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HEALTHPEAK PROPERTIES, INC. (PEAK)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered broad-based strength: diluted EPS $0.21, FFO as Adjusted $0.45, AFFO $0.39, and Total Merger-Combined Same-Store Cash (Adjusted) NOI growth of 4.5% . Total revenues were $695.5M, up 14.7% QoQ and 27.5% YoY .
  • Consensus context: EPS beat by $0.11 ($0.21 vs ~$0.10) and revenue beat by ~$$11.6M on Seeking Alpha’s revenue basis; note SA shows “revenue” of $687.7M vs company “total revenues” of $695.5M (methodology difference) .
  • Guidance raised across the board: FY24 diluted EPS to $0.27–$0.31, Nareit FFO to $1.59–$1.63, FFO as Adjusted to $1.77–$1.81, AFFO to $1.54–$1.58, and SS Cash NOI growth to 2.75%–4.25% (25 bps midpoint lift) .
  • Portfolio optimization accelerated: $853M of outpatient medical sales in Q2 and through July at a 6.8% trailing cash cap; YTD dispositions reached ~$1.2B at ~6.5% cap; seller financing of ~$418M at 6.0%/6.5% supports execution .
  • Capital deployment and de-risking: 4.6M shares repurchased for $88M through July 25 (10.5M YTD for $188M); quarterly dividend of $0.30 declared; early renewal with CommonSpirit extending WALE to Dec-2035 with 3% escalators .

What Went Well and What Went Wrong

What Went Well

  • Raised full-year guidance on EPS, FFO, AFFO, and same-store Cash NOI, signaling confidence in the outlook .
  • Strong leasing and pricing power: 1.7M sq ft executed in Q2 (905k outpatient, 797k lab), with positive renewal mark-to-market (+4.7% outpatient, +6.0% lab); 180k sq ft of incremental lab leases executed in July and 620k sq ft in signed LOIs .
  • Portfolio pruning and tenant de-risking: $853M outpatient sales at 6.8% cap (Q2 + July), part of $1.2B YTD; early renewal with CommonSpirit extended WALE to Dec-2035 with 3% escalators and lowered ABR exposure (from 4% to 3%) .

What Went Wrong

  • AFFO per share declined YoY ($0.39 vs $0.40) despite higher FFO run-rate, reflecting higher recurring capex and non-cash adjustments in the quarter .
  • Lab revenues declined YoY ($214.3M vs $223.3M) as life sciences markets normalize and non-same-store dynamics weighed on reported revenue composition .
  • GAAP net income strength benefited from realized gains on asset sales ($122.0M gain in Q2), highlighting the importance of looking at FFO/AFFO for run-rate earnings power .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Total Revenues ($USD Millions)$545.4 $606.6 $695.5
Net Income ($USD Millions)$51.8 $6.5 $145.8
Diluted EPS ($)$0.09 $0.01 $0.21
Nareit FFO per Share (Diluted) ($)$0.45 $0.27 $0.44
FFO as Adjusted per Share (Diluted) ($)$0.45 $0.45 $0.45
AFFO per Share (Diluted) ($)$0.40 $0.41 $0.39

Segment revenue breakdown ($USD Millions):

SegmentQ2 2023Q1 2024Q2 2024
Outpatient Medical$186.7 $238.3 $332.5
Lab$223.3 $223.8 $214.3
CCRC$130.2 $138.8 $140.9
Other$5.3 $5.1 $6.9

Selected KPIs (Q2 2024 unless noted):

  • Total Merger-Combined Same-Store Cash (Adjusted) NOI growth: 4.5% (also 4.5% in Q1 2024)
  • Net Debt to Adjusted EBITDAre: 5.2x
  • Dispositions: $853M at 6.8% cap in Q2 and through July; $1.2B YTD at ~6.5% cap
  • Leasing: 905k outpatient (+4.7% renewal MTM); 797k lab (+6.0% renewal MTM); plus 180k lab leases in July; 620k sq ft signed LOIs
  • Dividend declared: $0.30 per share (payable Aug 16, 2024)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Diluted EPSFY 2024$0.16–$0.20 $0.27–$0.31 Raised
Diluted Nareit FFO/ShareFY 2024$1.56–$1.60 $1.59–$1.63 Raised (midpoint +$0.02)
Diluted FFO as Adjusted/ShareFY 2024$1.76–$1.80 $1.77–$1.81 Raised (midpoint +$0.01)
Diluted AFFO/ShareFY 2024$1.53–$1.57 $1.54–$1.58 Raised (midpoint +$0.01)
Total Merger-Combined SS Cash (Adjusted) NOI GrowthFY 20242.50%–4.00% 2.75%–4.25% Raised (midpoint +25 bps)
Quarterly DividendQ3 2024$0.30 $0.30 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23 and Q1’24)Current Period (Q2’24)Trend
Merger integration & synergiesQ4’23: Merger targeted for Mar 1, 2024 . Q1’24: Year-1 synergy forecast raised to $45M; property management internalized in 10 markets (17M sq ft) .Anticipates ≥$45M synergies in 2024; internalization completed in 12 markets with two more by YE .Improving execution
Dispositions/portfolio optimizationQ4’23: $130M non-core sales; JV at Callan Ridge . Q1’24: $180M Poway R&D sale; $29M outpatient sales; $69M seller financing repayments .$853M outpatient sales (Q2 + July) at 6.8% cap; $1.2B YTD at ~6.5% cap; $418M seller financing at 6.0–6.5% .Accelerating
Leasing momentumQ4’23: 1.1M sq ft (743k outpatient; 312k lab) . Q1’24: 1.6M sq ft (1.4M outpatient; 155k lab); 455k sq ft lab LOIs .1.7M sq ft (905k outpatient; 797k lab); 180k lab leases in July; 620k sq ft LOIs .Strengthening
Tenant de-risking (CommonSpirit)–Early renewal of ~90% of 2M sq ft to Dec 2035, 3% escalators; ABR exposure reduced to ~3% post-dispositions .De-risking
Balance sheetQ4’23 Net Debt/Adj. EBITDAre 5.2x . Q1’24 5.2x .5.2x maintained in Q2’24 .Stable leverage
Guidance trajectoryQ4’23: Set initial FY24 outlook . Q1’24: Raised EPS/FFO/AFFO/SS NOI midpoint .Raised again across metrics and SS NOI midpoint .Upward revisions

Management Commentary

  • “In July, we executed an early lease renewal for a minimum of 90% of CommonSpirit’s approximately 2 million rentable square foot portfolio… extending [the] weighted average lease term from July 2027 to December 2035 with… 3.0% annual contractual lease escalators.” (Press release)
  • “Second quarter new and renewal lease executions totaled 1.7 million square feet… with positive 4.7% [outpatient] and 6.0% [lab] rent mark-to-market on renewals.” (Press release)
  • “We are updating [FY24] guidance… [lifting] diluted earnings per share, Nareit FFO, FFO as Adjusted, AFFO, and same-store Cash (Adjusted) NOI growth.” (Press release)

Q&A Highlights

  • Management emphasized robust leasing momentum and improving pricing power in both outpatient and lab, with a meaningful pipeline of signed LOIs expected to convert over coming periods; they also underscored early tenant renewals and favorable escalators as cash flow drivers (company press release details) .
  • Management framed portfolio optimization as opportunistic, with sizeable outpatient medical dispositions executed at blended trailing cap rates and supported by prudent seller financing to facilitate pricing, while maintaining leverage discipline (seller financing terms and cap rates) .
  • Clarified capital allocation priorities: continuing share repurchases under a refreshed $500M authorization through July 2026 and maintaining the $0.30 dividend, balancing internal and external growth with de-risking .

Estimates Context

  • EPS vs. consensus: $0.21 actual vs. ~$0.10 consensus; surprise +$0.11 (Seeking Alpha transcript page) .
  • Revenue vs. consensus: Seeking Alpha shows “revenue” of ~$687.7M vs. ~$676.1M consensus; surprise +$11.6M. Company-reported total revenues were $695.5M; the methodology difference explains variance in “actual” revenue figures used by aggregators .
  • Note: Direct S&P Global consensus via tool was unavailable at time of query (technical limits). Where third-party consensus is shown, we cite the source above.

Key Takeaways for Investors

  • Guidance momentum is positive: two straight quarters of midpoint raises across EPS/FFO/AFFO and same-store growth signal better-than-expected fundamentals and synergy capture .
  • Portfolio re-mix accelerates cash quality: $853M of Q2+July outpatient sales (6.8% cap) and $1.2B YTD (6.5% cap), plus $418M seller financing at 6.0–6.5%, streamline the footprint and recycle capital into higher-growth assets .
  • Leasing inflection remains a catalyst: 1.7M sq ft executed with favorable spreads and a growing lab LOI pipeline should sustain SS NOI growth and underpin FFO run-rate .
  • Tenant risk de-rates: Early CommonSpirit renewals extend duration and escalate rents, while dispositions reduced ABR exposure—supporting visibility and resiliency of cash flows .
  • Balance sheet steady: Net Debt/Adj. EBITDAre at 5.2x preserves flexibility while funding development and opportunistic buybacks; dividend sustained at $0.30 .
  • Near-term trading setup: Continued conversion of LOIs to signed leases and evidence of lab market stabilization, alongside further non-core sales, are likely stock drivers; conversely, any slowdown in leasing or market cap rates backing up could pressure multiple and AFFO trajectory .

Sources

  • Q2 2024 8-K and financial exhibits: revenues, EPS, FFO/AFFO, SS NOI growth, dispositions, seller financing, leasing, guidance, dividend, leverage .
  • Prior quarters for trend: Q1 2024 8-K (financials, guidance, leasing, synergies) ; Q4 2023 8-K (baseline metrics and 2024 outlook framework) .
  • Consensus/beat context: Seeking Alpha Q2 2024 earnings transcript page (revenue/EPS beat metrics) .