HEALTHPEAK PROPERTIES, INC. (PEAK)·Q4 2023 Earnings Summary

Executive Summary

• Q4 2023 delivered solid results: diluted EPS $0.13, Nareit FFO/share $0.48, FFO as Adjusted/share $0.46, AFFO/share $0.36; Total Same-Store Portfolio Cash (Adjusted) NOI growth was 3.6% .
• Management introduced initial FY 2024 outlook inclusive of the Physicians Realty Trust merger: EPS $0.07–$0.13, Nareit FFO/share $1.54–$1.60, FFO as Adjusted/share $1.73–$1.79, AFFO/share $1.50–$1.56, SS Cash (Adjusted) NOI growth 2.25%–3.75% .
• Strategic actions support growth and funding: JV sale of 65% interest in fully leased Callan Ridge at $236M (5.3% stabilized cap rate), two new on-campus HCA outpatient developments ($90M), and entitlements for 1.3M sq ft additional lab capacity at Vantage in South San Francisco .
• Stock-relevant catalysts: merger closing targeted for Mar 1, 2024, $750M term loan fixed near ~4.5% via forward swaps, quarter dividend declared at $0.30; narrative leans to synergy realization and lab/outpatient execution versus interest expense headwinds .

What Went Well and What Went Wrong

What Went Well

• Record leasing momentum and execution across segments; management highlighted exceeding initial same-store and earnings guidance by 130 bps and $0.05/share, respectively (Q4 call) .
• Strategic value realization: Callan Ridge JV sale values campus at $236M (~$1,275/sq ft), reduces future TI funding by ~$20M, and monetizes a fully leased lab asset (leased to BMY subsidiary through Apr 2035) .
• Development/entitlement pipeline strengthened: 1.3M sq ft additional lab entitlements at Vantage campus; two HCA outpatient starts totaling 192k sq ft with strong pre-leasing (100% at Galen Aurora; ~62% at McKinney) .

What Went Wrong

• Interest expense rose to $52.8M in Q4, up from $49.4M YoY; management’s 2024 outlook anticipates ~$35M higher interest expense (debt mark-to-market and rates) .
• Straight-line rent receivable write-off of $8.7M tied to Sorrento Therapeutics’ Chapter 11 earlier in 2023, a non-cash reduction to rental revenues impacting AFFO reconciliation .
• Transaction and merger-related costs elevated ($14.4M in Q4 2023), partially offset by Graphite Bio termination fee income embedded in rental revenues .

Financial Results

Segment Revenues ($USD Millions)

KPIs and Operating Metrics

Non-GAAP Adjustments (Q4 2023 highlights)

• Transaction and merger-related items: $10.842M added back in FFO as Adjusted .
• Reversal of valuation allowance on deferred tax assets (Callan Ridge JV held-for-sale classification): $(14.194)M adjustment .
• Straight-line rents and amortization adjustments reflected in AFFO reconciliation .

Guidance Changes

Note: FY 2023 guidance updates occurred in prior quarters (e.g., Q2 and Q3 2023), including upward adjustments to FFO as Adjusted and SS NOI ranges .

Earnings Call Themes & Trends

Management Commentary

• “Public market volatility, notwithstanding, your collaboration and winning mindset allowed us to produce record leasing volumes in two of our three business segments and to exceed our initial same-store and earnings guidance by 130 basis points and $0.05 per share respectively.” — Scott Brinker, CEO (Q4 2023 call) .
• “Our outlook includes $40 million of synergies from the merger noting that a portion of these synergies are operational and flowing through NOI...we see approximately $30 million year-over-year earnings benefit from same-store growth and ~$15 million from development earn-in (Vantage & Nexus plus Callan Ridge JV), offset by ~$35 million higher interest expense.” — Management (Q4 2023 call) .
• Press release key messages: JV monetization, expanded entitlements in South San Francisco, incremental HCA development starts, and dividend declaration of $0.30/share .

Q&A Highlights

• Analysts probed merger synergies and timing; management quantified ~$40M synergies and affirmed March 1, 2024 close assumption in 2024 outlook .
• Clarifications on interest expense drivers and debt mark-to-market impacts framing the ~$35M 2024 headwind; balance sheet metrics remain within target ranges (5.2x net debt/Adj EBITDAre; 4.7x fixed charge coverage) .
• Positive narrative on development earn-in and campus entitlements supporting medium-term growth, while acknowledging occupancy/free-rent timing variability into early 2024 .

Estimates Context

• S&P Global consensus estimates could not be retrieved due to a CIQ mapping issue for PEAK (no CIQ company ID linker). As a result, Wall Street EPS and revenue consensus for Q4 2023 were unavailable for comparison through the S&P Global tool [GetEstimates error].
• Implication: We cannot state a beat/miss versus S&P Global consensus for Q4 2023; investors should rely on company-reported actuals and directional guidance until consensus datapoints are available.

Key Takeaways for Investors

• Execution remains solid across lab/outpatient/CCRC with Q4 SS Cash NOI +3.6%; JV monetization and entitlement wins fortify medium-term growth optionality .
• 2024 setup: synergy realization ($40M) and development earn-in ($15M) versus interest expense headwind (~$35M); expect near-term margin pressure but improving trajectory as projects stabilize .
• Balance sheet capacity intact (5.2x net debt/Adj EBITDAre; 4.7x fixed charge coverage) to fund integration and selective development; dividend held at $0.30 supports income thesis .
• Trading lens: Merger close and synergy cadence are likely stock drivers; watch lab leasing absorption and outpatient private-market dispositions pacing referenced across releases .
• Medium-term thesis: South San Francisco campus scale (Vantage/Cove/Shore/Portside) and HCA on-campus developments underpin durable NOI growth with embedded rent escalators and operational synergies .
• Risk monitor: Rate sensitivity (interest expense delta), tenant credit events (e.g., Sorrento write-off), and occupancy/free-rent timing may create quarterly volatility; management is proactively addressing through JV structuring and pipeline management .

Citations

• Q4 2023 8-K press release and exhibits: .
• Q4 2023 Supplemental Report (company PDF): .
• Q3 2023 Supplemental Report (company PDF) and press coverage: .
• Q2 2023 press release and call transcript: .
• Q4 2023 earnings call transcript summary (InsiderMonkey/Yahoo): .