or if new operators are being considered. He also inquired about any changes in asset pricing for senior housing as the sector continues to perform well.

Answer

CEO Danny Prosky confirmed that the entire pipeline consists of deals with existing operators, including WellQuest and Great Lakes, with no new operators currently in the mix. Regarding asset pricing, Danny Prosky stated that they haven't seen much shift, perhaps a moderate uptick, but pricing has remained very stable, with buyers being efficient in their underwriting and no consistent 'fervor' driving up prices.

Seth Bergey followed up on the existing pipeline's composition, asking if it primarily involves existing operators and Trilogy or if new operators are being added. He also inquired about any changes in senior housing asset pricing due to strong performance and competition.

Answer

CEO Danny Prosky confirmed that the current pipeline exclusively involves existing operators, including WellQuest and Great Lakes, and Trilogy, with no new operators planned for the mix. Regarding asset pricing, CEO Danny Prosky noted that while there might be a moderate uptick, pricing has remained very stable, with buyers underwriting efficiently and no consistent fervor driving up prices.

Seth Bergey from Citi asked about the new operator relationship with Great Lakes Management, the criteria for operator selection, and the incremental margin on new occupancy. He also inquired about broader revenue management strategies being deployed across the portfolio.

Answer

CIO Stefan Oh and President & CEO Danny Prosky detailed a measured operator selection process focused on culture and growth alignment, noting that the operator relationship is established before an asset is acquired. Danny Prosky estimated the incremental margin on a new skilled nursing resident is around 40%. COO Gabe Willhite described Trilogy's sophisticated, centralized revenue management platform, which optimizes pricing in real-time, and confirmed they are now piloting this system with other SHOP operators to enhance platform-wide performance.

Seth Bergey of Citi asked about the new operator relationship with Great Lakes Management, the pipeline's allocation between new and existing operators, and the criteria for operator selection. He also inquired about incremental occupancy margins and other revenue management strategies.

Answer

CIO Stefan Oh and President & CEO Danny Prosky explained that new operator relationships are established first, with partners like Great Lakes bringing off-market deals. About 65-70% of the pipeline is with existing operators. On margins, Danny Prosky estimated a ~40% incremental margin for a new skilled nursing resident. COO Gabe Willhite detailed Trilogy's centralized revenue management system, which is now being piloted across other SHOP operators to enhance platform-wide value and optimize pricing.

Seth Bergey from Citi inquired about the new operator relationship with Great Lakes Management, the criteria for selecting partners, and the pipeline's allocation between new and existing operators. He also asked about the margin flow-through from incremental occupancy and other revenue management initiatives.

Answer

CIO Stefan Oh and President & CEO Danny Prosky described a measured selection process focused on culture and growth alignment, noting that about 70% of the pipeline is with existing operators. Prosky estimated a 40% incremental margin on new skilled nursing residents. COO Gabe Willhite detailed a sophisticated, centralized revenue management platform at Trilogy that is now being piloted across other operators to enhance platform-wide performance.

Seth Bergey of Citi asked about the new operator relationship with Great Lakes Management, the criteria for selecting partners, and the pipeline's mix of new versus existing operators. He also inquired about the margin flow-through on incremental occupancy and other revenue management initiatives.

Answer

CIO Stefan Oh described a measured selection process focused on cultural alignment and growth potential, noting that 65-70% of the current pipeline is with existing partners. President and CEO Danny Prosky added that operators often bring AHR off-market deals. On margins, he estimated a 40% incremental margin on new Medicare Advantage residents. COO Gabe Willhite detailed a sophisticated, centralized revenue management program at Trilogy that is being piloted across other operators to enhance platform-wide performance.

Seth Bergey from Citi inquired about the evaluation process for the two new operating partners in the acquisition pipeline and asked for details on the new campus development project mentioned in the supplemental filings.

Answer

CIO Stefan Oh explained that the new operators are groups AHR has known for a long time and were identified prior to the assets. President and CEO Danny Prosky added that the operators helped source the deals. Regarding the development, Prosky clarified it's a redevelopment of a never-opened AL building in Michigan, which Trilogy will convert into an Integrated Senior Health Campus by adding a skilled nursing component.

Seth Bergey inquired about the delay in the Flagstaff Courthouse completion date and the company's capital allocation strategy, including the targeted spread on development over the cost of capital and consideration of alternative funding sources.

Answer

Allison Marino, EVP and CFO, explained that the Flagstaff Courthouse delay is due to the government's ongoing design work and agency collaboration, with finalization expected in 2026. Darrell Crate, President and CEO, discussed the company's FFO cost of equity, debt cost, and weighted average cost of capital, noting a target of 100 basis points spread on development. He also mentioned strong relationships with sovereign wealth funds as potential partners to improve capital costs.

Seth Bergey of Citi inquired about the return expectations for the crime lab development project and the size of the current acquisition pipeline. He also asked about the company's optimal capital structure.

Answer

EVP & CFO Allison Marino stated that the crime lab development is being developed at a cap rate in the 10s, targeting a 150 basis point spread over their cost of capital. Marino added that the deal pipeline is between $1 billion and $1.5 billion and the company aims for a 50/50 debt-to-equity capital structure, with a current cost of capital in the eights, allowing for accretive deals in the nines.

Seth Bergey of Citi inquired about the expected returns for the crime lab development project and asked for details on the size of the acquisition pipeline and the company's optimal capital structure.

Answer

EVP & CFO Allison Marino stated that the crime lab development is consistent with other growth targets, aiming for a cap rate in the 10s, which represents a 150 basis point spread to their cost of capital. Marino added that the deal pipeline is around $1-1.5 billion and the company targets a 50/50 debt-to-equity capital structure. With a current cost of capital in the eights, this allows for accretive acquisitions in the nines.

Seth Bergey of Citi inquired about the expected returns for the crime lab development project, the size of the current acquisition pipeline, and the company's optimal capital structure.

Answer

EVP & CFO Allison Marino stated that the development project is consistent with their targets, aiming for a cap rate in the 10s, which represents a 150 basis point spread to their cost of capital. She added that the deal pipeline is around $1-1.5 billion and the company targets a 50/50 debt-to-equity capital structure, allowing for accretive acquisitions in the nines against a cost of capital in the eights.

Seth Bergey of Citigroup inquired about the expected returns for the new crime lab development project, the size of the current acquisition pipeline, and the company's optimal capital structure.

Answer

EVP & CFO Allison Marino explained that the crime lab development is consistent with other growth targets, aiming for a cap rate in the 10s, which represents a 150 basis point spread to their cost of capital. She noted the acquisitions pipeline is around $1-1.5 billion and that the company targets a 50/50 debt-to-equity capital structure. With a current cost of capital in the eights, this allows for accretive acquisitions in the nines.

Seth Bergey from Citi inquired about the expected returns for the new crime lab development project and questioned the current size of the acquisition pipeline and the company's view on its optimal capital structure.

Answer

EVP & CFO Allison Marino stated that the crime lab development is targeted in the 10% cap rate range, consistent with their goal of a 150 basis point spread over their cost of capital. Marino also noted the current acquisition pipeline is approximately $1-1.5 billion and that Easterly's cost of capital is in the 8% range, allowing for accretive acquisitions in the 9% range, while managing leverage on a 50/50 debt-to-equity basis.

Seth Bergey asked about the allocation strategy for the $1 billion in proceeds, specifically the split between life science, outpatient medical, and share repurchases, and if there are target percentages for each business segment.

Answer

President and CEO Scott Brinker stated that the company does not have fixed allocations and will pursue an opportunistic approach while prioritizing balance sheet protection. He emphasized that the proceeds could be deployed across any of the mentioned alternatives or a combination thereof.

Seth Bergey asked about the allocation strategy for the $1 billion in proceeds, specifically the expected split between life science, outpatient medical, and share repurchases, and if there are target percentages for each business segment. He also inquired about the required accretion spread to compensate for investing in life science, given the expected lag in real estate recovery.

Answer

Scott Brinker, President and CEO, stated that Healthpeak does not have fixed allocations and will be opportunistic, prioritizing balance sheet protection and flexibility across all three alternatives. He indicated that underwritten returns for life science distress or opportunistic projects would target double-digit unlevered IRRs. For outpatient development, yields are expected to be 7+% which provides a compelling spread to disposition and acquisition cap rates. He emphasized evaluating all alternatives against the implied cap rate of the company's stock.

Seth Bergey of Citigroup Inc. requested details on the Maplewood lease structure and the potential for rent upside. He also asked about the competitive landscape for investment opportunities and whether underwriting standards have changed following recent legislation.

Answer

CIO Vikas Gupta and CEO C. Taylor Pickett explained that the Maplewood lease is structured so that all cash flow from the entity is paid to Omega, similar to a RIDEA structure. Vikas Gupta added that the competitive landscape (REITs, private equity) is unchanged, and Omega's underwriting standards have remained consistent and were not impacted by recent legislative news.

Seth Bergey of Citigroup asked for the drivers behind the company's confidence in achieving a 92-93% occupancy target, given historical performance. He also inquired about the nature of expansion opportunities with top tenants like HCA and Ascension.

Answer

President & CEO Peter Scott cited an improved macro environment, the disposal of under-occupied assets, and a revamped asset management platform with available free cash flow for reinvestment as key drivers for higher occupancy. Regarding tenant expansion, Scott and EVP & COO Rob Hull emphasized focusing on growing relationships at the local level to have health systems expand within the existing portfolio, particularly in the redeveloped lease-up assets.

Seth Bergey asked to differentiate the contribution to SHOP margin expansion between pure occupancy gains and execution from the Ventas OI platform. He also asked about the potential for Q3 occupancy growth to exceed the prior year's level and the key factors to reach the high end of the SHOP NOI growth guidance.

Answer

J. Justin Hutchens, EVP - CIO of Senior Housing, explained that occupancy and platform execution are intertwined but expects RevPOR to become a larger growth driver as occupancy increases. He noted a strong start to Q3 and stated that reaching the high end of the 12-16% NOI growth range would depend on exceptionally strong revenue growth (from both occupancy and rate) and continued favorable labor cost trends.

Seth Berger from Citi inquired if Ventas would consider acquiring lower-class or value-add assets to leverage its operating platform and drive higher yields, as opposed to focusing on newer, well-positioned properties.

Answer

CEO Debra A. Cafaro confirmed that Ventas is eager to deploy capital across a broad-based aperture of investment profiles. She emphasized that the key criteria are achieving compelling risk-adjusted returns, targeting low to mid-teens unlevered IRRs, and acquiring below replacement cost, regardless of whether an asset is lower or higher occupied.

Seth Bergey of Citigroup asked for color on the leasing pipeline, specifically the size of tenants in the market, and inquired if Kilroy is seeing any demand impact in Los Angeles from recent tax incentives.

Answer

EVP & Chief Leasing Officer A. Robert Paratte described demand as broad-based, with deal sizes varying by submarket. CEO Angela Aman added that many small AI leases represent rapidly growing companies. On LA tax incentives, Aman stated it's too early to see a direct impact on near-term office demand.

Seth Bergey of Citigroup asked for the expected returns on the recent Brooklyn retail acquisition and requested an update on the marketing process for ESRT's suburban office asset, including any changes in the buyer pool or financing market.

Answer

President Christina Chiu stated that the Williamsburg acquisition is a strategic redevelopment opportunity expected to yield a sub-7% return within a few years, with strong leasing interest already materializing. Regarding the suburban asset, she confirmed it remains on the market and noted that while financing is available for quality assets, institutional capital is becoming more 'actionable' in New York City, which bodes well for market activity.

Seth Bergey asked how management thinks about the potential impact of a proposed New York payroll tax increase, intended to fund the MTA, on demand for New York City office space.

Answer

Chairman and CEO Anthony Malkin responded by highlighting New York City's fundamental strengths, including its significant population growth, its status as the top destination for college graduates and TAMI companies, and its position as the best-performing CBD in the U.S. post-COVID. While not addressing the tax directly, he emphasized the city's persistent high demand and expressed hope that political leaders recognize the potential impacts of their policy decisions.