Vikram Malhotra

Vikram Malhotra asked for clarification on the record pipelines in the 0-1 MW segment, seeking expansion on the larger segment's pipeline and details on available capacity to lease over the next two years in major markets.

Answer

President and CEO Andy Power reiterated that Digital Realty has a record pipeline across both segments, building on a strong year for 0-1 MW (up 35% year-over-year) and back-to-back years of over $1 billion in new signings. He highlighted hundreds of MWs of prized capacity in Northern Virginia, Charlotte, and Atlanta, and noted that hyperscaler demand is globalizing, with continued growth expected in Europe, South America, and Asia.

Vikram Malhotra asked for clarification on the record pipelines in both the 0-1 MW and larger segments, and details on available capacity for lease in major markets over the next two years.

Answer

President and CEO Andy Power confirmed record pipelines across both segments, following a strong year for 0-1 MW (up 35% year-over-year) and two consecutive years of over $1 billion in new signings. He highlighted hundreds of MWs available in Northern Virginia, Charlotte, and Atlanta, and noted the globalizing demand from hyperscalers extending into Europe, South America, and Asia.

Vikram Malhotra of Mizuho asked for more detail on the zero-to-one megawatt growth, questioning if it's driven by market share gains or an expanding total addressable market (TAM), and whether CapEx would need to ramp up to capture this opportunity.

Answer

CEO Andy Power responded that it is a large and attractive market where Digital Realty is taking share from a long tail of smaller competitors. He emphasized that the company's decade-long investment in a full-spectrum global platform provides a compelling value proposition that drives both new logos and repeat business from its 5,000 existing customers.

Vikram Malhotra of Mizuho Financial Group asked for insight into the visibility for hyperscale versus enterprise demand, referencing past comments on delayed decisions, and whether 2025 is still expected to be a record year.

Answer

CEO Andrew Power stated that after a landmark 2024, the company is off to a great start in 2025, with a similar pace. CRO Colin McLean added that hyperscale demand remains focused on large capacity blocks in core markets. He noted that enterprise buying cycles, while typically shorter, have remained stable quarter-over-quarter with no significant changes in decision timelines.

Vikram Malhotra of Mizuho sought clarification on whether the combined velocity of deals in both the sub-1 MW and lumpy >1 MW segments puts the next few years in a 'different zip code' for bookings and pricing power.

Answer

CEO Andrew Power responded that in the 0-1 MW segment, he sees a growing market where Digital Realty is gaining share and expects continued stair-stepping improvement. For the >1 MW segment, the lumpiness and timing of inventory delivery means there is no 'panicky rush,' allowing them to be selective on commercials. He noted strong pricing power in the smaller segment, with cash mark-to-markets just under 5%, and continued strong rates for valuable, near-term large capacity blocks.

Vikram Malhotra sought clarification on the leasing assumptions for developments and their impact on occupancy, asking if successful back-half leasing would lead to upside. He also inquired whether the 708,000 sq ft Central Pennsylvania space is likely to be multi-tenant or single-tenant, and if there are any markets in the portfolio where First Industrial Realty Trust is achieving rent growth of 3% or more.

Answer

Scott Musil, Chief Financial Officer, confirmed that achieving the 1.7 million sq ft development leasing and 708,000 sq ft Central Pennsylvania vacancy in the second half of the year would align with the midpoint occupancy rate, with occupancy increasing more towards year-end. Peter Schultz, Executive Vice President, stated that the Central Pennsylvania building is more likely to be single-tenant but is designed for two, with active discussions for both scenarios. He noted strong activity in Pennsylvania. Peter Baccile, Chief Executive Officer, and Peter Schultz identified South Florida, Nashville, Texas (Dallas, Houston), and Central Pennsylvania as markets where they are pushing rent growth of 3% or more.

Vikram Malhotra sought clarification on other factors influencing occupancy beyond the major lease-up assumptions and whether the projected H2 2026 lease-ups would represent upside. He also asked about the likelihood of the 708,000 sq ft Central PA space being multi-tenant or single-tenant, and identified markets where the company is achieving 3%+ rent growth.

Answer

Scott Musil (CFO) clarified that hitting the 1.7 million sq ft development leasing and 708,000 sq ft PA vacancy in H2 would bring them to the midpoint occupancy rate, with occupancy increasing more in the back end due to these assumptions. Peter Schultz (EVP) said the PA building is more likely single-tenant but designed to be split for two, noting good activity in Pennsylvania. Peter Baccile (CEO) and Peter Schultz (EVP) listed South Florida, Nashville, Texas (Dallas, Houston), and Central Pennsylvania as markets achieving 3%+ rent growth.

Vikram Malhotra of Mizuho Financial Group, Inc. sought clarification on whether the newly announced 501,000 sq. ft. lease was part of the original development leasing target and asked about the prospects for the remaining 1.5 million sq. ft. in the guidance. He also inquired about the impact on the previously mentioned $0.02 FFO risk.

Answer

EVP Peter Schultz and CIO Johannson Yap detailed the properties making up the remaining 1.5 million sq. ft. leasing target, noting active prospects but no signed leases yet. CFO Scott Musil confirmed the new 501,000 sq. ft. lease was not in the original target and its positive impact has effectively eliminated the previously disclosed $0.02 FFO risk, meaning the remaining development leasing is now assumed to occur at year-end.

Vikram Malhotra from Mizuho asked for clarification on a newly announced 501,000 sq. ft. lease, the leasing prospects for the remaining 1.5 million sq. ft. in the development pipeline, and the resulting impact on FFO guidance.

Answer

EVP Peter Schultz and CIO Johannson Yap detailed the properties in the leasing pipeline, including a large building in Denver and several on the West Coast. CFO Scott Musil clarified that the new Phoenix lease, combined with another in Orlando, eliminated a potential $0.02 FFO drag. The remaining 1.5 million sq. ft. is now assumed to be leased at year-end.

Vikram Malhotra from Morgan Stanley referenced a peer's comment on slowing leasing velocity and asked about First Industrial's experience in recent weeks. He also inquired about sensitivity analysis on FFO if occupancy drops and asked for an update on the Federal-Mogul and another specific vacant space.

Answer

CFO Scott Musil explained that if the key Q4 development leases don't occur, the FFO impact would be only about $0.02 per share. CEO Peter Baccile noted that while conversations have paused due to tariff uncertainty, the underlying positive momentum from the start of the year remains. EVP Peter Schultz clarified the Federal-Mogul lease expired at the end of Q1 and is now vacant, while the other building is being marketed for sublet by the tenant, who remains current on rent.

An analyst on behalf of Vikram Malhotra from Morgan Stanley asked about recent leasing velocity, any stress tests performed on guidance, and the status of two specific large vacant spaces.

Answer

CFO Scott Musil explained that if key Q4 development leases are delayed, the FFO impact would be only about $0.02 per share. CEO Peter Baccile noted that while some leasing conversations have paused due to tariff uncertainty, underlying momentum remains. He also provided an update on two large spaces, stating one lease expired at the end of Q1 and the other tenant is current on rent and backed by a letter of credit.

Vikram Malhotra from Mizuho asked for clarification on the timing of FFO contribution from 2024 leasing, whether visibility into 2025 was higher than normal, and about the expected occupancy trajectory throughout the year.

Answer

Chief Financial Officer Scott Musil specified that of the Q4 leases, a JV deal would contribute from Q1 2025 and a Nashville deal from Q3 2025. President and CEO Peter Baccile stated that visibility is about average for this time of year. An executive also confirmed that occupancy is expected to dip in the first half of 2025 due to a known move-out and new properties coming online, with a recovery in the second half.

Vikram Malhotra inquired about the evolution of the tenant watch list, the re-leasing prospects for the 780,000 square foot Federal-Mogul space, and the company's capital deployment strategy for development and acquisitions heading into 2025.

Answer

Executive Vice President Peter Schultz stated that the Federal-Mogul space is already being marketed and has seen interest due to limited comparable options in Central Pennsylvania. CFO Scott Musil confirmed that, aside from boohoo, there is nothing material on the tenant watch list. CEO Peter Baccile addressed capital deployment, noting that while some tenants are delaying decisions, the company sees encouraging fundamentals for new development starts in 2025 in markets like Pennsylvania, Texas, South Florida, and Nashville.

Vikram Malhotra sought more granular anecdotes on what is driving the current improving cycle, particularly from tenants or field observations, and EastGroup's perspective on absolute rents in the Sun Belt, including any potential 'sticker shock' from current levels.

Answer

CEO Marshall Loeb highlighted the increased quantity and larger sizes of development leases in Q4 2025, along with 6-9 ongoing conversations for large pre-leases across diverse geographies, indicating a 'thawing' market. He noted that EastGroup doesn't lose tenants over rent, as market rents, while higher, remain a cheap alternative for last-mile distribution. COO Brent Wood added that multi-tenant vacancy is tight at 4-4.5%, suggesting room to push rents further without a 'wall of vacancy' to overcome.

Vikram Malhotra sought granular anecdotes on what's driving the new upcycle and EastGroup's thoughts on absolute rents in the Sun Belt, specifically addressing potential 'sticker shock' from high rent levels.

Answer

CEO Marshall Loeb highlighted the quantity and larger sizes of Q4 development leases, indicating increased tenant comfort with capital allocation across diverse geographies. EVP and COO Brent Wood added that current multi-tenant vacancy rates (4-4.5%) are much tighter than previous cycles, suggesting room for further rent pushes rather than widespread sticker shock.

Vikram Malhotra of Mizuho Financial Group, Inc. sought to reconcile EastGroup's observations with a peer's comments on muted rent growth and active build-to-suit demand.

Answer

President and CEO Marshall Loeb clarified that EastGroup's shallow-bay portfolio has a much lower vacancy rate (around 4%) than the broader industrial market (7.5%), positioning it for earlier rent growth in a recovery. He differentiated their business from larger build-to-suit players, as EastGroup's average tenant is much smaller. He agreed that tenants are becoming more comfortable with uncertainty, which is improving activity, but noted larger leasing decisions are still taking longer.

Vikram Malhotra from Mizuho Financial Group, Inc. asked for clarification on two points: how to reconcile a peer's comment about no market rent growth with EastGroup's more optimistic view, and how to square a peer's active build-to-suit pipeline with EastGroup's observation of slower decision-making.

Answer

President and CEO Marshall Loeb differentiated EastGroup's position by highlighting its focus on the shallow bay sector, where vacancy is closer to 4%, compared to the national average of 7.5% for all industrial. He believes this lower vacancy will allow for rent growth sooner. Regarding leasing, he noted that EastGroup's business is not focused on large build-to-suits but on multi-tenant properties, where smaller tenants are active but larger tenants are more cautious, thus elongating the decision-making process for larger spaces.

Vikram Malhotra asked about the amount of development lease-up required to meet guidance, current trends in build-to-suit activity, and for more details on the company's changing underwriting standards for new projects.

Answer

Executive Brent Wood stated that FFO from development lease-up is minimal in Q2 and Q3, with most of it projected for Q4, reflecting a conservative forecast. He noted that build-to-suits are less common for their smaller, multi-tenant product type. The company's guidance reflects a more cautious approach to both the timing of development starts and subsequent lease-up.

Vikram Malhotra requested clarification on the Q4 2025 to Q1 2026 FFO bridge, specifically how much of the termination income or occupancy lag benefit from Q4 would flow into Q1. He also asked for details on the leased versus occupied rates for the lab portfolio and the renewal assumptions for 2026 expirations.

Answer

CFO Kelvin Moses indicated that Q1 FFO is expected to be down approximately $0.03 from Q4 2025, moving from $0.47 to around $0.43. He noted that some benefits from Q4, such as free rent burn-offs and lease escalations, would continue into Q1. President and CEO Scott Brinker stated that there are a couple of hundred basis points of signed but not yet commenced lab leases, which should begin in 2027 and largely offset non-renewals. He reiterated that total lab occupancy is expected to increase from year-end 2025 to year-end 2026, based on a comprehensive analysis of macro and micro factors.

Vikram Malhotra sought clarification on the FFO trajectory from Q4 2025 to Q1 2026, specifically how much of the termination income or occupancy lag benefit from Q4 would flow into Q1. He also asked for the current leased versus economic occupancy for Life Science and the renewal assumptions for 2026 expirations.

Answer

CFO Kelvin Moses clarified that Q1 FFO is expected to be down approximately $0.03 from Q4, moving from $0.47 to around $0.43. He noted that Q4 benefits, including free rent burn-offs and lease escalations, would provide some incremental earnings in Q1. President and CEO Scott Brinker stated that Healthpeak has a couple hundred basis points of signed but not yet commenced leases, expected to start in 2027, which should offset most non-renewals. He reiterated that total occupancy is projected to increase from year-end 2025 to year-end 2026, based on a comprehensive analysis of macro and micro factors.

Vikram Malhotra sought further clarity on the expected occupancy bottoming in the lab portfolio, including near-term risks for Q4, the impact of signed but not yet commenced leases, and how these factors interact within the same-store pool.

Answer

CFO Kelvin Moses reiterated that occupancy could trend down to the high 70% range over the next couple of quarters before recovering. He noted approximately 300,000 sq ft of Q4 expirations, with 186,000 sq ft designated for redevelopment, and potential additional reductions from early terminations or proactive tenant downsizings.

Vikram Malhotra sought more clarity on the occupancy bottoming, near-term risks into Q4, and how sign-but-not-commence leases might offset losses, specifically for the same-store pool. He also asked about the implications of increased M&A, using the Eli Lilly acquisition as an example, for tenant space needs within Healthpeak's portfolio.

Answer

Kelvin Moses, CFO, reiterated that lab occupancy is expected to trend down to the high 70% range over the next few months or quarters before building back up. He noted 300,000 sq ft of expirations in Q4, with 186,000 sq ft going into redevelopment, which will largely be offset by new commencements, but acknowledged potential for additional reductions from early terminations. Scott Brinker, President and CEO, explained that M&A's impact on space needs varies; some acquisitions lead to expansion (buying a platform), while others might lead to downsizing (buying just a drug). Historically, the impact has been about half and half, but M&A generally benefits the ecosystem by recycling capital and driving demand.

Vikram Malhotra of Mizuho asked what level of performance would be needed from the MOB segment to maintain overall guidance if lab credit issues persist. He also requested a breakdown of the life science leasing between new and renewal deals and an outlook on the pipeline. Finally, he asked how much more occupancy loss in the lab segment is assumed at the low end of the guidance range.

Answer

CEO Scott Brinker stated the reaffirmed guidance range already includes the bookends of potential outcomes, with outperformance in CCRC and Outpatient offsetting lab weakness. CFO Kelvin Moses reiterated that 85% of Q2 lab leasing was renewals and that the pipeline has a strong mix of new deals. Mr. Brinker acknowledged that some further lab occupancy deterioration is possible by year-end, which is factored into their outlook.

Vikram Malhotra from Mizuho asked about the level of MOB performance needed to offset lab weakness to maintain guidance, the mix of new versus renewal leasing in the lab segment, and the potential occupancy loss required to hit the low end of guidance.

Answer

CEO Scott Brinker responded that the reaffirmed guidance range already incorporates the potential for lab downside, which is being offset by outperformance in the CCRC and Outpatient segments. CFO Kelvin Moses reiterated that Q2 lab leasing was 85% renewals but noted the future pipeline skews more toward new deals. Scott Brinker acknowledged that some further lab occupancy deterioration is possible by year-end.

Vikram Malhotra asked about the current portfolio mark-to-market, given the strong leasing activity and reported double-digit roll-ups. He also sought to understand the trajectory of actual dollars in tenant improvements (TIs) hitting the FAD calculation this year compared to last year, considering past and current leasing volumes.

Answer

Marc Holliday, Chairman and CEO, SL Green Realty Corp, and Steve M. Durels, EVP and Director of Leasing and Real Property, stated they don't mark-to-market the entire portfolio but confirmed the current pipeline reflects the high single-digit range given in December. Matt J. DiLiberto, CFO, Marc Holliday, and Steve M. Durels explained that while TIs from past leasing are still being funded, capital spend will moderate as occupancy nears 95%, leading to a 'big improvement' in FAD in 2027 and beyond due to less rollover and tightening concession packages.

Vikram Malhotra inquired about the actual dollars in tenant improvements (TIs) that are expected to impact the FAD calculation this year compared to last year, considering the volume of past and current leasing activity.

Answer

Matt J. DiLiberto, CFO, SL Green Realty Corp, explained that the company is still funding TIs from leasing done over the past couple of years. However, as the portfolio fills and approaches 95% occupancy by year-end, leasing volumes will drift lower, concessions will moderate, and capital spend will decrease. Marc Holliday, Chairman and CEO, SL Green Realty Corp, added that the company has the lowest rollover in its history for the next four years (less than 900,000 sq ft annually), which will further reduce capital needs and allow for tighter TI packages and free rent, leading to a significant improvement in FAD in 2027.

Vikram Malhotra sought clarification on the cap rate and value creation strategy for Park Avenue Tower, the nature of SL Green's acquisition pipeline going forward, and a high-level outlook for market rent growth into 2026.

Answer

Marc Holliday, Chairman and CEO, clarified the Park Avenue Tower cap rate is 6.2% and described it as a market play focused on rental appreciation, with limited capital needed for refreshing amenities (estimated $25-$40 million over 5-6 years). He stated SL Green's acquisition pipeline is opportunistic, encompassing rental-driven, development-driven, opportunistic debt, and redevelopment plays, all targeting mid-teens risk-adjusted returns in Midtown Manhattan. Marc Holliday deferred a detailed 2026 rent growth outlook to the December investor conference, expressing optimism for earnings and leasing momentum.

Vikram Malhotra of Mizuho Financial Group, Inc. asked about the implications of broadening tenant demand for investment opportunities and rent growth, and how a successful casino bid would impact the Times Square submarket.

Answer

Chairman & CEO Marc Holliday attributed the demand shift to high prices on Park Avenue and shrinking supply, creating new opportunities. He described a potential casino as 'absolutely transformational' for Times Square, envisioning a halo effect that would uplift the entire area, much like One Vanderbilt did for Grand Central.

Vikram Malhotra asked about the opportunity and execution timeline for the planned Summit in Paris. He also inquired about the progression of Funds Available for Distribution (FAD) throughout the year.

Answer

CEO Marc Holliday shared that the Summit Paris project is progressing well, with an expected opening by the end of Q1 2027. Regarding FAD, Matthew Diliberto explained that while economic occupancy is expected to ramp up through the year, capital spend also typically accelerates in the second half, so the full-year FAD is still expected to be in line with guidance despite a strong Q1.

Vikram Malhotra asked about BXP's long-term structural peak occupancies for its refined portfolio, compared to pre-COVID or pre-GFC levels, and how this links to rent spreads and growth, particularly in San Francisco.

Answer

President Douglas Linde estimated that a structural peak occupancy above 93% is attainable but challenging. He identified San Francisco as having the most significant upward opportunity for improvement. He noted a modest roll-down on the overall portfolio due to base-of-building rents, but positive mark-to-markets on the top 20-30% of San Francisco towers. CFO Michael LaBelle emphasized the direct link between rental rates and occupancy, with tighter occupancy in markets like Back Bay Boston and Midtown New York accelerating rents, allowing for higher pricing and more selective leasing.

Vikram Malhotra asked about BXP's long-term structural peak occupancies for its refined portfolio, compared to pre-COVID or pre-GFC levels, and how this links to rent spreads and growth, particularly in San Francisco.

Answer

Douglas Linde, President, stated that achieving above 93% occupancy for the portfolio (with an 8-9 year average lease length) is attainable but challenging. He identified San Francisco as having the most opportunity for improvement, with positive mark-to-markets on the top 20-30% of towers, but modest roll-downs in lower-tier Embarcadero Center spaces. Michael LaBelle, CFO, linked rental rates directly to occupancy, noting that tighter occupancy in Boston's Back Bay and Midtown, New York, is accelerating rents.

Vikram Malhotra of Mizuho Financial Group, Inc. asked for more detail on the 343 Madison project, including target rents to achieve the 7.5% yield, and sought clarification on the year-end occupancy outlook.

Answer

Owen Thomas, Chairman & CEO, detailed rent assumptions for 343 Madison, ranging from mid-to-upper $100s at the base to mid-to-upper $200s at the top, averaging in the low $200s. Douglas Linde, President & Director, clarified that the current in-service portfolio is expected to end the year around 87% occupied, but the headline number will be reduced by about 70 bps due to the addition of new, partially leased developments.

Vikram Malhotra sought clarification on the earnings trajectory for Alexandria Real Estate Equities throughout 2026, specifically confirming if the cadence trending down to the $1.40-$1.60 range for Q4 2026 remained intact. He also asked about recent insights from FDA officials or larger VCs regarding shifts that could precede new company formation and future leasing, and inquired about the current state of incentive packages, tenant improvements (TIs), and free rents for new leasing.

Answer

Marc Binda, CFO, confirmed that Q4 2026 is still expected to be the low point in earnings for the year, and the general trajectory remains consistent. Joel Marcus, Executive Chairman and Founder, and Hallie Kuhn, SVP of Life Science and Capital Markets, discussed the FDA's focus on compressing drug development and the critical need for the public biotechnology cohort to recover, with IPOs being a key capital source. Peter Moglia, CEO and CIO, stated that TIs remain elevated for shell spaces but stable for renewals, while free rent continues to elevate as a primary tool to win deals and meet the market.

Vikram Malhotra sought granular color on incentive packages, tenant improvements (TIs), and free rents used to achieve recent leasing, specifically asking if TI numbers are very high in markets like South San Francisco.

Answer

Peter Moglia, CEO and CIO, stated that TIs remain elevated for shell space but are stable for renewals and re-leasing. He emphasized that free rent continues to elevate and is the primary tool used to win deals and meet the market, helping to keep rental rates stable, especially with mid-20s to low-30s availability in major markets.

Vikram Malhotra questioned why the company would not consider an outright equity raise to address leverage and capital needs, given macro uncertainty and reliance on asset sales. He also asked why the company chose to provide 'tea leaves' for 2026 earnings rather than a high-level FFO number, suggesting a two-step process.

Answer

Joel Marcus, Executive Chairman and Founder, stated that the balance sheet is in good shape, and leverage is manageable with planned asset sales. The primary goal is to reduce non-income-producing assets from 20% to 10-15% through sales of non-core, stabilized, and non-stabilized assets, and to increase mega campus ARR to 80%, without needing a common equity raise. Regarding 2026 guidance, Joel Marcus acknowledged the timing issue and indicated that Marc Binda and his team might provide a range or framework for FFO shortly to avoid a prolonged mystery, explaining the industry's complexity due to regulation and government shutdown impacts.

Vikram Malhotra questioned why Alexandria Real Estate Equities isn't considering an outright equity raise to fix its balance sheet and capital needs, rather than relying on asset sales, to better position itself for future distress. He also asked why the company isn't providing a high-level FFO number for 2026 immediately, instead of a two-step process.

Answer

Joel Marcus, Executive Chairman and Founder, stated that the balance sheet is in good shape, and leverage is manageable. The strategy is to reduce non-income-producing assets from 20% to 10-15% through asset sales, including non-core properties and those with significant entitlements, thereby avoiding a common equity raise. Joel Marcus acknowledged the timing issue for 2026 FFO guidance and indicated that Marc Binda and his team might provide a framework or range to the street shortly to avoid a prolonged delay before Investor Day, citing the complexities of the regulated industry and the government shutdown's impact.

Vikram Malhotra questioned if the company was considering a larger capital transaction, like a core asset joint venture, to fund its pipeline. He also asked for the occupancy outlook over the next 18 months and the strength of the build-to-suit pipeline.

Answer

Joel Marcus, Founder & Executive Chairman, stated the current strategy is to fund needs by selling non-core assets and land to increase ownership concentration in their core mega campuses. Peter Moglia, CEO & CIO, added that monetizing mega campus equity is a backstop, not the primary plan. Regarding the outlook, Joel Marcus cited lower interest rates and agency stabilization as key catalysts for future leasing.

Vikram Malhotra of Mizuho asked if Alexandria would consider a large-scale asset sale to fund a significant share buyback and requested an update on the credit watch list and exposure to pre-revenue tenants.

Answer

Executive Chairman Joel Marcus stated the company prefers a 'measured and careful' approach to dispositions rather than a large one-time sale, but will evaluate buybacks quarterly. CFO Marc Binda addressed credit, explaining they proactively monitor all tenants, especially private ones, through quarterly financial reviews to manage risk, noting that while failures happen, their diligence is high.

Vikram Malhotra asked for a bigger-picture outlook on 2025 leasing velocity, requested color on the relative strength of the three core markets, and questioned if there were any circumstances that would cause a pause in 2025 or 2026 developments.

Answer

Executive Joel Marcus deferred specific leasing velocity forecasts to the next quarter but provided market color, identifying Mission Bay and San Diego as strong, Boston as steady, and South San Francisco as a "sore thumb" due to oversupply. He affirmed that no material changes or pauses are expected for the '25 or '26 development pipeline.

Vikram Malhotra (Mizuho) sought clarification on Prologis' confidence in achieving its 2026 occupancy guidance, particularly given past challenges in predicting inflection points. He also asked about potential offsets limiting FFO growth despite strong core business performance.

Answer

CFO Tim Arndt addressed the occupancy outlook, noting that recent low absorption years were outliers. He expressed confidence in the 2026 forecast for approximately a 25 basis point increase in average occupancy, building on the 95.8% period-end occupancy from 2025. The FFO growth offsets were not explicitly detailed in the provided response.

Vikram Malhotra sought clarification on Prologis' confidence in building occupancy to meet its 2026 guidance, despite an expected Q1 downtick, and asked about the offsets that might limit FFO growth this year despite strong core growth.

Answer

CFO Tim Arndt noted that the past few years' low absorption rates were outliers, and even the forecast of approaching 200 million sq ft for 2026 is not fully robust. He expressed confidence in the forecast, given the year-end occupancy of 95.8% and the expectation of building occupancy over the year, with a guide for about a 25 basis point average increase.

Vikram Malhotra asked about the direction of Prologis's occupancy into Q4 and next year, its implications for rent growth, and a clarification on Hamid Moghadam's 'big opportunity' comments regarding vacancy, rent growth, or other factors.

Answer

Managing Director Chris Caton expressed reasonable confidence in sustaining occupancy around current levels into Q4 and building from there into 2026, consistent with market trends. He noted market vacancy at 7.5%, expected to hang around this level for a couple of quarters before improving through 2026, driven by declining deliveries. CFO Tim Arndt added that priorities for 2026 include a robust build-to-suit pipeline, continued investment in data centers, and potential for more spec starts internationally and in U.S. pockets.

Vikram Malhotra of Mizuho asked for the 2-3 year outlook on when market rents might inflect and what a normalized net absorption level for the industry would be, given current vacancy rates.

Answer

CEO Hamid Moghadam opined that the current 7.4% market vacancy is near its peak and that real pricing power returns when vacancy drops to around 5%. He estimated this could take one to two years with normalized net absorption around 250 million sq. ft. annually. He expects future rent growth to be strong due to the lack of new supply and rising construction costs.

Vikram Malhotra requested more detail on the company's stress-test scenario, asking about the specific assumptions for market rent declines, net absorption, and bad debt.

Answer

Timothy Arndt, CFO, detailed the severe stress test, which mirrored and amplified GFC conditions. It assumed a 170 basis point market occupancy drop, an immediate 18% decline in market rents, and a bad debt expense of approximately 75 basis points. Hamid Moghadam, CEO, stressed that this was a 'worst-case' analysis, not a forecast.

Vikram Malhotra of Mizuho Securities USA LLC asked for details on 2024 market rent growth across different regions and the 2025 forecast. He also requested a bridge for GAAP to cash NOI growth and clarification on net absorption drivers given the rate environment.

Answer

Managing Director Christopher Caton stated that rents declined about 2% in the quarter, with a narrowing differential between coastal and non-coastal markets. He noted that while calling an inflection point is difficult, scenarios for 2025 range from flat to slightly up or down. President Dan Letter added that with 90% of leases rolling beyond 12 months, short-term fluctuations have limited impact on long-term value. CFO Timothy Arndt explained the GAAP-to-cash NOI difference is mainly driven by free rent normalizing. Caton attributed the expected lift in net absorption to reduced uncertainty and deferred decision-making being unlocked.

Vikram Malhotra questioned how to reconcile the company's statement about a 'bottoming process' with its updated view on market rent growth and the decision to reduce development starts, which seemed to contradict a previous strategy of preparing inventory for a 2025 market inflection.

Answer

An executive explained that while near-term rent softness continues, the long-term driver for rent growth remains the significant gap between current market rents and higher replacement costs. Regarding development, they cited a disciplined approach, deferring some spec projects due to current market fundamentals and clients delaying build-to-suit decisions. However, they are still selectively starting projects in strong submarkets and have a substantial $40 billion land bank ready for future deployment.

Vikram Malhotra asked for a reminder of the key building blocks contributing to the flattish FFO projection for 2026 and the latest updates on these factors. He also inquired about specific pockets and types of buildings where $200 rents are achievable, and if Vornado is exploring a pipeline of assets similar to the 623 Fifth Avenue acquisition.

Answer

Michael Franco, President and CFO, Vornado Realty Trust, cited income taken offline for retail redevelopment and signage rebuilds, asset sales ($250-$300 million), and the timing of Penn 2 income (significant growth in 2027) as factors for flattish 2026 FFO. Glen Weiss, EVP, Vornado Realty Trust, noted that while average rents are $100, newer stock sees $150-$200, with 623 Fifth Avenue being an example for achieving higher rents. Steven Roth, Chairman and CEO, Vornado Realty Trust, elaborated on 623 Fifth Avenue's potential for high returns (9-10% yield on cost) due to its unique positioning and market shortage.

Vikram Malhotra of Mizuho Financial Group, Inc. sought more color on any major factors affecting 2026 earnings before the 2027 step-up and asked about Vornado's appetite for new investments given market improvements.

Answer

President and CFO Michael Franco indicated the earnings growth would be a relatively straightforward step-function, with no unusual headwinds in 2026, and noted that interest expense is on a 'downhill trajectory.' Chairman and CEO Steven Roth added that capital allocation is a top priority, and the company will be disciplined, investing cautiously but aggressively when true value-creation opportunities arise.

Vikram Malhotra of Mizuho Securities inquired about the future development sequence for the Penn District beyond current projects and asked for an update on the street retail leasing environment on Fifth Avenue and Madison Avenue.

Answer

Steven Roth, Chairman and CEO, identified the Hotel Pennsylvania site (Penn 15) as the next logical development, though no plans are finalized. Michael Franco, President and CFO, described the retail market as strengthening, with vacancy declining and rents for prime spaces nearing peak levels, driven by strong retailer sales and demand from new-to-market tenants.

Vikram Malhotra from Mizuho Securities asked about the development sequencing for the next assets in the PENN District and requested an update on the high-street retail leasing environment on Fifth Avenue and Madison Avenue.

Answer

Chairman and CEO Steven Roth identified the Hotel PENN site (PENN15) as the next logical development, though the company is still studying options. President and CFO Michael Franco described the high-street retail market as strengthening, with vacancy declining and rents for prime spaces approaching peak levels, driven by strong retailer sales and the need for a New York presence.

Vikram Malhotra of Mizuho Securities inquired about the development sequencing for the next assets in the Penn District and asked for an update on the street retail leasing environment on Fifth Avenue and Madison Avenue.

Answer

Chairman and CEO Steven Roth identified the Hotel Pennsylvania site (Penn 15) as the next logical development, noting the company is considering all options, including office and apartments. President and CFO Michael Franco described the retail market as strengthening, with vacancy declining and rents for prime spaces returning near peak levels, driven by strong retailer sales.

Vikram Malhotra inquired about the development sequencing for the next phase of the Penn District and asked for an update on the leasing environment for high-street retail on Fifth Avenue and Madison Avenue.

Answer

Chairman and CEO Steven Roth identified the Hotel Pennsylvania (Penn 15) site as the next development opportunity, with an office building and potentially apartments under consideration. President and CFO Michael Franco noted that the street retail market is strengthening, with rents for prime spaces approaching peak levels. Roth added that for some Fifth Avenue assets, selling is more economic than renting due to high buyer demand.

Vikram Malhotra asked about the strategic rationale behind launching Welltower 3.0 and the extensive changes in portfolio, personnel, and compensation plans, questioning the need for disruption given the company's strong recent performance and seeking clarity on the future cash flow growth engine.

Answer

CEO Shankh Mitra explained that the company is not trying to prove anything but rather to eliminate agency problems and align interests across the ecosystem. He emphasized that the disruption is a proactive measure to transform the business digitally, prevent external disruption, and elongate the duration of growth and compounding cash flow for owners, drawing a parallel to Netflix's evolution.

Vikram Malhotra inquired about the impact of the Welltower Business System on both operating margins and CapEx control, seeking to understand the magnitude and duration of its performance benefits.

Answer

CEO Shankh Mitra explained that the Welltower Business System is a complex adaptive system designed to streamline operations and augment the capabilities of their operating partners. He stated its goal is to provide site-level employees with actionable insights, freeing up their time for resident care, which he believes will drive a long runway for margin expansion.

Vikram Malhotra of Mizuho Securities inquired about the pricing power across different occupancy levels within Welltower's senior housing portfolio and asked for details on the occupancy of assets in the new $2 billion acquisition pipeline.

Answer

CEO Shankh Mitra explained that RevPOR growth is well into the six-percent range for assets over 90% occupied but roughly flat for those under 70%. Executive Vice President Nikhil Chaudhri added that the $2 billion in recent acquisitions have occupancy in the low 80s, consistent with prior deals. CFO Tim McHugh noted that over a quarter of the portfolio remains below 80% occupancy.

Vikram Malhotra sought clarification on the 4.4% cap rate for asset sales, specifically regarding the occupancy of those assets and the potential for future sales of vacant properties. He also asked for confirmation on the cash mark-to-market and its implications for rent spreads into 2026.

Answer

Howard Schwimmer, Co-Chief Executive Officer, clarified that the occupancy on sold assets was 67%, with cap rates based on market rates, and that the occupancy increase was primarily due to net absorption. He confirmed a net effective mark-to-market of 10% and a cash mark-to-market of negative 1%. He acknowledged potential pressure on releasing spreads into 2026-2027 but outlined mitigants, including a staggered lease maturity profile, $65 million in projected NOI from repositioning/redevelopment (with $12 million stabilized and $30 million in lease-up), accretive capital recycling, and a focus on operating margin.

Vikram Malhotra of Mizuho Financial Group, Inc. expressed concern about the 2026 growth outlook, citing the amount of NOI coming offline from the development pipeline coupled with likely negative rent spreads and higher market vacancy.

Answer

CFO Michael Fitzmaurice stated it was too early to comment on 2026 but clarified that for 2025, the NOI coming offline for new starts is consistent with prior guidance at around $13 million. He noted the future pipeline is fluid and largely driven by the Hertz lease expiration, promising more specific guidance on 2026 later in the year.

Vikram Malhotra of Mizuho Financial Group expressed concern about the 2026 growth outlook, citing the amount of NOI coming offline from the development pipeline combined with potential negative rent spreads and higher market vacancy.

Answer

CFO Michael Fitzmaurice responded that it is too early to comment on 2026 but reiterated that the NOI impact from 2025 starts remains consistent with prior guidance at around $13-15 million. He described the future pipeline as 'fluid' with multiple strategic options for each asset and promised more detailed guidance on 2026 later in the year.

Vikram Malhotra of Mizuho Financial Group, Inc. sought clarity on the NOI impact from the development pipeline, suggesting that a significant amount of NOI could come offline in the next 18 months, potentially leading to a lower growth outlook for 2026.

Answer

CFO Michael Fitzmaurice stated it is too early to comment on 2026 but confirmed that the 2025 NOI impact from new starts remains consistent with original guidance at around $13 million. He noted the future pipeline is fluid, heavily influenced by the large Hertz lease expiration, and that more definitive guidance for 2026 will be provided later in the year.

Vikram Malhotra of Mizuho Financial Group, Inc. sought clarification on the NOI impact from the development pipeline, expressing concern that planned redevelopments and negative rent spreads could lead to lower-than-expected growth in 2026.

Answer

CFO Michael Fitzmaurice responded that it is too early to comment on 2026 but confirmed that the projected $13-15 million of NOI coming offline in 2025 is consistent with prior guidance. He noted the future pipeline is fluid, largely driven by the Hertz lease expiration, and that more detailed guidance will be provided in future quarters.

Vikram Malhotra of Mizuho Financial Group, Inc. sought clarification on the NOI impact from the development pipeline, expressing concern that planned redevelopments and market headwinds could lead to a lower growth outlook for 2026.

Answer

CFO Michael Fitzmaurice stated it was too early to comment on 2026 but confirmed the 2025 NOI impact from new starts remains consistent at around $13-15 million. He reiterated that the future pipeline is fluid and largely driven by the Hertz lease expiration, promising more specific guidance later in the year.

Vikram Malhotra from Mizuho asked about the potential scale of asset sales and whether proceeds might be used for share buybacks, considering the stock's valuation relative to private market values.

Answer

CFO Michael Fitzmaurice stated that the highest risk-adjusted return remains in repositioning and redevelopment projects, which deliver ~20% incremental returns. He emphasized that the company's $600 million cash balance allows for a patient and offensive position. While $30 million in dispositions are under contract, he did not provide further guidance on future sales or commit to buybacks, prioritizing reinvestment in the portfolio.

Vikram Malhotra of Mizuho inquired about Rexford's capital allocation strategy regarding acquisitions and buybacks, and later asked for a breakdown of year-to-date leasing and a clarification on market rent growth figures.

Answer

COO Laura Clark and Co-CEO Howard Schwimmer emphasized a strategic shift to focus on capital recycling and high-yield redevelopments over acquisitions due to increased hurdle rates. In a follow-up, Laura Clark stated year-to-date leasing was approximately one-third new and two-thirds renewal. She also clarified that the -8% year-over-year figure represented a decline in market taking rents for comparable properties, which CFO Mike Fitzmaurice noted is the new baseline for 2025 guidance.

Vikram Malhotra requested an update on the acquisition environment, asked for more specific reasons for pulling the 3-year guidance, and inquired about the portfolio's sublease percentage and near-term rent spread trends.

Answer

Co-CEO Michael Frankel confirmed the large market opportunity in Southern California persists but emphasized a judicious investment approach. He explained pulling the 3-year guide was a matter of prudence, not a change in long-term outlook. Co-CEO Howard Schwimmer noted that sublease space in the portfolio had actually declined quarter-over-quarter. CFO Laura Clark stated near-term spreads are trending in line with guidance.

Vikram Malhotra of Mizuho Financial Group, Inc. sought clarification on the back-half guidance, asking for specific occupancy build numbers versus pre-COVID trends and the reason for an anticipated pickup in G&A expense.

Answer

CFO Rob Crisci directed the question to a slide in the presentation, indicating the guidance implies occupancy of roughly 75% in Q3 and 78% in Q4, which is a muted seasonal build compared to historical trends. Regarding G&A, he stated they are managing costs prudently and believe the current level of investment supports long-term growth and will provide operating leverage.

Vikram Malhotra pressed on the guidance, asking what other areas were implicitly cut to maintain the range despite the acquisition benefit. He also asked about considering a stock buyback and for any industry data to prove Lineage is outperforming peers.

Answer

CEO W. Lehmkuhl acknowledged the simple math implies a $25 million offset elsewhere in the business due to uncertainty, but stressed the company has many levers to pull. He stated the board always evaluates all options to drive shareholder value. On competitive data, both he and CFO Rob Crisci explained the industry is too fragmented and non-transparent for public stats, but their internal intelligence indicates strong relative performance.

Vikram Malhotra sought to clarify the implications of the guided NOI seasonality, asking if it embeds negative NOI growth and falling occupancy in the first half of 2025.

Answer

CFO Robert Crisci confirmed that this interpretation is correct. He explained that due to tough comparisons from elevated inventory levels in H1 2024, a normal seasonal pattern in 2025 would result in flattish to slightly down NOI in the first half, followed by a pickup in the second half, which is consistent with the company's guidance.

Vikram Malhotra of Mizuho Financial Group, Inc. questioned the timeline for AFFO growth given future lease expirations and asked if divesting the studio business was still a strategic consideration.

Answer

Chairman & CEO Victor Coleman corrected the premise, stating that near-term expirations are the lowest in eight years, which supports a path to substantial AFFO growth by 2026. He firmly stated that the company never planned to divest the studio business itself, but has successfully executed on divesting non-core leases and obligations to reduce costs.

Vikram Malhotra of Mizuho Securities asked about the implied acceleration in the investment pipeline for the second half of the year and its sustainability into 2026. He also requested clarification on same-store growth excluding transition assets and whether the pipeline included Canadian properties.

Answer

CEO Rick Matros and CIO Talya Nevo-Hacohen clarified that the investment pace is not overly back-half weighted, as $350 million is already closed or awarded, and deal flow remains strong. Nevo-Hacohen stated there are no Canadian deals in the pipeline due to rich pricing. CFO Michael Costa confirmed same-store growth would be better without the transition assets but did not provide a specific figure.

Vikram Malhotra of Mizuho Financial Group, Inc. asked about the timing of the investment pipeline, its sustainability into 2026 to meet the 30% SHOP goal, and sought clarification on the same-store growth impact from transition assets and whether any pipeline deals were in Canada.

Answer

CEO Rick Matros stated the investment pace is not overly back-ended, as $350 million is already closed or awarded. CIO Talya Nevo-Hacohen added that deal volume is 'unabated' but noted Canadian pricing is currently 'too rich' for Sabra. CFO Michael Costa confirmed that same-store growth would have been 'better' without the transition assets but did not provide a specific figure.

Vikram Malhotra of Mizuho Securities asked if the investment pipeline implies a back-half weighted acceleration and if the pace is sustainable into 2026. He also sought clarification on same-store growth excluding transition assets and whether the pipeline includes Canadian deals.

Answer

CEO Rick Matros clarified that with $350 million already closed or awarded, the investment pace is not overly back-half weighted. CIO Talya Nevo-Hacohen noted that Canadian deal pricing is currently too rich for Sabra. CFO Michael Costa confirmed same-store growth would have been better without the transition assets but did not provide a specific figure.

An analyst on behalf of Vikram Malhotra from Mizuho Financial Group asked about the competitive landscape for stabilized senior housing assets and the level of January rent bumps.

Answer

EVP Talya Nevo-Hacohen stated that competition for high-quality assets is primarily from other healthcare REITs, as it is difficult for levered buyers to compete. She also noted that rent bumps for major operators are being achieved in the 4% to 5% range.

Vikram Malhotra of Mizuho Financial Group, Inc. asked how Omega's approach to RIDEA structures compares to peers buying stabilized assets at lower yields. He also requested specifics on the four assisted living facilities acquired and an update on the UK investment pipeline.

Answer

President Matthew Gorman explained that Omega's cost of capital necessitates a more selective approach, targeting smaller, value-add opportunities rather than large, low-yield stabilized portfolios. CIO Vikas Gupta confirmed the four ALF deals were structured as triple-net leases at a 10% yield. He added that while the UK pipeline is currently smaller, it remains an active market with long-term consolidation opportunities.

Vikram Malhotra of Mizuho followed up on Genesis, asking for the specific reason the ABL lender reduced its borrowing base. He also questioned what had changed to make the U.S. acquisition pipeline more attractive recently and sought clarification on the strategy to raise equity for 2026 debt maturities.

Answer

CEO Taylor Pickett stated his belief that the ABL lender's action was related to a pool of aging collateral but did not have further details. CIO Vikas Gupta explained the shift towards the U.S. pipeline is simply due to seeing more accretive opportunities there at the moment. CFO Bob Stephenson confirmed the plan is to raise equity throughout the year to pre-fund investments and prepare for the 2026 debt maturity, contingent on a favorable stock price.

Vikram Malhotra asked if the push into the U.K. is a hedge against potential U.S. Medicaid changes, inquired about raising debt in the U.K., and sought views on potential regulatory paths for the staffing mandate and other proposals like FMAP changes or block grants.

Answer

President Matthew Gorman clarified the U.K. expansion is driven by opportunity, not as a hedge, and that U.S. debt remains more favorable than what's available in the U.K. SVP of Operations Megan Krull expressed hopefulness that the staffing mandate will be overturned legally or legislatively due to its cost. She noted that while block grants have been discussed for years, the industry would lobby for per capita caps and that Medicaid expansion represents 'low-hanging fruit' for potential cuts before core services.

Vikram Malhotra's line from Mizuho asked if Medical Properties Trust had provided additional loans to HSA, whether HSA's EBITDA covers its rent, and for an update on the tenant in Columbia with coverage below 1.0x.

Answer

Edward Aldag, Founder, Chairman, President & CEO, confirmed a $5 million loan was made to HSA in May to resolve issues related to a TSA agreement with Stewart. He stated that HSA's operations do not yet cover full cash rent. Regarding the Columbia assets, he explained the hospitals are performing well operationally but are facing country-wide reimbursement delays, which are expected to be resolved over time.

Vikram Malhotra of Mizuho asked about the key drivers and risks for the 2026 outlook beyond signed leases, and sought more detail on the large RFPs in the market, including industry types and competition.

Answer

CFO Brendan Maiorana pointed to the high 330-basis-point spread between leased and occupied rates as a key driver for steady occupancy growth into 2026, supplemented by NOI from recently delivered developments. COO Brian Leary noted that the large RFPs are competitive, often multi-market searches, and include financial services and international manufacturing firms, with state incentives playing a significant role.

Vikram Malhotra inquired about the expected cadence for FFO and occupancy throughout 2025, the level of new leasing assumed in the updated guidance, and feedback from local economic councils on corporate migration trends.

Answer

Executive Brendan Maiorana stated that FFO and occupancy are expected to trough in the first half of 2025 before growing later in the year, reaffirming the year-end occupancy target of 86% to 87%. He clarified that most new leasing signed in 2025 will drive occupancy growth in 2026. CEO Theodore Klinck added that economic development councils report positive trends, with a notable increase in office-related inquiries.

Vikram Malhotra requested more color on the confidence in a second-half market recovery, asking about large tenant requirements. He also sought clarification on the NOI and FFO trajectory through 2025 and asked about any sizable known move-outs in 2026 that could impact the recovery.

Answer

COO Brian Leary noted an increase in corporate headquarter relocation inquiries in Q1, particularly in Nashville and Charlotte. Executive Brendan Maiorana confirmed the financial trajectory: an occupancy and FFO trough in the first half of 2025, followed by a recovery, with cash flow improvement lagging into 2026. CEO Theodore Klinck added that the 2026 lease roll is manageable, with only four expirations over 50,000 square feet and an expectation of high retention.

Vikram Malhotra of Mizuho asked for more details on the elevated clinical move-outs in March and inquired about pricing power for the remainder of the year, questioning if the maintained guidance implies an acceleration.

Answer

EVP & Chief Investment Officer J. Hutchens clarified that the March move-outs were an unpredictable mortality event, uncorrelated to flu or other trends, and that move-in activity remains strong. Regarding pricing, he noted a strong start with a leap-year-adjusted RevPOR of around 5%, supported by internal rent increases and favorable street rates, with good pricing opportunities in both the U.S. and Canada.

Vikram Malhotra sought clarification on whether the 2025 SHOP guidance assumes a typical seasonal occupancy pattern, how pricing power evolves across different occupancy levels, and the strategy for growing the Ventas Investment Management (VIM) fund business.

Answer

Executive J. Hutchens confirmed the guidance assumes normal seasonality but noted recent counter-seasonal strength. He stated 25% of the portfolio is below 80% occupied and that pricing power directly correlates with higher occupancy. CEO Debra A. Cafaro added that the VIM fund is a successful and growing vehicle used to benefit the overall enterprise.

Vikram Malhotra asked about the quarterly cadence for revenue, EBITDA, and AFFO growth, questioning if there would be a step-down in Q2 before the projected step-up.

Answer

CFO Keith Taylor addressed the seasonality in the business, noting that despite higher seasonal costs in Q1, margins are expected to improve throughout the year, with the second half stronger than the first. He also pointed to the seasonal nature of recurring CapEx impacting AFFO. CEO and President Adaire Fox-Martin reiterated that the revenue step-up in the second half is supported by the implementation of bookings from the first half of 2025.

Vikram Malhotra asked for an update on the backfill pipeline for the large Google and JPMorgan Chase & Co. expirations in San Francisco and inquired about the potential for additional joint ventures or strategic actions given the company's stock valuation.

Answer

Peter Brindley, EVP, Head of Real Estate, reported that several leases are out for the spaces at One Front Street and One Market Plaza, tour activity is picking up, and planned amenity upgrades are being well-received by prospective tenants. Albert Behler, Chairman, CEO, and President, confirmed the company would consider more joint ventures on its assets if they can achieve attractive pricing, similar to past deals. He stated this strategy provides capital flexibility for growth, share buybacks, or dividends.

Sought clarification on the 2024 FFO trough, including the Meta lease expiration and the quantified impact of move-outs. Also asked about the key drivers for FFO recovery and what metrics might be used for future executive LTIP awards.

Answer

The 270,000 sq ft Meta lease expiration is confirmed, but the company will not quantify the FFO impact of specific move-outs. The FFO recovery path is accurate, driven by lower interest rates, occupancy gains, and PENN 2 lease-up. Future strategy remains New York-centric, focused on office, with acquisitions only at distressed prices, and potential for more residential development in the PENN District.