Healthpeak Properties, Inc. ((DOC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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During the recent earnings call, Healthpeak Properties, Inc. presented a mixed sentiment, highlighting both positive achievements and notable challenges. The company reported strong performance in its outpatient medical and Continuing Care Retirement Community (CCRC) segments, alongside advancements in technology efficiency and a robust balance sheet. However, the life sciences segment faced challenges, including occupancy declines and impairment charges, which were significant lowlights.
Outpatient Medical Sector Growth
The outpatient medical sector demonstrated robust growth, with leasing volumes reaching 3.2 million square feet year-to-date and occupancy increasing by 10 basis points to 91%. The third quarter saw the highest new leasing activity in the company’s history, with positive cash re-leasing spreads of 5.4%.
CCRC Business Performance
Healthpeak’s CCRC business continues to thrive, with Net Operating Income (NOI) increasing by more than 50% since acquiring the remaining interest in the portfolio six years ago. Sequential occupancy rose by 70 basis points, and cash NOI saw a 9.4% increase for the quarter.
Technology and Efficiency Gains
The company has made significant strides in its strategic plan to enhance capabilities as an AI-enabled real estate owner. Despite inflation and a $5 billion merger, General & Administrative (G&A) expenses are projected at $90 million, which is less than five years ago.
Balance Sheet and Liquidity
Healthpeak issued $500 million in senior unsecured notes at 4.75%, marking one of the tightest investment-grade REIT 7-year spreads year-to-date. The company concluded the quarter with $2.7 billion in liquidity, underscoring its strong financial position.
Life Science Occupancy Decline
The life sciences segment faced challenges with occupancy declining to 81%. The company anticipates further declines due to expirations and terminations, potentially reaching the high 70s before a recovery is expected.
Impairment on Lab Joint Venture
Healthpeak recognized an impairment charge on its lab joint venture, reflecting changes in market conditions as carrying values fell below fair values.
Regulatory Challenges in Biopharma
Earlier regulatory uncertainty in the biopharma sector impacted sentiment, although recent developments have been more positive, providing a more optimistic outlook.
Forward-Looking Guidance
Healthpeak provided forward-looking guidance during the call, reporting Funds From Operations (FFO) as adjusted at $0.46 per share and Adjusted Funds From Operations (AFFO) at $0.42 per share. The company is negotiating to recycle outpatient sale proceeds into higher-return lab opportunities, potentially generating over $1 billion. With a doubled leasing pipeline since the start of the year, they anticipate occupancy bottoming soon, with more than 2 million square feet available to recapture NOI. The CCRC business remains strong, with double-digit growth expected this year.
In summary, Healthpeak Properties, Inc.’s earnings call reflected a balanced sentiment, with strong performances in some segments offset by challenges in others. The company’s strategic focus on growth and efficiency, alongside its robust financial position, positions it well for future opportunities despite current hurdles in the life sciences sector.