Healthpeak Properties - Q4 2025
February 3, 2026
Transcript
Operator (participant)
Good morning, and welcome to the Healthpeak Properties, Inc.'s Fourth Quarter 2025 Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference 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. You may begin.
Andrew Johns (SVP of Investor Relations)
Welcome. Today's conference call contains certain forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, these statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. A discussion of risks and risk factors is included in our press release and detailed in our filings with 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 and exhibit to the 8-K we furnished to the SEC yesterday. We have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. The exhibit is also available on our website at healthpeak.com. I'll now turn the call over to our President and Chief Executive Officer, Scott Brinker.
Scott Brinker (President and CEO)
Thanks, AJ, and welcome to Healthpeak's fourth quarter earnings call. Joining me for prepared remarks is our CFO, Kelvin Moses. First and most important, thank you to our entire team for battling through an historic Life Science environment to finish 2025 with earnings in line with the midpoint of our original guidance range and significant transaction activity that should drive future earnings growth. A couple of comments on our segments. Outpatient Medical represents just over 50% of our portfolio income. Kelvin will discuss our outstanding operating results in that segment, but I want to make some more general comments, including the benefits of the merger with Physicians Realty Trust. That merger created the best platform and portfolio in the Outpatient sector and positioned us to quickly and profitably internalize property management across our entire Outpatient and Life Science portfolio.
$70+ million of synergies certainly helped offset the Life Science environment. The Outpatient sector is benefiting from the ongoing shift in care delivery to lower costs, more convenient outpatient settings. Policy changes from Washington also support demand, including CMS, allowing more and more surgeries to be done in outpatient settings, and new supply continues to be very low, given the cost of new construction. All of the above contribute to the favorable operating environment we spoke to when we announced the merger two and a half years ago. The private market is now recognizing this as well, which is driving down cap rates. We're taking advantage of that demand by selling fully stabilized, less core Outpatient assets at strong prices, including $325 million in the fourth quarter at a low 6% cap rate. Turning to our lab segment.
The operating environment over the past four years peaked in intensity in the first half of 2025, which is now fully impacting earnings. But in the last five months, we've seen continued improvement in capital raising and M&A. New deliveries will soon go to zero and will remain at zero for several years. Certain Life Science buildings are pivoting to alternative uses, which helps address the supply overhang. All of the above points to early signs of an inflection point. Naturally, earnings will lag the underlying recovery because of the time to build a pipeline, sign leases, and build out the space before rent commences. But the building blocks of a recovery are in place.
Four years ago, we had the opposite view of the trajectory in the sector, and this team chose to cut off capital deployment in Life Science, which at the time was by far our largest business segment. That decision, combined with the merger and related synergies, has allowed us to grow the dividend and maintain earnings since 2022 when the downturn began. A significant accomplishment, given the severity of the environment we've been up against. As the sector recovers, we now have opportunities to acquire properties that would have been untouchable in the past and to do so on a compelling basis. While others in the sector are retrenching, we're strengthening our portfolio and platform, including the recent Gateway acquisition and hiring Dennis Sullivan to lead San Diego and Claire Donegan Brown to lead Boston. Our team was working hard over the new year.
In late December and early January, we closed the Outpatient Medical sales and recycled that capital into a highly strategic 1.4 million sq ft campus in South San Francisco. We see potential for significant upside as the sector recovers, as the campus has more than 500,000 sq ft of vacancy in a prime location. We now own and control 210 acres in South San Francisco, which is roughly one-third of the land in the entire submarket. We own 6.5 million sq ft of space at various sizes and price points, so we can provide unmatched solutions to current and future tenants. A recent report from a leading brokerage firm showed the Bay Area led all Life Science markets in the fourth quarter and full year 2025 in absorption and leasing activity and has the largest volume of current tenant demand.
That broker report is consistent with our own leasing activity and pipeline and further supports the acquisition. Moving to Senior Housing. Our fourth quarter results were outstanding, with 17% same-store growth. We point to three factors driving the growth. First, our highly amenitized full continuum campuses that resonate with seniors. Second, our asset management team collaborates with our operating partners to develop and execute property-specific business plans. And third, favorable supply and demand fundamentals. We expect all three factors to drive another year of strong growth in 2026. Okay, I want to comment on the Janus Living announcement from January 7. Our Senior Housing portfolio has been operating at a very high level, but was largely ignored inside Healthpeak, given its relative scale.... In addition, we have significant expertise and relationships in the sector, two valuable resources that were being underutilized.
Over the past several quarters, with a singular focus on generating shareholder value, we worked alongside our board and advisors to review a range of strategic alternatives to the status quo. We chose to pursue the creation of a pure-play Senior Housing REIT. We believe the planned IPO is a unique and creative way to capture value in the near term through a higher multiple on our Senior Housing NOI, and as a significant shareholder in Janus Living, to participate in future value creation from internal and external growth. The transaction can be summarized as follows: Healthpeak intends to contribute its entire Senior Housing portfolio to Janus Living in exchange for all the shares in the new company. Shares in the new company will be sold to the public in the IPO, which will dilute Healthpeak's ownership.
Janus Living will own 100% of its properties in a REIT structure. Healthpeak will be the manager for Janus Living, with strong alignment, given our ownership interest in the new company. Simply put, our economics will be driven by Janus Living's operating results and stock price. Since making the announcement in January, we closed on the purchase of our joint venture partner's 46.5% interest in a 3,400-unit Senior Housing portfolio for $314 million. We now have full control of those 19 communities. Over the next few months, we expect to transition 11 communities to Pegasus Senior Living and eight communities to Ciel Senior Living under highly aligned management contracts. We have long and successful relationships with the principals of each company.
Both Pegasus and Ciel have successfully underwritten and executed operator transitions, and they have strong track records in these regions. We have $360 million of additional relationship-driven acquisitions in our Senior Housing pipeline. These are newer vintage assets located in high-growth markets in Orlando and the northern suburbs of Atlanta, both markets that we know very well. We expect the acquisitions will close in the first quarter and be contributed to Janus Living. We're excited to add Jonathan Hughes to our team as SVP of Finance and Investor Relations. Jonathan knows the sector well and will lead our efforts with the street at Janus Living, while Andrew Johns will continue to lead that effort at Healthpeak. In terms of timing, we filed a confidential S-11 with the SEC in December.
The SEC process will determine the ultimate timing of the IPO, but our current expectation is to close the offering in the first half of this year. I'll turn it to Kelvin to review our 2025 results and 2026 outlook.
Kelvin Moses (CFO)
Thank you, Scott. Before we get into the 2025 financial results, I want to briefly highlight one of our operational initiatives. We continue to make investments in technology, team, and process to deliver our investment management capabilities to a broader asset base, even more efficiently than we have in the past. A component of the strategy is the acceleration of corporate automation, which will streamline our internal workflows and deliver a best-in-class experience to our clients. We're excited to welcome Omkar Joshi as our new Head of Enterprise Innovation to lead us through this next chapter of our growth. Omkar previously held leadership roles in both healthcare and real estate at Palantir. Now turning to the results. For the fourth quarter, we reported FFO as adjusted of $0.47 per share, AFFO of $0.40 per share, and total portfolio same-store cash NOI growth of 3.9%.
For the full year, we reported FFO as adjusted of $1.84 per share, AFFO of $1.69 per share, and total same-store cash NOI growth of 4%. Starting with Outpatient Medical, we continued to deliver sector-leading results, and for the year, we executed 4.9 million sq ft of leasing, including 1 million sq ft of new leasing. This is the first time in company history that we have achieved this record milestone for new leasing. We also achieved cash re-leasing spreads of 5% on renewals, 79% tenant retention, and ended the year at 91% total occupancy. We also ended the year with same-store growth of 3.9%, which was above the high end of our original guidance range.
These results reinforce our leadership position in Outpatient Medical, highlight our focus on deepening relationships with leading health system partners, and demonstrate our ability to capitalize on strong sector fundamentals. Most importantly, this reflects a tremendous team effort and a fantastic outcome for our platform. Moving to lab, we ended the year with 1.5% same-store growth and total occupancy of 77%, inclusive of our recent Gateway portfolio acquisition in South San Francisco, which depressed total occupancy by more than 150 basis points. For the full year, we completed nearly 1.5 million sq ft of lease executions, including 562,000 sq ft of new leasing and positive 5% cash re-leasing spreads on renewals. Since year-end, we have an additional 100,000 sq ft of leasing activity either executed or under LOI. And finally, Senior Housing.
We ended the year with 12.6% same-store growth, which was meaningfully above the high end of our original guidance range and includes 16.7% growth in the fourth quarter. Our 15 life plan communities that comprise our same-store pool have delivered tremendous results over the last five years, and our entire Senior Housing portfolio is well positioned to take advantage of healthy sector fundamentals. Congratulations to Patrick Cheng, our entire Senior Housing team, and operating partners for achieving a record year in entrance fee sales, highlighting excellence in execution, and underscoring the importance of aligning with the right operating partners that have the expertise to deliver leading results... Briefly on the balance sheet before moving on to guidance. We ended the year at 5.2x net debt to Adjusted EBITDA and $2.4 billion of liquidity.
We maintained focus on the strength of our balance sheet and prioritized disciplined capital allocation to pursue strategic investments and fund portfolio growth. Now turning to 2026 guidance. We are forecasting FFOs adjusted to range from $1.70-$1.74 per share. Our total same-store NOI growth is forecasted in the range of -1%-+1%. This assumes Outpatient Medical between 2%-3%, lab -5% to -10%, and Senior Housing ranging from 8%-12%. Our earnings guidance for 2026 reflects the Life Science environment over the past several years. The reduction in earnings is attributable to the loss of occupancy in lab, which, as we have noted, has a lagging impact to earnings.
This equates to $0.12 of earnings from the lost base rent, OpEx, and capital to re-lease the space, and includes the impact of a $68 million contractual purchase option exercised in Salt Lake City at an 11% cap rate. Strength in our Outpatient Medical and Senior Housing segments offset the impact of balance sheet refinancing at higher rates, the receipt of loan proceeds of $150 million in 2025 at an approximately 10% interest rate, and drag from redevelopment and development. The leading indicators supporting each of our businesses gives us a foundation to grow from and an opportunity to capture demand as the Life Science sector recovers. Touching on sources and uses. We're off to a busy start to the year with transaction activity.
So far in 2026, we've completed $464 million of acquisitions, including $314 million buyout of our joint venture partner in our Senior Housing rental portfolio and the acquisition of the remaining South San Francisco Gateway lab portfolio. We have an additional $360 million of Senior Housing investments under LOI or purchase agreement. To fund these transactions, we are well underway on our opportunistic capital recycling plan, including $1 billion or more of asset sales, recapitalizations, and loan repayments in 2026. Given the strong private market for Outpatient Medical, we'll continue to take advantage of that demand as an attractive source of capital.
Finally, we have approximately $1.1 billion of refinancing activity in 2026, including $650 million of senior unsecured notes maturing in July and an additional $440 million of secured mortgages maturing throughout the year, which will either be refinanced or repaid. Finally, two housekeeping items related to Janus Living before we move into Q&A. With respect to our previously announced Janus Living IPO, the impact of the proposed formation and public offering are not reflected in our most recent supplemental materials or in our earnings guidance. We should note that we do not anticipate any meaningful impact on 2026 guidance from the transaction. And one last point on this.
While we understand there will likely be many questions about the IPO, we are limited in what we can discuss specifically, and we'll focus our answers to information that we have previously disclosed on the transaction and operational information that we provide in the normal course for our Senior Housing segment. Operator, with that, you can open the line for Q&A.
Operator (participant)
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone 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 the participants to limit their questions to one and a related follow-up. If you have additional questions, please queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from the line of Nick Yulico with Scotiabank. Your line is open.
Nick Yulico (Managing Director)
Thanks. Good morning. I guess first question, perhaps for Scott. You know, in terms of the Gateway acquisition, can you just talk a little bit more about how you saw that as a complement to your existing portfolio in that market, and, and how you were comfortable, you know, taking on more vacancy with the acquisition?
Scott Brinker (President and CEO)
Oh, hi, Nick. Good morning. You're always first on the list. You must call in really early. It's all good. It gives us something to... We know what to expect. Nick is always first. Yeah, Gateway. No, it—we're really excited about the Gateway acquisition. We feel like decisions we've made over the past four years really positioned us to take advantage of these opportunities. It's a campus that never would have been available at the peak. I mean, this is either the number one or number one A submarket in the whole country. We've got a huge footprint there already. This is complementary. It really just gives Scott and the team an additional 1.5 million sq ft of... It's really opportunity, is the way we're thinking about it, not so much vacancy.
And we're using proceeds from our Outpatient sales, where there's a really deep market. We're getting great prices, fully stabilized assets that have decent growth, but certainly not the type of potential growth that we see at this Gateway campus. And we really view it as one enormous campus at this point. I mean, it's 6.5 million sq ft. You can park your car once and walk to the whole thing. I mean, it's pretty impressive in terms of what we can provide to our current tenants and, most important, prospective tenants. We really are the market leader in South San Francisco. It had really a phenomenal Q4 in terms of leases signed, a lot of tenants in the market. Doesn't mean that all that vacancy goes away within a year, but the momentum is positive.
Love the team that we have on the ground.
You know, we see kind of a break-even year one yield, with the opportunity to create some real growth over time at a basis that I think, you know, in the five, 10 years from now, people will look at and say, "Wow, that's an amazing buy at a time when there was really no one else at the table." So yeah, we're pretty excited about it, Nick.
Nick Yulico (Managing Director)
Okay, great. Thanks. And then the second question is on the Lab segment, and I wanted to see if there's any way you can give us a preview of how to think about, you know, occupancy, sort of total occupancy for Lab, the cadence of that throughout the year. And then also, I think you could say you've built in some cushion for some tenants where there may be a capital raise or not, so there's some contingency on that. If you could just sort of talk about that impact as well. Thanks.
Scott Brinker (President and CEO)
Yeah. Let's assume that the recent improvement in the capital markets and capital raising continues. We saw that commence around Labor Day in 2025, and it's continued into the first month of the new year. The conversations we have with bankers, capital markets desks, venture capitalists are quite positive, so we are optimistic that that will continue. We do think total occupancy by year-end 2026 should improve from where we ended the year in 2025, just with the caveat that the leases in Life Science are big, they're chunky. The average size is, like, 60,000 sq ft. So, you know, it can't jump around from quarter to quarter, but the pipeline is good. It's weighted more towards new leasing, which is a huge positive, and we don't have a ton of expirations this year.
So it should be a good setup to start growing occupancy again, but again, it obviously depends on the capital markets continue to be cooperative.
Nick Yulico (Managing Director)
All right. Thanks, Scott.
Operator (participant)
Our next question comes from the line of Farrell Granath with Bank of America. Your line is open.
Farrell Granath (Equity Research Associate)
Thank you. Good morning, this is Farrell Granath. I first also just wanted to dive in deeper with the lab leasing. And just thinking about it going forward, I believe you made the commentary around 100,000 of leasing activity under execution or LOI. Can you give us a little bit more background around that 100,000? It seems a little bit lower than potential past LOIs that we've been seeing, that you've stated on calls. So are you seeing a slowdown in incoming, or is it just year-end processes that now need to pick back up heading into 2026?
Scott Bohn (Chief Development Officer)
Hey, Farrell, it's Scott Bohn. I can, I can take that one. I mean, I think when you look at where we are in the calendar year, you know, you've got the holidays towards the end of the year, which are always a little bit slower, then you roll right into the JPMorgan conference, which, you know, a lot of these companies, you know, spend a lot of time preparing for. So it's, it's typically a slower time of, time of the year. You know, we do feel good with the pipeline with where it is today, at, you know, a little over 1.5 million sq ft. If you look at that compared to where we were last year, we're 50%, you know, higher starting the year.
So our jumping off point going into 2026 is much, much improved from where we were a year ago. You know, I think what's important, too, on the pipeline as we look at it, the mix of that pipeline continues to shift towards new leasing versus being very heavy on the renewal side, you know, nine, 12 months ago. You know, so we're, I think it's a good indicator of where demand is broadening.
Farrell Granath (Equity Research Associate)
Okay, great. And, and then also on the lab guidance, the -5% to -10% same-store NOI growth, can you walk through a few of the underlying assumptions within that range? I understand that a chunk of that is coming from the 2025 expirations, but then also looking forward to 2026, what, what elements are in that range, that is building?
Kelvin Moses (CFO)
Yeah, Farrell, this is Kelvin. I'll take that one. I think what was probably most important from the fourth quarter results is that the disconnect between the occupancy decline and the NOI that we achieved for the quarter is probably important to note as you're looking into 2026, as you think about that 5%-10% decline to same-store NOI. Occupancy today is in the high 77% area. We do have the opportunity over the course of the year to improve that, as Scott and Scott just mentioned. But we're likely gonna see in the first quarter some incremental impact to NOI and earnings as a result of the lower occupancy at the end of the year.
So that trajectory is not clear in the Q4 numbers, but will become a little bit more clear in the first quarter as that occupancy starts to set into income.
Farrell Granath (Equity Research Associate)
Thank you very much.
Operator (participant)
Next question comes from the line of Austin Werschmidt with KeyBanc Capital Markets. Your line is open.
Austin Wurschmidt (Director)
Hey, good morning, everybody. Kelvin, I was hoping to better understand the impact that the lab occupancy losses are having on 2026 FFOA. And if the $0.12 that you highlighted is that specifically from the expirations that occurred in the fourth quarter of last year and you know tenants that didn't renew or are there additional move-outs in that figure beyond maybe what was you know captured in the lease expiration schedule?
Kelvin Moses (CFO)
Yeah. So I think it's a combination of things. We walked through the component parts of that $0.12 impact. There's the Salt Lake City transaction that we mentioned, that's a component of that. It's about a $0.01 from the $68 million sale at 11% cash cap rate. That's a component. There's also-
... Outside of the lab portfolio, our refinancing borrowing costs are just higher today than our in place levels. So that's another reduction to our 2026 FFO. And we also received $150 million of loan proceeds at a 10% interest rate. So that's offsetting the FFO performance and that $0.12 number that we're talking about. But specifically, with respect to the lab occupancy, we did lose about 600 basis points of total occupancy for the year. And for each 100 basis points of total occupancy, that's about $0.01-$0.015 impact on earnings. So that incorporates the base rent reduction, the OpEx that we will absorb with respect to the triple nets, and then some costs for re-leasing.
As we get into the first quarter, again, 2026, you're looking at occupancy levels now that are more representative of where earnings are headed. So you'll start to see the income reduction in that first quarter and through the year. But again, when we get to the end of the year, we hope that occupancy will start to tick back up again, and we'll start to be able to capture earnings and growth from there.
Austin Wurschmidt (Director)
Can you just... You know, that was helpful, but can you just help me better understand what's driving the lag between, I guess, when the expiration occurs and the financial impact? Are these, you know, planned move-outs where they've gone to month-to-month, and you're still collecting, you know, rental income, or, you know, what, what's driving that delay between, you know, what we're seeing, I guess, in the supplemental on, you know, the operating metrics, and then what actually flows through to the financials? Thank you.
Kelvin Moses (CFO)
Yeah.
Scott Brinker (President and CEO)
Yeah, I mean, part of it's also Austin, you've got... Our reported occupancy is just a point in time. It's just literally December thirty-first. So it can be a little misleading. And I get back to the point I made, that our Life Science leases tend to be pretty big. They're 60,000 sq ft on average. So you did have a number of lease expirations in Q4, where we got the rent for most or all of Q4, but then lost the occupancy the very last day of the year. So that's, that's a material component. And then when we have an early termination, you know, we generally do have security deposits, letters of credit. In some cases, there are modest termination fees.
All the above can help cover up for a quarter or two, the impact of an early termination, but it's really kind of that forward 12-18 months, where the full impact is realized, and of course, you're now putting capital into the building. So it's really a combination of all those things that explains the lag in to the impact in earnings. You know, the same will be true on the way back up. As we sign leases and grow occupancy, it'll take a little bit of time for that to flow through earnings. So it does go both ways. Right now, we're on the wrong side of it, obviously, but we feel like the building blocks are there to get on the right side of it, as we, you know, look towards 2027.
Austin Wurschmidt (Director)
I appreciate the clarification there. Just lastly, I guess, on the 1.5 million sq ft, can you characterize the types of tenants looking for space? Are these large, established biotech companies or more smaller, kind of early stage type tenants that, you know, may have a greater sensitivity to the capital markets backdrop? And that's all for me. Thanks for the time.
Scott Bohn (Chief Development Officer)
Yeah. Hey, Austin. It's Scott Bohn. I mean, I can take that. I think if you look at the pipeline, it's a pretty good cross-section of the industry. You know, everywhere from Series A companies up through established public biopharmas. You know, and some of that is new tenancy to our portfolio, some of that is tenants renewing, some of that is tenants expanding within the portfolio. So it's a pretty wide range in the pipeline today.
Austin Wurschmidt (Director)
Thanks Scott.
Operator (participant)
Next question. Next question comes from the line of Rich Anderson with Cantor Fitzgerald. Your line is open.
Rich Anderson (Managing Director)
Thanks. Good morning, everyone. So back to Gateway, and Scott, you, you said in a response to an earlier question, you know, five years from now, we'll look back. I don't think you were being scientific in saying that it's gonna take five years for that, you know, that, that campus to recover. But when you guys were thinking, when you were underwriting this, what was the cadence of, of the recovery, at Gateway specifically, and how do you think that compares generally to Life Science overall? I mean, do you think it, it, it moves quicker or slower for whatever reason, versus the entirety of the Life Science continuum?
Scott Brinker (President and CEO)
Yeah. So I mean, the acquisitions break even on day one, just to be clear. So the upside probably gets captured over the next 2-3 years, best guess, incrementally. So yeah, the five years, 10 years, obviously, I'm not - that wasn't intended to be a comment about the lease-up period. So I'm glad I could clarify that, if that was somehow misunderstood.
Rich Anderson (Managing Director)
No, no, not at all. I figured that. Just wanted to put it on record.
Scott Brinker (President and CEO)
Yeah.
Rich Anderson (Managing Director)
So two, you know, call it two, two-plus years to sort of recapture some of that vacancy or a lot of that 500,000 sq ft of vacancy. Is that about right? I mean, rough guess right now, who knows?
Scott Brinker (President and CEO)
Yeah. I mean, it's not gonna go to 100%, but yes.
Rich Anderson (Managing Director)
Yeah. Gotcha. Second question for me, different topic for Kelvin. You got the 1.1 million, 1.1 billion of refinancing activity for this year at a 4% rate, but then you look at your debt maturity schedule, you got some chunkiness in the aftermath in 2027, 2028, and 2029, mostly at lower rates than the 4%. I'm wondering, is there a strategy around any of that, you know, preemptively, for this year, or do you let that ride out and see where, what the day brings, you know, this time next year for future debt expirations? Thanks.
Kelvin Moses (CFO)
... Yeah, I think just like in years past, Rich, we'll be very opportunistic and access the market when we see the best pricing opportunity. This year, we'll focus on our maturities that are ahead of us. The in-place rates are fairly attractive relative to the new issue pricing, so we'll continue to try to be opportunistic throughout the year. But there's no plan currently to accelerate some of our 2027 maturities into 2026.
Rich Anderson (Managing Director)
Okay, thanks.
Operator (participant)
Next question comes from the line of Seth Bergey with Citi. Your line is open.
Nick Joseph (Managing Director)
Thanks. It's Nick Joseph here with Seth. Just on the 2026 expirations for Life Science, you know, what percentage of that do you know is moving out, and where are you on negotiations with the remainder?
Kelvin Moses (CFO)
I can start there. This is Kelvin. So for 2026, we have about 450,000 sq ft of expiration, and that'll be fully offset by commencements throughout the year. I think we did a great job of pulling forward some of our renewals into 2025 to really pull that number down as we head into 2026. And a substantial majority of our expirations are actually in South San Francisco, our biggest market, where we have the deepest tenant relationships. So we feel good about being able to capture some of those renewals. But, Scott, maybe I'll kick it to you to add some more context.
Scott Bohn (Chief Development Officer)
Yeah, I know. I think as Kelvin said, we did address some of the 2026 expirations already in 2025. So some of, you know, the ones we're working on that are later in the year are still, you know, still TBD. So, probably a little bit too early to tell on some of those.
Nick Joseph (Managing Director)
Thanks. That's helpful. And then just as you've been going through the leasing process, have there been any changes to the pipeline in terms of, you know, converting to executed leasing and conversion timelines?
Scott Bohn (Chief Development Officer)
Yeah, I think if you're still working through a process where, you know, it's different than it was in the peak when there was no space available, and people were making very quick decisions. You know, people are being, boards and CEOs are being a little bit more cautious and taking the time to make sure that they, you know, have the plan's fully baked and the economics fully baked.
So the duration is still, you know, longer than it used to be, but, you know, I think what we're seeing today is the credibility of the pipeline is much stronger in so much that, you know, that we have more confidence in the pipeline will transact versus if you went back to two years ago, it was a lot of, you know, a lot of tire kicking versus deals that were actually gonna turn into transactions.
Nick Joseph (Managing Director)
Thank you.
Operator (participant)
Next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open.
Juan Sanabria (Managing Director)
Hi. Good morning. Just going back to the kind of bridge from fourth quarter to first quarter with regards to the occupancy loss being back end loaded. Can you comment on, like, on what that NOI bridge, like, was there any... Can you quantify how much one-timers there were in the fourth quarter that are going away? And/or what, like, the pro forma NOI is on the lab side, just so we can have a clear or clean runway to start modeling for the full year, 2026.
Kelvin Moses (CFO)
Yeah. This is Kelvin, Juan. I think maybe I'll start, and it's a lot to unpack. But, you know, I think starting with total occupancy at around 77%, we came down about 375 basis points sequentially. And from an NOI perspective, that shift in NOI will be a lot more pronounced in the first quarter, as we mentioned. If you think about our guide between, you know, down 5% to down 10% for the segment, that should give you some context for, you know, the decline that we'll expect in that first quarter from a same-store NOI perspective. As Scott mentioned, there were a number of other items that don't impact same store as well, that we got the benefit of in 2025 that you won't see in 2026.
So there's incrementally more of an impact with respect to earnings. So if you look at, from an earnings perspective, you know, our the midpoint of our guidance range at $1.72, if you take that over the four quarters, it'll probably be a little bit higher in the first quarter and the fourth quarter, and it'll be a little bit lower in the second and third quarters, plus or minus $0.01, as you think about it. But hopefully, that gives you a little bit of direction in the trajectory that we're expecting.
Juan Sanabria (Managing Director)
Okay, great. And then just a question on seniors' housing. I know you guys kind of commented that you'd rather not get into specifics. But just curious on the previous sub Sovereign Wealth JV, how we should think about CapEx for that business and what kind of deferred CapEx there may be associated with that portfolio with the transitions upcoming? I'm not sure what kind of unit per year spend has been put into those assets, but just curious on how we should think about CapEx for that piece of the portfolio.
Scott Brinker (President and CEO)
Yeah. Hey, Juan, it, it's Scott, and it's not that we don't want to talk about it, we just have to focus our comments on Healthpeak, just to be clear. So this is totally fair game. These are assets mostly in Houston, in Denver, so big markets, we think they've underperformed, not be capital. There will be some normal transition-
... stuff that we have to put into the buildings, technology, signage, stuff like that. But it's not like there's some massive CapEx plan to revitalize these. We think this is more operational in nature, so we're glad to have full control of the assets again. And we've already moved decisively after that buyout to align ourselves with two groups that we've got a good track record with, and we have high confidence that they're gonna turn these around over the next 2-3 years. So there's significant opportunity in these buildings, so we're excited to capture it.
Juan Sanabria (Managing Director)
Thank you.
Operator (participant)
Next question comes from the line of Wes Golladay with Baird. Your line is open.
Wes Golladay (Senior Research Analyst)
Hey, good morning, everyone. Can you unpack the lab watch list? You know, how much has that list changed from a year ago? Obviously, flushed out a lot of the tenants in the last few quarters. And I guess maybe can you quantify the, the exposure to call it higher risk Preclinical and Phase I companies?
Kelvin Moses (CFO)
Hey, Wes, I'll start. This is Kelvin, and then I'll probably ask Scott to jump in as well. But I think if you start looking back at the capital markets activity over the last four months, we are certainly encouraged by the volume of activity, both from an M&A perspective and equity capital markets perspective. The IPO backlog is building. Secondary equity offerings have been far more prevalent than what we saw for the first three quarters of 2025. M&A activity is picking back up again. So there's a good amount of capital recycling again in the biotech sector, which is very important to see. And as a result, our watch list has reduced considerably as tenants have raised capital, so we're, we're encouraged by that. That being said, in our portfolio, we're still monitoring tenants, as we always do.
That's just a part of this business. There's some folks that, you know, we expected to vacate in the fourth quarter that didn't, that could come out of our portfolio. We're still keeping our eye on specific names. You know, we could be surprised to the upside as well, where they, you know, continue to engage in BD discussions and engage in strategic discussions that could bring capital into their businesses and allow them to continue beyond our expectations. I don't know, Scott, if you have anything more.
Scott Brinker (President and CEO)
Yeah, I think just from the industry perspective, too, which is fueling the capital markets. I mean, you have the interest rate cuts, you know, the three cuts last year, the two in the fourth quarter were really helpful for the industry. And from a policy perspective in D.C., you know, they reached MFN deals with 14 companies. Those deals had little to no impact on share prices of those biopharma companies. So the read-through is, you know, the general impact on those deals is gonna be pretty minimal on biopharma, which is, you know, helpful to understand and just get more clarity there. And then you look to the FDA. The FDA approved 52 drugs last year, which is right in line with the 10-year average, a little bit below the 5-year average.
But given all the chaos and change there, it provides reassurance to the industry that the agency is still functioning and hitting dates and processing approval. And we talked to our CEOs. I talked to 30 different CEOs at the JPMorgan conference and asked the question to virtually all of them. You know, and the response was just the feedback they're receiving from the agency is normal and responsive. You know, and the FDA, again, if you look at the Commissioner speaking, they're talking about process improvements and streamlining reviews and lowering costs, which are all changes, you know, helpful changes to the industry, which, you know, again, isn't directly correlated to the capital markets, but, you know, certainly helping the sentiment behind the industry.
To go back to answer the first part of your question, too, less than 10% of our ABR on the Lab side is from preclinical tenants. Pretty small.
Wes Golladay (Senior Research Analyst)
Okay, thank you for that. And then when you look at your leasing pipeline, is that starting to shift more towards some of the redevelopment and development properties?
Scott Brinker (President and CEO)
Yeah, I... You know, we had a good quarter on the dev and redev side. We executed 121,000 sq ft of leases on our redevelopment properties in the quarter. Additionally, we completed 100,000 sq ft of TIs and delivered space both at, you know, Combined Advantage and Gateway in San Diego. So, you know, certainly we have more credible activity again and ongoing discussions on those development or redevelopment spaces today than we've had in a while. But nothing far enough to talk about in detail today.
Wes Golladay (Senior Research Analyst)
Okay, thank you.
Operator (participant)
Next question comes from the line of Vikram Malhotra with Mizuho. Your line is open.
Vikram Malhotra (Managing Director)
Good morning. Thanks for taking the questions. I guess just two clarifications. So first of all, I guess, Kelvin, can you just confirm or clarify, fourth quarter, I think you had between $0.02 or $0.04 of, you know, whether it was termination income or the benefit from the occupancy lag versus the income hit, et cetera. You know, like you mentioned, in terms of security deposits. So that's like the, you know, $0.12, $0.13, but how much of that is actually still flowing into 1Q? Because you mentioned 1Q FFO is likely higher before we see the full impact. Just because $0.03 is a lot in the quarter.
So I just want to make sure we understand how much of that, you know, $0.02-$0.04 or $0.03 kind of percolates into one Q.
Kelvin Moses (CFO)
Yeah, and maybe just to jump to first quarter FFO, it's probably down $0.03 from where, you know, we ended the year, so $0.47 to something closer to $0.43. So, you know, maybe that helps give a little bit of context. I think the numbers that were benefiting the fourth quarter will naturally come out as we start in the first quarter.
... But Vik, I, I think that should give you some context in terms of the trajectory between Q4 to Q1, just to get right to it.
Vikram Malhotra (Managing Director)
Okay. So there's some security deposit, you know, term, you know, letters of credit that still benefit you in 1Q, and then they fully go away in 2Q onwards. Is that fair?
Kelvin Moses (CFO)
I think they largely go away in the fourth quarter. But you'll see the benefits that we got in the fourth quarter that were not related to vacates in our portfolio, included some free rent burn-offs, so that benefit's coming in in the first quarter as well. So there are other natural benefits, escalation from leases in 4Q that started to provide some incremental earnings benefit, you'll start to see in the first quarter as well. So not just those items that we're talking about around terminations and letters of credit, but, you know, that should hopefully give you enough context relative to the year, how the first quarter will start.
Vikram Malhotra (Managing Director)
Okay. And then just on the Life Science occupancy build, just to maybe give us a bit more context, do you mind giving us kind of where occupancy is, either portfolio-wide or same store, like, leased versus, you know, economic today? And then just clarify again, I think you made a comment on expirations. Like, what do you actually have baked in for renewal on the expirations in 2026? Thanks.
Kelvin Moses (CFO)
A lot of questions in there.
Scott Brinker (President and CEO)
What, what was the first question, Vik? Or my-- We didn't catch it.
Vikram Malhotra (Managing Director)
Just the, like, leased versus—like, what's the leased versus occupied. Like, economic versus leased rate. So, like, what you've actually leased, which may not be, like, commenced, which may have been leased but not commenced. So the difference there, there's a difference between the two. So I think you had 77-ish total portfolio.
Scott Brinker (President and CEO)
Yeah. Yeah, we've got a couple hundred basis points. We've got a couple hundred basis points of leases that have been signed that haven't yet commenced, that should start in 2027. That probably offsets most of the non-renewals, although Scott already said we don't have full clarity on the renewals. A lot of them are back and weighted. So I'll just repeat that. And I'll also repeat what I said earlier, is we think total occupancy should increase from year-end 2025 to year-end 2026. That is what is in our guidance.
Vikram Malhotra (Managing Director)
Okay. And that's a combination of your—like, you, you hope it's a macro comment, but it's also based on kind of micro, where you look at the pipeline today, and you can see a higher conversion rate, perhaps, than prior. Is that fair? Like, it's, it's not just out of a macro. You need the macro to stay where it is, but you actually also see specific conversion.
Scott Brinker (President and CEO)
Yeah, it's certainly fair to say we're looking at the macro, the sub-market, the lease, I mean, from top to bottom, Vikram, in putting together our guidance. We're looking at all those components. Yes, that is fair to say.
Vikram Malhotra (Managing Director)
Thank you.
Operator (participant)
Next question comes from the line of Mike Mueller with JPMorgan. Your line is open.
Mike Mueller (Senior Equity Research Analyst)
Yeah, hi. Quick question for them. What's embedded in guidance for AFFO CapEx and capitalized interest for 2026? And what's our CapEx split between the segments?
Kelvin Moses (CFO)
Yeah, maybe I'll start. In our guidance, we had just over $500 million of CapEx in our plan, and that's a combination of redevelopment capital, non-recurring capital, development capital. So it incorporates everything. The timing of that spend is, you know, naturally throughout the course of the year. Last year, we had about $600 million. This year, it's come down a decent amount, and we'll be executing on that plan throughout the year. So the amount, I don't have it specifically in front of me just for the AFFO component of that, but, you know, I think we're gonna be lighter on the capital spend this year than we were in 2025.
Scott Brinker (President and CEO)
Yeah. There, there's no material change in AFFO CapEx in 2026 versus 2025, Mike. So if you just look at the supplemental in the disclosure there, that's, that's a good run rate for all three business segments.
Mike Mueller (Senior Equity Research Analyst)
Got it. Okay. And what about capitalized interest?
Kelvin Moses (CFO)
Yeah, cap rate is flat, actually, so no change to cap rate.
Mike Mueller (Senior Equity Research Analyst)
Okay. Appreciate it. Thanks.
Operator (participant)
Next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open.
Omotayo Okusanya (Managing Director)
Yes. Good morning, everyone. I wanted to go back to the Gateway transaction, and really kind of understanding. It's almost a little bit to Rich's, you know, question. Trying to understand exactly how you expect that to kind of ramp up over the next few years. And I guess I, I, I ask the question in the context of, you know, you're kind of buying it at 60% occupied, according to media reports, and also buying it from kind of two other well-known, you know, players in the space. So it's like, just kind of curious, like, exactly like, what are you seeing versus like, they, they're kind of exiting, and you're kind of doubling down, and I'm just trying to understand those dynamics a little bit.
Ultimately, kind of, you know, when you look at this investment 3-5 years down the road, how do you expect it to be performing?
Scott Brinker (President and CEO)
Yeah, well, you know, can't necessarily speak for others. I mean, they're in a joint venture. I think they made it public. They're looking to raise money in 2026 to fund various things, development pipelines, et cetera. You know, we're in a much different situation. You know, we're being opportunistic. Balance sheet's in great shape. We don't have the big development pipelines, so we're in a position to opportunistically acquire assets with a lot of upside, but also good current yield. So I think that's the right way to think about it. Low sixes going in. A lot of capital has already been put into these buildings. The future capital that we would need to invest is really good news capital... tied to leasing. So that's a positive thing. If we're investing capital into these buildings, it means we signed a lease.
You know, we see high single digit unlevered type return opportunity in this market, as it stabilizes. So that, that's pretty compelling in comparison to the things that we're selling.
Omotayo Okusanya (Managing Director)
Well, that's actually very helpful context. And if I may just ask one more about, you know, just like tiptoeing around Janus. I just—I mean, are all your CCRC assets going to be going into this thing, or is it just the Senior Housing stuff and the thing, and then the skilled nursing and the memory care still kind of remains at Healthpeak?
Scott Brinker (President and CEO)
Yeah, Tayo, let me clarify that. When we complete the IPO, all of our Senior Housing assets, whether entry fee or rental, would be contributed into Janus Living. Going forward, Healthpeak will not own any Senior Housing real estate. We'll just have an ownership interest in the stock of Janus Living.
Omotayo Okusanya (Managing Director)
Right. So the memory care and all the other stuff that's part of the CCRC is also going into Janus.
Scott Brinker (President and CEO)
That's right. Yeah, those are campuses that we can't break them up. That, that's-
Omotayo Okusanya (Managing Director)
No.
Scott Brinker (President and CEO)
-that one asset. They can't be broken up.
Omotayo Okusanya (Managing Director)
Got you. All right. I guess over time, you'll, you'll kind of share more details about the external management contract and things like that.
Scott Brinker (President and CEO)
That's right. Outside of what has already been made public, Omotayo. So if you have a question about what's been made public, I'm happy to address that here.
Omotayo Okusanya (Managing Director)
Got you. All right. Sounds good. All the best. Thank you.
Scott Brinker (President and CEO)
Thanks Omotayo.
Operator (participant)
Next question comes from the line of Jim Kammert with Evercore ISI. Your line is open.
James Kammert (Managing Director)
Thank you. Good morning. With the Gateway transaction behind you, what is the appetite? Just generically, you still have some guidance in terms of $1 billion± of acquisitions in 2026. What's your appetite for opportunistic lab now that you've already got Gateway under your belt?
Scott Brinker (President and CEO)
Yeah. Hey, Jim, we've got $1 billion of acquisition and stock buyback built into our guidance. We've already closed or are under contract to just over $800 million between the Gateway transaction and the Senior Housing opportunities that should close here in the first quarter. So you're right, there's a little dry powder, you know, not significant. But we do have a pretty large pipeline of asset recycling, whether outright sales, recaps, loan repayments. So there's at least the potential for that $1 billion to grow, depending on whether we can recycle capital. We're obviously not looking to issue equity at our current stock price, but if we're more successful in selling assets or recapping assets, we would have additional dry powder to look at opportunistic Life Science investments.
There's a number that we're keeping our eye on, but certainly nothing that is ready to be disclosed or under contract. But, fair to say that we'll be very disciplined in which assets and which submarkets we would pursue. That was the case even in the peak. We did not get overly aggressive. We stayed disciplined. Our entire portfolio is in the three core markets. That will continue. So anything we do, I think, would have a lot of crossover or similarities to what we just did in Gateway. We're in a known submarket, a team that can execute, and what we feel is a real competitive advantage to drive lease-up.
James Kammert (Managing Director)
Fair enough. Understood. And then something we haven't talked about, are most of the synergies relating to the Physicians Realty on the Outpatient Medical side, are those synergies basically in run rate today or late 2025, I guess I should say, or should we sort of have some maybe a little further margin implications for the Outpatient Medical across 2026?
Scott Brinker (President and CEO)
We've got another 2 or 3 million sq ft that we could internalize property management over the next 1-2 years. So there's still a little bit of opportunity, but it's not material. Most of that $70+ million of synergies are basically included in our not only fourth quarter 2025 run rate, but our 2026 guidance as well, Jim.
James Kammert (Managing Director)
Okay. Thank you, guys.
Operator (participant)
Next question comes from the line of John Pawlowski with Green Street. Your line is open.
John Pawlowski (Managing Director)
Hey, thanks for the time. My first question is on the operator transition of the assets held in the Sovereign Wealth JV. Do you expect occupancy declines in the near term as the new operators take over? And how long do you expect for the properties to reach more of a stabilized market type of occupancy level?
Scott Brinker (President and CEO)
Hey, John. Scott here. Hopefully, we can get those transitions done by April first. That's at least the target. Teams are working hard to do that, including the operators. We appreciate their cooperation. There could be a small decline in occupancy, but I don't think it's material. We see significant upside, 50%+ NOI growth potential in the next 2-3 years, in our view. Highly aligned management contracts and operators that have a really good track record with us and in these markets. So pretty optimistic about the upside, but yeah, there could be a quarter or two of transition-related occupancy loss, John.
John Pawlowski (Managing Director)
Okay, and then last question, maybe for Scott Bohn. I want to better understand the composition of tenants that have either signed leases or that are in your pipeline, kind of the post-Labor Day. Can you give me, like, rough ballpark, what proportion of tenants are more of the traditional wet lab users versus other, perhaps AI or almost quasi-traditional office users?
Scott Bohn (Chief Development Officer)
... Yeah, it's a, it's a pretty good mix. You know, we did have some office-related, you know, users, sign leases in the fourth quarter. We did, you know, one GMP manufacturing type space with an existing tenant of ours, in a redevelopment project, and then several wet lab spaces. So pretty good mix. You know, we also signed one lease with a group who, you know, we announced it on social media, but it was, actually a drone manufacturer who just raised $600 million at, I think, it was a $6 billion market cap.
You know, so a wide variety of uses, and I think that, you know, underscores the ability, you know, within our buildings for to capitalize on the robust infrastructure that is in those buildings, and be able to play, you know, cast a wide net in our, in our leasing. You know, and especially in, in the Bay Area, where we've seen a real convergence of, you know, office demand increasing, you know, AI and AI adjacent, both in, you know, office space, but also on the lab, on the lab front as well.
John Pawlowski (Managing Director)
Maybe a follow-on there. As, as you see that convergence, what are the implications for the rents those tenants are paying? Are they, are they decent? All else equal, are they decently lower than the wet lab users going to pay?
Scott Bohn (Chief Development Officer)
Yeah, I mean, if you're just looking at a straight office space, which, you know, we don't have all that much of, I mean, that's obviously gonna be a lower rent than a lab space. But, you know, each deal is different. You know, overall rents and economic or net effect is to tick down a little bit, but we've seen a little bit more free rent in certain deals in certain markets, but it's all deal specific. I mean, it depends on the space. It depends on the build-out of the space. You know, we have been able to control the TIs quite well. If you look at our second-generation leasing and our renewal leasing, they were close to zero.
You know, and our TIs on our new leasing tick down as well. So I think, so got to look at a little bit more than just the face rate on these deals. It's the total economic package, and that's how we think about it.
John Pawlowski (Managing Director)
Okay. Thanks for the time.
Operator (participant)
Our last question comes from the line of Jamie Feldman with Wells Fargo. Your line is open.
Jamie Feldman (Managing Director)
Great. Thanks for taking the question. I'm pinch-hitting for John Kilichowski here. So we appreciate all the, you know, the guidance and, and all the moving pieces on 2026 for the key line items. As we think about, you know, how those move throughout the year, is it safe to assume that 2026 is a bottom for FFO, or do you think it can still be lower in 2027? I know you, I mean, I'm not really asking to give guidance, but how should we think about, like, the key line items and how they, how they progress throughout the year and what that means for 2027?
Scott Brinker (President and CEO)
Oh, hey, Jamie. Yeah, so two-thirds of the portfolio is doing really well. Even if we're successful with the IPO, most of those earnings will still flow through Healthpeak's financial statements, so there really is any impact from the IPO there, which is one reason we really liked it, as an alternative outcome for shareholders. The Outpatient fundamentals are very strong. If anything, the growth outlook in 2027 looks even more favorable, just given the leasing trajectory and occupancy trajectory, and we obviously see Life Science coming down. I mean, we've said throughout this call, we see occupancy increasing a bit from year-end 2025 to the year-end 2026. That should be a positive. The variables are obviously what happens with interest rates. As Rich pointed out, we still have some refinancing to do over the coming years.
But the building blocks of the actual portfolio sure feel like, 26 absolutely would be a bottom.
Jamie Feldman (Managing Director)
Okay, great. That's super helpful. And then just how do you think about doing, you know, an equity acquisition like you did versus some of the higher yielding mezz or loan-to-own deals you had done in the past at higher yields? Like, why the transition to put so much capital into that type of investment versus more fixed income type stuff?
Scott Brinker (President and CEO)
Yeah, I mean, we only did two of the loans. Those were just unique situations in San Diego about a year ago. We do like those in terms of the risk profile versus the return. So if those were opportunities in 2026, we'd continue to look at those. This was just a unique opportunity to buy a campus we absolutely wanted to own from day one at a break-even yield, with the ability to capture a bunch of upside. So it's just different dynamics. The two loans we did, those buildings were essentially empty. So just a very different return profile, where we thought the loan with a pathway to ownership was the right structure for those two particular deals.
Jamie Feldman (Managing Director)
Okay. All right, great. Thank you for taking the question.
Scott Brinker (President and CEO)
Yeah. Thanks, Jamie.
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, everyone. Hopefully, we'll, we'll see you tomorrow in Florida. Take care.
Operator (participant)
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.