HEALTHPEAK PROPERTIES, INC. (DOC)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 was operationally solid (Revenue $705.9M, AFFO $0.42), but reported EPS missed materially due to a $175.8M other‑than‑temporary impairment in unconsolidated lab JVs, driving diluted EPS to $(0.17) despite FFO as Adjusted of $0.46 .
• Revenue beat Wall Street consensus by ~3.7%*, while EPS missed meaningfully as the impairment flows through GAAP but not FFO; management reaffirmed FY FFO as Adjusted ($1.81–$1.87) and SS Cash NOI growth (3–4%), but cut FY diluted EPS to $0.00–$0.06 from $0.25–$0.31 .
• Outpatient medical continues to outperform: +5.4% cash re‑leasing spreads, higher annual escalators (~3%), low TI outlays, occupancy +10 bps; management is negotiating ~$1B of sales/recaps to recycle into higher‑return opportunities and/or buybacks .
• Lab occupancy at 81% and likely to decline near‑term, but leading indicators improved: pipeline doubled to ~1.8M sq ft, escalators 3–3.5%, and management sees an occupancy bottom followed by recovery beginning late 2026 .
• Dividend remains well‑covered (AFFO payout ~71% YTD) and unchanged at $0.10167 per month for Q4 (annualized $1.22), supporting income investors while strategic capital recycling and technology initiatives lower G&A and enhance flexibility .

What Went Well and What Went Wrong

• What Went Well

  • Outpatient medical fundamentals: +5.4% cash re‑leasing spreads, escalators ~3% on Q3 signings (vs ~2.7% existing), low TI outlays (<5% of rent on renewals), and occupancy +10 bps sequentially .
  • CCRC portfolio strength: Q3 SS Cash NOI +9.4% YoY, YTD +11.3%; NOI up >50% since 2019; sequential occupancy +70 bps .
  • Technology and G&A discipline: early rollout improved connectivity/productivity, enabling a ~5% reduction in G&A guidance; CFO highlighted moving toward an AI‑enabled platform and $10M reduction in interest expense and G&A guidance combined .

• What Went Wrong

  • GAAP EPS miss driven by impairments: $(0.17) diluted EPS and ~$176M impairment in unconsolidated lab JVs (non‑cash, excluded from FFO), forcing FY EPS guidance cut to $0.00–$0.06 .
  • Lab near‑term headwinds: total lab occupancy at 81% and expected to slip into high‑70s before rebounding; earnings impact from 2025 occupancy decline will bleed into 2026 .
  • SS NOI deceleration: total merger‑combined SS Cash (Adjusted) NOI growth slowed to 0.9% YoY in Q3 (Lab −3.2% YoY), down from 3.5% in Q2 and 7.0% in Q1 .

Financial Results

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Leading indicators in life science are turning positive, and private market values for outpatient medical are strengthening… we’re in various stages of negotiation… that have the potential to generate proceeds of $1 billion or more.” — Scott Brinker, CEO .
• “We’re advancing our strategic plan to strengthen our capabilities as an AI‑enabled real estate owner… our automation initiatives are building a stronger foundation for our data architecture.” — Kelvin Moses, CFO .
• “Outpatient fundamentals… positive cash releasing spreads of 5.4%, escalators ~3%, and TIs below historical averages… occupancy up 10 bps at 91%.” — Kelvin Moses .
• “Our lab pipeline has doubled to 1.8 million sq ft… we’re encouraged by strengthening demand as we move toward an occupancy bottom and ultimate recovery.” — Kelvin Moses .

Q&A Highlights

• Lab leasing pipeline and impairment: Management cited improved mix of new vs renewals, capital markets access, and took a non‑cash JV impairment per accounting rules; emphasized FFO unaffected .
• Capital recycling: ~$130M under contract at strong cap rates, with ~$1B potential sales/recaps; intent to redeploy into higher‑return lab opportunities, pre‑leased outpatient developments (~7%+ yields), and/or buybacks .
• Occupancy path: Lab occupancy could trend down to high‑70s before recovering; recent leasing and pipeline conversions expected to aid occupancy/earnings from late 2026 onward .
• Regulatory environment and M&A: Less regulatory noise, more FDA priority reviews; real‑time examples of tenant M&A and positive Phase 3 data improving sentiment .

Estimates Context

Values retrieved from S&P Global.
Management reaffirmed FY FFO as Adjusted and SS NOI guidance ranges, but lowered FY diluted EPS to reflect the non‑cash JV impairment that does not impact FFO metrics .

Key Takeaways for Investors

• Core cash metrics resilient: FFO as Adjusted $0.46 and AFFO $0.42 in Q3, with outpatient and CCRC segments providing ballast despite lab headwinds .
• GAAP EPS volatility likely transitory: Non‑cash JV impairment drove EPS miss and guidance cut; FFO guidance intact, underscoring REIT‑specific cash metrics for valuation .
• Capital recycling is a potential catalyst: ~$1B in potential outpatient sales/recaps could fund higher‑return lab investments, pre‑leased MOB developments (~7%+ yields), and/or buybacks .
• Lab trajectory: Expect occupancy to bottom in the coming quarters (high‑70s possible) with recovery from late 2026, supported by doubled pipeline, improved capital access, and regulatory tailwinds .
• Outpatient momentum durable: Positive re‑leasing spreads, higher escalators, low TI, and sequential occupancy gains point to sustained SS NOI growth .
• Balance sheet flexibility: ~$2.7B liquidity and Net Debt/Adj EBITDAre 5.3x provide optionality to invest or repurchase shares amid improving private market pricing .
• Dividend maintained and covered: Q4 monthly dividend ($0.10167) with annualized $1.22, supported by AFFO and portfolio cash flows .