Healthpeak Properties - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered $0.06 diluted EPS, Nareit FFO of $0.45/share, FFO as Adjusted of $0.46/share, AFFO of $0.43/share, and 7.0% total same-store Cash (Adjusted) NOI growth; management reaffirmed full-year 2025 guidance ranges (FFO as Adjusted $1.81–$1.87/share; SS NOI +3–4%).
• Versus S&P Global consensus, DOC beat EPS and revenue, was roughly in-line on EBITDA, and FFO/share sat between Nareit FFO ($0.45) and FFO as Adjusted ($0.46) relative to consensus 0.458; guidance was maintained despite lab headwinds, aided by outpatient medical and CCRCs strength.
• Capital allocation optionality: $94M of buybacks through Apr 24, 2025 (5.1M shares at $18.50), $500M 10-year notes at 5.375%, ~$2.8B liquidity, and Net Debt/Adj. EBITDAre 5.2x; Hines partnership announced for Cambridge Point residential component.
• Call narrative emphasized outpatient resilience and CCRC momentum; lab segment faces near-term uncertainty (funding/regulatory), with management expecting deceleration as internalization and free-rent benefits normalize; still pursuing structured life science opportunities and buybacks within a $500M investment framework.

What Went Well and What Went Wrong

What Went Well

• Outpatient medical: 5.0% SS Cash (Adjusted) NOI growth, 973k sf executed, 86% retention, +4% cash releasing spreads; CEO highlighted internalization as a “success strategically and financially”.
• CCRCs: 15.9% SS Cash (Adjusted) NOI growth, ~86% occupancy with runway (3–4 pts upside); CFO: “rate growth of ~6% and 100 bps increase in occupancy” drove strength.
• Liquidity and capital markets: $500M 10-year unsecured notes at tightest 10-year spread in company history, ~$2.8B liquidity, and share repurchases at ~10% FFO yield.

What Went Wrong

• Lab deceleration ahead: Q1 SS growth of 7.7% benefited from free-rent expirations and internalization; management expects quarterly SS growth to slow as those benefits normalize.
• Regulatory/funding uncertainty: management cited NIH/FDA/policy headlines and tougher capital raising for some tenants; watch list composition unchanged but monitoring credit closely.
• Cost risk from tariffs: management estimated potential 2–6% cost increases for future developments (mitigated by GMP contracts and supplier work).

Transcript

Operator (participant)

Good morning and welcome to the Healthpeak Properties Inc First Quarter Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a content specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then one. Please note this event is being recorded. I would now like to turn the conference over to Andrew Johns, Senior Vice President, Investor Relations. Please go ahead.

Andrew Johns (VP of Investor Relations)

Welcome to Healthpeak's First Quarter 2025 Financial Results Conference Call. Today's conference call contains certain forward-looking statements. Although we believe expectations reflected in any forward-looking statements are based on reasonable assumptions, our forward-looking statements are subject to risks and uncertainties that may cause financial results to differ materially from our expectations. A discussion of risk and risk factors included in our press release and detailed in our filing to the SEC. We do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures will be discussed on this call. In an exhibit to the 8-K referenced to the SEC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with the Reg G. The exhibit is also available at our website at healthpeak.com. I'll now turn the call over to our President, Chief Executive Officer, Scott Brinker.

Scott Brinker (President and CEO)

Okay. Thanks, Andrew, and welcome to Healthpeak's First Quarter Earnings Call. Very excited to introduce Kelvin Moses as our new CFO. He'll be an outstanding partner for me and the senior team. When I took this role in October of 2022, I talked about getting Healthpeak closer to our real estate, immersing ourselves in the underlying business of our tenants to drive better capital allocation decisions. The merger with Physicians accelerated our transformation, and Kelvin's promotion moves us further in that direction. His well-rounded experience includes healthcare, operations, portfolio management, transactions, and development. Kelvin has been with Healthpeak for seven years and excelled at every role we've given him. As I reflected on what the role of the CFO should be at Healthpeak, we have the luxury of outstanding in-place leadership in accounting, finance, capital markets, and investor relations.

This allows Kelvin to be more of a strategic and operational CFO, and we expect a seamless transition. Our existing strategy around leverage in the balance sheet will not change. Today, our executive team is 45 years old on average, with an average tenure of 10 years at Healthpeak. Every one of us was internally promoted to our current position. This points to a strong culture, deep bench, and thoughtful succession planning. Thank you to our entire team for another quarter of excellence in execution, one of the WE CARE core values that define our culture. Execution is important in any environment, particularly in this backdrop. This team has worked diligently to meet or exceed expectations, including earnings, leasing, and merger synergies. Kelvin will cover guidance in more detail, but I want to comment that maintaining guidance against this market backdrop is a testament to our diversified, high-quality portfolio.

Strong results in outpatient medical and senior housing are offsetting weakness in our lab business caused by actions and comments from Washington that impacted biotech capital raising. I will come back to this topic. We produced another strong quarter in outpatient medical, our largest business segment. Across the outpatient sector, demand is outpacing new supply, a trend we expect will remain in our favor due to the high cost of new construction. Our decision to internalize property management has been an overwhelming success strategically and financially. We completed an additional 4.5 million sq ft since January 1, with additional markets in the pipeline. Outpatient medical is one of the very few sectors in all of real estate with positive NOI growth every year for the past two decades. We expect that portfolio to outperform other sectors if the economy slows down, and we foresee de minimis impact from tariffs.

Our senior housing portfolio had another strong quarter of occupancy and rental rate growth, driving positive 16% same-store growth. With occupancy at 86%, we still have plenty of upside to capture, and I'm very happy with the strategic and tactical decisions we've made to grow NOI in these properties. Moving to our lab business, which represents approximately 35% of our income. There's been a barrage of headlines, so consider these thoughts to be an alternative perspective. No doubt it's a bumpy road right now, but we do see some themes emerging that could be positive for our lab business over time. Most important is our government's focus on China, which has been making a big push to challenge America's leadership position in the biopharma sector. Our view is that policymakers in a bipartisan way have correctly identified U.S.-based biopharma as being paramount to our national security and economic prosperity.

We see very little chance that an America-first agenda leaves behind the biopharma sector. For too long, innovation from the U.S. has subsidized medicines around the world, and other countries have captured too much control of the supply chain. Washington's willingness to address these risks and inequities has the potential to be very positive life science real estate demand here in the U.S. This includes the push to onshore biomanufacturing and would logically include R&D as well. There appears to be support in Washington to address the profitability and complexity of PBMs and to eliminate the so-called Pill Penalty in the Inflation Reduction Act, which would extend market exclusivity for small molecule drugs by four years. Both changes would improve biopharma return on investment and therefore demand for lab space. A functional FDA is critical to the U.S. maintaining its leadership position in the sector.

Today, it takes at least 10 years and $1 billion to bring a drug to market in the U.S. It's in our national interest to look for ways to make that process more efficient. The recent job cuts at the FDA captured headlines but did not impact the scientists or the reviewers. It is early, but the feedback to date from our tenants suggests normal response times from the FDA, with only isolated delays. Final drug approvals have continued at the FDA since the inauguration. New applications have been approved as well, including last week for one of our tenants to start Phase I trials for gene-edited liver transplant. There's also discussion at the FDA of using technology to replace expensive vivarium work and a new conditional approval, which could shorten the timeline for costly Phase III trials.

The point is, there's some early evidence that the FDA is looking to encourage innovation and create faster timelines. Last point I'll make on this topic is that consumers also vote in elections, and consumer demand for innovative diagnostics and therapeutics is not going away. In fact, demand is projected to accelerate to 8% per year through 2030. We expect voters to push their elected representatives to support medical innovation. Specific to our portfolio, we continue to focus on capturing market share with our high-quality portfolio. We've signed 450,000 sq ft of leases year-to-date, and our pipeline is the largest it's been since last summer. It would not surprise us to see some tenants delay final leasing decisions given the environment, but we see this as demand getting pushed back, not eliminated.

Finally, we have even more confidence today that new supply in the sector will essentially go to zero for many years to come. This is obviously a great foundation for recovery in our lab business. I want to comment on recent capital allocation by this team, which puts our balance sheet and liquidity in an enviable position. First, we were early to shut down capital allocation life science. we have not started a new development since 2021. Second, we executed the merger with Physicians Realty Trust, which increased our allocation to the stable and attractive outpatient medical business to just over 50% while generating earnings accretion, improving our balance sheet, and creating the best platform in the outpatient sector.

Finally, we sold $1.4 billion of stabilized assets at a very attractive 6.3% cap rate and used the proceeds to fully fund our development pipeline, buy back almost $300 million of stock at an implied 8% cap rate, and bring leverage down to below fives. We also reduced floating rate debt from 20% to almost zero. That brings us to today. life science loan pipeline is active, and we continue to see opportunity to position Healthpeak for the inevitable recovery. We still believe the best time to invest is when others are not. As market uncertainty has increased, we've stepped back to reassess the appropriate risk-adjusted returns, which may be different than three to six months ago when certain transactions were negotiated. We chose to maintain our $500 million investment guidance this year, but we've now included stock buybacks in that line item to reflect our optionality.

In any event, we intend to maintain leverage within our targeted range in the mid-fives. I'm happy to turn the call to Kelvin.

Kelvin Moses (CFO)

Thank you, Scott, for the warm introduction. I'm grateful to have the opportunity to grow within Healthpeak's leadership. In this role, I'm excited to continue to help shape our business strategy and influence the outcomes that drive our operating results. The complement of my real estate and transactions mindset alongside of this outstanding team will allow us to continue to focus on disciplined capital allocation decisions that will deliver long-term value to our shareholders. Before we get started with the first quarter results, I wanted to share a brief update on our master plan development project in West Cambridge. I've spent the last five years working closely in the Boston market to help build our lab portfolio, including our land assemblage and entitlement efforts for our CambridgePark master plan.

On behalf of the team, I'm pleased to announce that we've selected Hines to join as the development partner to advance the residential component of the project. Hines brings a depth of expertise in placemaking, multifamily construction, and mixed-use development, which will allow us to commence this project once we are fully entitled late next year. We are extremely pleased with this outcome, and the partnership with Hines advances our vision to establish a mixed-use destination of scale and validates this generational opportunity that will be delivered over the next decade plus. Now turning to the first quarter financial and operating results, we reported FFO as Adjusted at $0.46 per share, AFFO of $0.43 per share, and total portfolio same-store growth of 7%. Moving to segment performance.

In outpatient medical, we reported first quarter same-store growth of 5%, driven by strong tenant retention, a positive rent mark-to-market of 4.1%, and the benefit from our continued internalization efforts. During the quarter, we executed nearly 1 million sq ft of leases, including 265,000 sq ft of new leasing, which is followed up by a strong and active pipeline as we head into the second quarter. Fundamentals for the outpatient business have never been stronger, and our team is working hard to translate this favorable backdrop into higher occupancy, stronger rent mark-to-market, and ultimately cash flow growth. Turning to lab, we reported same-store growth of 7.7%, which includes the positive impact from the expiration of free rent on two large leases in South San Francisco and a full quarter benefit of internalization.

For the balance of the year, we expect quarterly same-store growth to decelerate as the benefits of internalization and free rent normalize. Despite the challenging market backdrop, we continue to see strong demand for space within our portfolio. Year-to-date through April, we've signed 443,000 sq ft of leases and have entered into LOIs on an additional 400,000 sq ft. Finally, CCRCs. We reported same-store growth of 15.9%, driven by rate growth of approximately 6% and a 100 basis point increase in occupancy. Shifting to the balance sheet, in February, we issued $500 million of unsecured notes at a rate of 5 and 3/8. That is a 102 basis point spread over the 10 year, and this was also the tightest 10-year spread in the history of Healthpeak.

We end the first quarter at 5.2x net debt to EBITDA and $2.8 billion of available liquidity, which further positions our balance sheet for long-term success. Ending with guidance, we are maintaining our FFO as Adjusted guidance in the range of $1.81 per share-$1.87 per share. We are also maintaining our blended portfolio same-store growth in the range of 3%-4%, which reflects the strong performance during this first quarter. The strength of this diversified portfolio reinforces our ability to maintain guidance and allows us to direct our business strategy towards initiatives that will provide the greatest long-term value to the company. With that, operator, please open the line for Q&A.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then one. So that everyone may have a chance to participate, we ask that participants delimit their questions to one and a related follow-up. If you have additional questions, please requeue. At this time, we will pause momentarily to assemble our roster. The first question comes from Farrell Granath with Bank of America. Farrell, please go ahead.

Farrell Granath (Equity Research Associate)

Thank you. Good morning, and congratulations, Kelvin, on the new position. My question is about, you've made comments about weakness life science, and I appreciate all the comments that you made on the policy front. I'm curious, kind of in a broader sense, what would change you to a more positive expectation and performance, perhaps in the back half of 2025, if there was any news or updates to be expected?

Kelvin Moses (CFO)

Yeah, sure. I'll hear from you this morning. I'll start with that. Scott Bohn probably has some comments as well, but I think it's important that we do have a diversified portfolio. Just to start with, 65% is in industries with really strong fundamentals and across the entire portfolio, life science in particular, very high-quality assets and platform where I think we've been outperforming the market at large, and I think that will continue. Obviously, there's a lot of instability and uncertainty in certain sectors right now, if not most sectors. Biopharma is one of them. Whether it's tariffs or capital raising or regulatory uncertainty, we think that does start to calm down. Over the balance of the year, obviously, certain things they've already backed away from, from pressure from Congress or just the American public, and I do think that will benefit the sector and add some stability.

The first 90 days or 120 days of this quarter were not ideal from a capital raising standpoint. That is not new information in terms of what has happened with IPOs or venture capital or secondary funding. We still see a lot of upside. Certainly, the patent cliffs that Big Pharma needs to fill, that is not going away. Biotech is the likely spot for them to look. There was a deal announced yesterday, just as an example. There are things that we can point to that we see as potential inflection points, but the first 120 days was not ideal from a capital raising standpoint.

Farrell Granath (Equity Research Associate)

Thank you. I guess, Ben, you made comments about potential push-outs of releasing in life science. tell me if you could potentially quantify that with your current pipeline, if that is what you're seeing or things getting pushed out by single quarters or longer-term decision-making.

Kelvin Moses (CFO)

Yeah, I mean, we signed 250,000 sq ft plus of leases in the first quarter, continued momentum into April, really strong LOI pipeline. As I mentioned, there's a pipeline beyond that tours, prospects, proposals that is the largest it's been since last summer. We actually feel pretty good about the leasing that we're doing. We do have 400 basis points or 500 basis points of leases that have been signed that are just not yet occupied and paying rent. Obviously, those leases will commence in the coming quarter. There's clearly some positives. We feel good about that. Bohn, you should comment.

Scott Bohn (CDO and Head of Lab)

Hey, Farrell, Scott Bohn. I mean, the thing I would add too is that the tenants that are in our LOI pipeline or our active demand pipeline, those are tenants that typically have raised capital or already have well-capitalized balance sheets and aren't the groups who need to raise capital in the next six months. Groups who are executing on their business plan and can play through kind of some of this noise here.

Farrell Granath (Equity Research Associate)

Okay. Thank you. Appreciate it.

Operator (participant)

Your next question comes from the line of John Kilichowski with Wells Fargo. John, please go ahead.

John Kilichowski (VP of Equity Research)

Good morning. Thank you. I guess first question would be on the guide, the $500 million of investments. Were the share repurchases driven by the relative attractiveness of the stock, or is that more due to the difficulty of underwriting lab here?

Scott Brinker (President and CEO)

It's more the attractiveness of the stock. We have the luxury of a strong balance sheet that gives us optionality and flexibility. We bought back stock year to date, almost $100 million at a roughly 10% FFO yield for a really high-quality portfolio. That was the driver.

John Kilichowski (VP of Equity Research)

Okay. I guess in terms of underwriting lab in an environment like this, how has it changed for you in terms of what you need to see maybe pre and post-Liberation Day?

Scott Brinker (President and CEO)

Yeah. It's more just timelines for leasing. I don't know that rental rates are changing in any material way. It's just if we underwrote a two-year lease-up six months ago, that might be a longer lease-up today. There's just uncertainty. It may end up being less. The headlines today change daily, if not hourly. From where we sit today, we would be smart to underwrite a longer lease-up than we would have six months ago.

Scott Bohn (CDO and Head of Lab)

Yeah. I would also add that it's less about kind of Liberation Day and the tariffs than it is about just the uncertainty and instability. The NIH funding and the FDA more so than tariffs that biotechs are looking at.

John Kilichowski (VP of Equity Research)

Got it. Thank you.

Operator (participant)

Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Austin, please go ahead.

Austin Wurschmidt (Senior Equity Research Analyst)

Great. Thanks. Good morning, everybody. Scott Brinker, just going back to your comments about weakness in the lab business, I guess, can you just provide an update about the health of the tenant base and more specifically the watch list and whether there's any signs of credit concerns emerging at this point?

Scott Brinker (President and CEO)

Yeah. We had a significant improvement in rent collections and bad debt in 2024 relative to 2023 on top of really strong leasing volumes. At any point in time, a number of our tenants are in the market actively raising capital, and that has just been a lot more difficult for the last three to four months. There are a number that are still in process of trying to raise money. Unclear if they will make it or not. A lot depends on whether some of this regulatory uncertainty and market chaos stabilizes, in which case, I think a good number of them will end up raising money. If not, obviously, a number of them will not.

We still feel like the guidance range that we've reaffirmed, by the way, so there's no change in guidance or same-store, captures the potential upside and downside scenarios from where we sit today.

Austin Wurschmidt (Senior Equity Research Analyst)

That's helpful. Maybe pivoting to your comment about risk-adjusted returns and potentially moved here versus three to six months ago. I mean, how many of the parties that you're speaking with are in need of a solution in the near term and could be price takers where you think maybe you can still get a deal done, particularly on sort of the loan investments that you've spoken to?

Scott Brinker (President and CEO)

Yeah. I think it's too early to speculate on that, Austin. We'll have more clarity in the coming weeks and months, but I hesitate to try to give precise feedback on a question like that. I appreciate the question itself, but we're just too early in that process.

Austin Wurschmidt (Senior Equity Research Analyst)

Understood. Thanks for the time.

Operator (participant)

Your next question comes from the line of Ronald Kamdem with Morgan Stanley. Ronald, please go ahead.

Ronald Kamdem (Managing Director and Head of US REITs and CRE Research)

Hey, just going back to sort of the guidance and just a little bit more details because presumably a lot of the deceleration is coming from the lab side, right? Because the MOBs and DCRC seems pretty stable, as you mentioned. Just is it all sort of free rent, deceleration? Just what's the color on sort of the decel on the lab side would be more helpful. Thanks.

Scott Brinker (President and CEO)

Yeah, Ron, even in the outpatient and senior housing sector, our first quarter results were significantly ahead of the initial year guidance for those segments. There could be some deceleration in all three segments. I think you're right. The bigger drop is more likely to be life science. we did have free rent that was supporting our first quarter result, the benefit of internalization, which we'll no longer have that year-over-year benefit life science. that will have an impact as well. Then just the uncertainty that I mentioned earlier around the funding environment.

Ronald Kamdem (Managing Director and Head of US REITs and CRE Research)

Great. Just my follow-up would be, do you think about sort of your three markets, San Diego, Boston, San Francisco? Is there one that's better positioned, worse positioned from all these sort of funding environments and cuts, so forth? Just trying to figure out what the ranking looks like in your minds. Thanks.

Scott Bohn (CDO and Head of Lab)

Yeah. Hey, Ron and Scott Bohn. I think Boston overall, relative to market size, continues to be the slowest. We're fortunate to have several growth tenants there driving the demand within our portfolio and very little roll or vacant space there. So we're in good shape in Boston. I'll say it's equal. I would say from a demand perspective, it's probably the slowest. San Diego has been pretty consistent over the past 12 months-18 months. In San Francisco, we clearly see the most demand there. Part of that is due to our portfolio and our scale. We do a lot of deals that don't hit the active broker sheets. That's the order I would rank them.

Ronald Kamdem (Managing Director and Head of US REITs and CRE Research)

Thanks so much.

Operator (participant)

Your next question comes from the line of Seth Bergey with Citi. Seth, please go ahead.

Seth Bergey (Senior Analyst)

Hi, thanks. Can you give some more color on the 2Q lab leasing activity today? Is that from the development pipeline and kind of what does the rent look like for that space?

Scott Bohn (CDO and Head of Lab)

Yeah. For the 2Q numbers, I mean, I don't think we're going to get into the quantum of the LOIs. Most of the LOIs are in the operating portfolio. The pipeline, as Scott mentioned, has certainly been since last summer. There are certainly deals in that pipeline that do fall into that dev and redev bucket. I don't think we're ready to get into the details of those deals just yet because it'll matter when they're executions versus pipeline.

Seth Bergey (Senior Analyst)

Okay. Great. Just for the follow-up, for the $500 million of investments activity, how are you kind of thinking about capital allocation in terms of development or external growth versus buybacks today?

Scott Brinker (President and CEO)

They will be flexible. It depends what happens with the stock price. It depends what happens with some of these opportunities we've been pursuing and what the potential new terms would look like. Hard to speculate. We've got optionality.

Seth Bergey (Senior Analyst)

Thanks.

Operator (participant)

Your next question comes from the line of Rich Anderson with Wedbush. Rich, please go ahead.

Rich Anderson (Managing Director)

Thanks. Good morning. Kelvin, congrats on the move-up. Looking forward to working with you. Scott, you mentioned a lot about sort of the slowdown in leasing life science, understood given all the chaos, which is the right word to use. Specific, though, to sort of the marquee leasing that we've talked about in the past, Portside, Vantage, Directors Place, $60 million of NOI there, potential. You've made some good progress getting through a lot of that. Maybe half of it is sort of locked up for future revenue recognition. Do you think that now, if getting to $60 million was a three-year event to actually realize that cash, do you think it's significantly pushed back now based on what's happening, or do you think you're still on track with those three specific opportunities?

Scott Brinker (President and CEO)

Rich, I think it just depends. I mean, if the next nine months look like the last three months, it might take a little bit longer. We have seen that the market can shift pretty quickly based on one press release or comment. It is hard to predict what the future holds. We do see, as I said in the prepared remarks, a lot of themes emerging that could be very helpful. Stability would be the most important thing in the near term for us to answer your question on specific lease-out timelines.

Rich Anderson (Managing Director)

Okay. Fair enough. Then follow-up is you talked about kind of reassessing required returns on life science loan program. If memory serves, you were getting an eight-ish type number on that. The buyback was an 8% implied. What is the appropriate premium to doing buybacks? Is it 100 basis points in your mind, or is it more or less? I mean, or is that sort of a TBD number that you are sort of addressing as you monitor the market? Thanks.

Scott Brinker (President and CEO)

Yeah. I mean, the 8% you mentioned was a really low loan-to-value first mortgage in Torrey Pines, kind of premier submarket. Most of life science investments that we had been pursuing were more distressed situations that the returns were substantially higher than 8%. I mean, way into the double digits. It is a different investment profile than buying back our own stock.

Rich Anderson (Managing Director)

Okay. And so that double digit isn't enough for you at this point? Is that a fair statement?

Scott Brinker (President and CEO)

Yeah. That's why we stepped back. We're reassessing that pipeline. It's not going away, but we have stepped back to reassess.

Rich Anderson (Managing Director)

Fair enough. Okay. Thanks, everyone.

Operator (participant)

Your next question comes from the line of Vikram Malhotra with Mizuho. Vikram, please go ahead.

Vikram Malhotra (Managing Director)

Good morning. Thanks for the questions. Maybe just first one life sciences specifically. Can you kind of talk about the components of same-store, specifically occupancy, how you see that trending for the balance of the year? If there's some pressure, then how much of that is known versus sort of just a placeholder for the uncertainty that you referenced?

Scott Brinker (President and CEO)

Yeah. Vikram, we don't guide to occupancy. Never have. We're certainly not going to start to in an environment like this. It's possible that occupancy comes down a bit. I mentioned the offsets. We've signed a ton of leases that will become rent-paying spaces in the next couple of quarters. We continue to sign leases here in the first quarter into April. Got a bunch of LOIs. The offset is we obviously have 600,000 of maturities this year, and we give really good clarity in the supplemental about what's happening with each of those, whether they're going into redevelopment under LOI, being negotiated, or likely going vacant. There's pretty good clarity there. The uncertainty element is what happens with regulatory policy and bad debt. That's just too hard to speculate on in an environment like this. Most important is diversified portfolio.

Our earnings guidance has not changed. Our same-store guidance has not changed. Those are the numbers that we are focused on, the aggregate company-wide metrics.

Vikram Malhotra (Managing Director)

Okay. Just to clarify, while the overall same-store has not changed and the guide has not changed, I'm assuming the MOB side is doing better, like you referenced. That's probably gone up. The same-store NOI life sciences has gone down or decel. Is that fair?

Scott Brinker (President and CEO)

From where we sit today, that's most likely. Again, there's quite a bit of uncertainty to be too precise life science in particular. The outpatient business is doing very well. Great portfolio platform, good fundamentals. We do feel good about that sector.

Vikram Malhotra (Managing Director)

Okay. Just the last thing, just to clarify. The watchlist you referenced, I'm assuming that's a review you've done over the last 30-60 days, given this uncertainty. Can you kind of frame it for us a little bit? Compared to two years ago when we were coming out of all this uncertainty during COVID, too many companies had formed. How does the watchlist compare today to that uncertainty maybe two, three years ago?

Kelvin Moses (CFO)

Hey, Vik. This is Kelvin. We have a very robust tenant credit monitoring platform. I'd say that where we sit today, the composition of our watchlist hasn't changed materially. I don't think there's anything that we can speculate on right now. We still kind of need to wait and see. The composition hasn't changed materially.

Vikram Malhotra (Managing Director)

Thank you.

Operator (participant)

Your next question comes from the line of Michael Carroll with RBC Capital Markets. Michael, please go ahead.

Michael Carroll (Managing Director)

Yeah. Thanks. I just wanted to quickly follow up on life science side. I know, Scott, you kind of mentioned in the call that there's a lot of tenants or maybe a few tenants that are trying to raise capital. And if they can't, then that could be a problem. I guess, first, how many are we talking about here? What happens if they can't raise capital? Is it just kind of a general mixture of some could be bought out and others might default on their lease? I mean, what's the type of scenarios we should think about related to your earlier comments?

Scott Brinker (President and CEO)

Yeah. There are subtenants in some of the spaces. Each one is unique. I will not speculate on the number. I just continue to say it. The guidance range that we have reaffirmed captures the potential outcomes of what we foresee based on the very detailed credit monitoring that we do. Kelvin referenced it. It is qualitative. It is quantitative. Kind of looking at it from every angle. Obviously, spending a lot of time with the companies that we think do need to raise capital to continue.

Michael Carroll (Managing Director)

Good. Okay. I guess, congrats, Kelvin. Maybe can you talk a little bit about the Hines agreement that was announced? I know that their plan is to build apartments on this site. How should we think about the benefits and the cash flow that could come from DOC related to this? I mean, is it related to selling the land in the beginning and then you get some upside, or will this not really kind of hit your P&L until these buildings are completed? I guess, how should we think about the amount and the timeline of that?

Kelvin Moses (CFO)

Yeah. I'd look at it as a phased takedown. The agreement we have with Hines is a forward valuation on the land. As they get ready to take down sites over time, including the first one that would take place within 6 months-12 months of entitlement plate next year, we would be able to recapture those proceeds. It'll be over time.

Michael Carroll (Managing Director)

Okay. Great. Thank you.

Operator (participant)

Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Juan, please go ahead.

Robin Haneland (Senior Equity Research Associate)

Hey, this is Robin Haneland on Juan. Just curious if you can provide a bit more detail on the watchlist profiles. Are these tenants in any particular sectors? Is there any sites you can share on the aggregate watchlist pool as far as the total portfolio?

Kelvin Moses (CFO)

Hey, Juan. This is Kelvin. I don't think we have granular detail to share. Again, I think the watchlist composition is consistent with what it's looked like in the past. We continue to monitor actively. As we get further along in the year, we'll have more color.

Robin Haneland (Senior Equity Research Associate)

Got it. You talked a lot about the stepping back in investments. I imagine banks are also sidelined at this point. Just curious if you can elaborate. What do you want to see to still avoid in lending? On the purchase agreements tied to your loans, how willing are sellers to provide that as part of the deals?

Scott Brinker (President and CEO)

We have purchase options on everything we've done today. And we'd have options on everything that we would do in the future. I mean, that's just fundamental to the strategy here would be a pathway to ownership on buildings that we want to own. What would need to change? Probably better security, potentially higher rate. Come to mind is things that are on our mind as we reassess life science pipeline.

Robin Haneland (Senior Equity Research Associate)

Thank you.

Operator (participant)

Your next question comes from the line of Wes Golladay with Baird. Wesley, please go ahead.

Wes Golladay (Senior Research Analyst)

Hey. Good morning, everyone. Do you expect to see any distress opportunities from the tier-one locations for lab if this goes on for another year?

Scott Brinker (President and CEO)

The answer is yes. I mean, that's been the pipeline. Those are the things we're pursuing. We do see significant opportunity coming out of this. I mean, we've outperformed the sector the last couple of years. Capital allocation decisions made in the past two to three years have positioned us well to take advantage of the distress. We still see that opportunity. It's just a matter of when is the right time to invest and what are the right terms. That's what we're reassessing. The answer to your question is yes, absolutely.

Wes Golladay (Senior Research Analyst)

Okay. When you look at your outpatient medical developments, do you have a higher hurdle for that? Do you expect any impact from the tariffs on the development cost in a material way?

Scott Brinker (President and CEO)

You want to comment on tariffs?

Scott Bohn (CDO and Head of Lab)

Yeah. Sure, Wes. I can start with the tariffs. I mean, I think what we're seeing in the tariffs, if the tariffs are in place today, continue, we'd probably see an estimated 2%-6% increase in cost. I think what's important on our active developments on the OM and lab side, we're 100% under GMP contracts. Over 85% of our redevs are under GMP. That accounts for the building core and shell and any ongoing TIs. We see little to no risk of cost increases to our active portfolio. Going forward, again, it's a little bit of a murky crystal ball, but probably in the 2%-6% range. We're also working very closely with our suppliers and GCs to ensure we drive those costs down as much as we possibly can.

Wes Golladay (Senior Research Analyst)

Okay.

Do you have a higher hurdle rate for future projects? At some point, you may want to maintain the relationships you have, but then also your costs may go up. How do you manage that?

Scott Brinker (President and CEO)

Yeah. I mean, certainly in a volatile environment, we have to be thoughtful and flexible on capital deployment and what's the appropriate risk-adjusted return. That is why you saw us scale back the amount of the $500 million of investments that is going towards acquisitions or loans and increase the buyback. The answer is yes. We are flexible. We adjust and allocate capital to receive the best risk-adjusted return.

Wes Golladay (Senior Research Analyst)

Okay. Thank you.

Operator (participant)

Your next question comes from the line of John Pawlowski with Green Street. John, please go ahead.

John Pawlowski (Managing Director)

Thanks for the time. Kelvin, could you spend a few minutes talking through the West Cambridge development? I don't have a good sense of what the total construction costs might be over time, what percentage of it's going to come through Healthpeak's balance sheet timeline. Would love an update on kind of the bigger master plan and the capital costs and the time to deploy the capital.

Kelvin Moses (CFO)

Yeah. I might start with we're not yet fully entitled on the project. We're working through the entitlements now. We expect to be entitled at the end of 2026. The Hines partnership has been our focus really to accelerate the project, catalyze the projects with residential, which is the highest in demand right now. We do not have any construction cost exposure to the residential component. Hines will be responsible for all of those expenses. Down the line, as the market improves, we'll evaluate when it's appropriate to get started and pursue the lab component. We're really focused on Hines right now. We're happy to have them as a partner and being able to get started on the project.

John Pawlowski (Managing Director)

I guess I worry a little about the dynamic that while you're waiting to start lab in practice, you're going to be pot committed to this deal. You are effectively committing to a big check today. I guess maybe any comments there would help given where your stock's trading and just the total capital cost. How high of odds are there that you're going to start these lab developments in West Cambridge?

Kelvin Moses (CFO)

I might point you back to investments we've made in West Cambridge specifically. Half of our $600 million+ has been developable sites. The other half is actually leased today. We have credit tenants occupying buildings that are paying us rent. I don't think we have pressure per se to move quickly. Hines is prepared to get started within 6 months-12 months on the residential component. The economics there are actually beneficial. It's a forward value on the land. We get a share of the upside. I think we're going to actually be able to pull in some economics from the Hines transaction.

John Pawlowski (Managing Director)

Okay. Thank you.

Scott Brinker (President and CEO)

Yeah. John, they're independent. I mean, the multifamily and the lab are independent projects. We're not allocating any capital to the multifamily. That's Hines. I just want to make sure you're clear on our capital commitment and the deal structure.

Operator (participant)

Your next question comes from the line of Jim Kammert with Evercore. Jim, please go ahead.

Jim Kammert (Managing Director)

Hi. Good morning. Thank you. Maybe a qualitative probe potentially on the development and redevelopment prospects. Would you say that the number of tenants you're having discussions with and their aggregate space needs is really kind of held together? It's just we can all appreciate that the decision-making has been on pause, but just trying to get a better sense of what that kind of looks like as an aggregate pool, your number of conversations, and so on.

Scott Brinker (President and CEO)

Yeah. Jim, it's Scott again. I would say go back to my comment that I made earlier. The pipeline that we have today, both in the LOI pipeline and the active management pipeline, these are tenants that are well-capitalized. They've already raised funds. They aren't looking to raise money in the next three to six months. They've got their business plan and are looking to take either additional space, whether they're renewing in place or moving. Typically, if they're moving, they're looking to take additional space.

Jim Kammert (Managing Director)

Okay. Derivative of that question, you haven't seen, to your knowledge, tenants that you're speaking with jump ship and go somewhere else for $10 cheaper rent. It's just not a price issue. It's really a total capital and visibility of their business issue making the decision to lease or not.

Scott Brinker (President and CEO)

Yeah. Yeah. Yeah. I think that's accurate. I think that's why you continue to see the incumbent landlords win an outside share of the deal, right? I mean, I think these are mission-critical facilities. They're going to make a decision for the long term and want to know who their landlord is going to be for the duration of the lease. That's one of the reasons we've outperformed the broader market.

Jim Kammert (Managing Director)

Sounds good. Thank you.

Operator (participant)

Your next question comes from the line of Mike Mueller with J.P. Morgan. Mike, please go ahead.

Mike Mueller (Senior Equity Research Analyst)

Yeah. Hi. First, I also want to pass on and congrats to Kelvin. For the two questions, first, it looks like additional rents may have helped your MOB growth this quarter, both sequentially and year over year. Was that the case? If so, how much? For the second question, what do you see as full occupancy for the CCRCs?

Mark Theine (SVP of Outpatient Medical)

Yeah. Hey, Mike. This is Mark Theine. I'll take the first one on the Medical City additional rent. We had a great start to the year there. I had a budget, as you mentioned, and I had a schedule. It's a total of about $1 million in the quarter, which is about 50 basis points impact on our same-store for the year-over-year and sequential.

Scott Brinker (President and CEO)

Mike, your senior housing question, we're at roughly 86% today. There are a couple of properties that bring that average down. There is upside. It is probably in the 300-400 basis point range, would be a rough estimate just based on trajectory. The lead volume continues to be strong. Definitely some upside to capture.

Mike Mueller (Senior Equity Research Analyst)

Got it. Thank you.

Operator (participant)

Your next question comes from the line of Omotayo Okusanya with Deutsche Bank. Omotayo, please go ahead.

Omotayo Okusanya (Managing Director and Head of U.S. REIT Research)

Yes. Good morning, everyone. Kelvin, first of all, congratulations. I look forward to working with you, bro. My first question is around, Scott, I mean, you're kind of giving a very candid picture life sciences, which I appreciate. I take a look at your leasing volumes, and it sounds like things actually accelerating into 2Q relative to Q1. How should we be—and this kind of sounds very much like last year as well, right, where the backdrop was tough, but your leasing actually got better over the course of the year. Is that the same idea this year, or are you really kind of cautioning that maybe we may not have that same kind of tempo this year?

Scott Brinker (President and CEO)

First quarter is always a little weak. That was the case last year. We were less than 200,000 ft, and we signed, I don't know, 800,000 ft in 2Q. There was definitely an increase. We have a good pipeline. I mean, we keep saying that. Yes, the leasing pipeline is strong, whether it's what's signed in April, the LOIs, and what comes behind that. As we've said a couple of times now, it's as strong as it's been since the summer. We've also said it wouldn't surprise us if some of those lease executions get pushed back. That's just the reality of the market environment that we're in. There's a huge amount of uncertainty. We are giving a candid view. We still love the sector. We have a great market position, high-quality real estate.

If you're expecting massive earnings growth and turnaround in 2Q, I mean, that's going to be tougher. I mean, I don't think that should be a surprise if you look at what's happened to biopharma capital raising in the start to the year.

Omotayo Okusanya (Managing Director and Head of U.S. REIT Research)

Nope. Fair enough. Also, for the new leases in the quarter, the weighted average lease term was like 58 months or so. That number is usually almost double that. Anything unique there in regards to mix or just terms changing, people wanting shorter leases because of the uncertainty?

Scott Bohn (CDO and Head of Lab)

No. This is Scott Bohn. I think the new leases were on average about five years, which is not too far off where we were, I think, for full year 2024. As we've talked about, when we talk about mark-to-markets and other things in life science portfolio, our deals tend to be pretty chunky. Looking at it on a quarter-by-quarter basis isn't necessarily the right way. You got to look at the full year or the trailing 12 months. I don't think there's anything specific in that quarter that is telling.

Omotayo Okusanya (Managing Director and Head of U.S. REIT Research)

Yeah. That's helpful. Okay. One more for me, if you don't mind. The redevelopment bucket for other redevelopment, that amount increased this quarter. Now you have 15 projects versus 12 last quarter. Could you talk a little bit about kind of what the additional projects were? What's being moved into redev? Is it like a building you have that's kind of moved out and you're now moving into redev? Just kind of trying to understand some of the movement there.

Kelvin Moses (CFO)

Yeah. We added three projects to that bucket this quarter: two lab buildings and one MOB building. All of them were 100% pre-leased, just some pretty large TIs as well as base building work needed on those buildings. It is about 130,000 ft and about $40 million total in those. The bulk of those, I think, are Q4 starts for the lease, supposed to be in for the next few quarters.

Omotayo Okusanya (Managing Director and Head of U.S. REIT Research)

Have the current tenants already moved out of those buildings?

Kelvin Moses (CFO)

Correct.

Omotayo Okusanya (Managing Director and Head of U.S. REIT Research)

Okay. Helpful. Thank you.

Operator (participant)

Your next question comes from the line of Rich Anderson with Wedbush. Rich, please go ahead.

Rich Anderson (Managing Director)

Thanks for the quick follow-up. When you think about maintaining guidance and perhaps ramping up buybacks and ramping down life science loan business, is the net forced downward, but yet you're able to maintain guidance? Would that be something—would the combination of those two observations actually help you to sustain, maintain guidance? I'm just curious how the math works in your mind. Thanks.

Scott Brinker (President and CEO)

Yeah. I mean, it depends, obviously, what price for buying back the stock and which investments either proceed or not. Some have higher returns. Some have higher returns than others. There is also the impact on leverage. We did make the comment. In any event, we do not expect to take our leverage above 5.5x. Buybacks, obviously, are not helpful for leverage, whereas investments could potentially be high enough yielding that they would be beneficial to leverage. There is an impact, but I will come back to regardless of how we use the $500 million. That could include just sitting on the cash and keeping leverage lower. We still feel like our guidance range captures the potential endpoints.

Rich Anderson (Managing Director)

Okay. Great. Thanks very much.

Scott Brinker (President and CEO)

Yep.

Operator (participant)

This concludes our question-and-answer session. I would like to turn the conference back over to Scott Brinker for any closing remarks.

Scott Brinker (President and CEO)

Thanks for your time today. I look forward to seeing you in May, if not June, at the various events. Thanks, everyone.

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.