Good morning, and welcome to the Healthpeak Properties, Inc. Fourth Quarter 2025 Conference Call. All participants will be in listen-only mode. During today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 1. 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. Welcome.

Today's conference call contains certain forward-looking statements. Although we believe expectations reflected in forward-looking statements are based on reasonable assumptions, statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. Discussion of risk 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 we discussed on this call are exhibits of the 8-Ks 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 healthgate.com. I'll now turn the call over to our president and chief executive officer, Scott Brinker.

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 a 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. Couple of comments on our segments. 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-cost, 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 '25. Which is now fully impacting earnings. But in the last five months, we've seen continued improvement in…

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 continue to deliver sector-leading results. And for the year, we executed 4.9 million square feet of leasing including 1 million square feet 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 releasing 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…

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 1 so that everyone may have a chance to We ask the participants limit their questions to one and a related follow-up. If you have additional questions, please pre-queue. At this time, we will pause momentarily to assemble our roster. And our first question comes from the line of Nick Yulico with Scotiabank. Your line is open.

Thanks. Good morning. I guess first question, perhaps for Scott. 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? How you're comfortable taking on more vacancy with the acquisition?

Oh, hey, Nick. Good morning. Always first on the list. You must call in really early. It's all good. It gives you something to we 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 complimentary. Really just gives Scott and Natalia and the team an additional 1.5 million feet of it's really opportunity, is the way we're 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. They've had decent growth, but certainly not the type of potential growth that we see at this gateway. Campus. And and and we really view it as one enormous campus at this point. I mean, it's and a half million square feet. You can park your car once and walk through the whole thing. Mean, it's pretty impressive in terms of what we can provide to our current tenants and most important perspective tenants. We really are the market leader in South San Francisco. It had really a phenomenal four q, in terms of leases signed, a lot of tenants in the market. Doesn't mean that all that vacancy goes away within a year. The momentum is positive Love the team that we have on the ground, and, you know, we see kind of a breakeven year one yield with the opportunity to create some real growth over time at a basis that I think you know, in the five, ten years from now, people will look at and say, wow. That's an amazing buy at a time when there's really no one else at the table. So, yeah, we're pretty excited about it, Nick.

Okay. Great. Thanks. And then, the second question is 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 you 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.

Yeah. Let's assume that the recent improvement in the capital markets and capital raising continues. We saw that commence around Labor Day in '25, and it's continued into the, first month of the the New Year. The conversations we have with bankers, capital markets desks, venture capitalists are are quite positive. So we are optimistic that that will continue. We do think total occupancy by year-end '26 should improve. From where we ended the year in 2025 just with the caveat that the leases in life science are are big. They're chunky. The average size is, like, 60,000 square feet. 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 can continue to be cooperative.

Alright. Thanks, Scott.

Our next question comes from the line of Farrell Grenot with Bank of America. Your line is open.

Thank you. Good morning. This is Farrell Granat. 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 a 100,000 of leasing activity under execution or LOI. You give us a little bit more background around that 100,000 seems a little bit lower than potential past LOIs that we've been seeing that you've stated on calls. Are you seeing a slowdown in incoming, or is it just year-end processes that now need to pick back up heading into '26?

Hey, Farrell. It's Scott Bone. I I can I can take that one? Mean, I think when you look at where we are in the calendar year, you know, you you have the the holidays towards the end of the year, which are always a little bit slower, and 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 time of the year. We do feel good with the pipeline with where it sits today. A little over one and a half million square feet. If you look at that compared to where we were last year, we're 50% you know, higher starting the year. So our our jumping off point going into '26 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 the mix of that pipeline continues to shift towards new leasing. Versus being very heavy on the renewal side in nine, twelve months ago. Know? So we're I think it's a good indicator of where demand is broadening.

Okay. Great. And and then also on the lab guidance, the negative five to negative 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 25 expirations, but then also looking forward to 26 what what elements are in that range that is building?

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 five to 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 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.

Thank you very much. Next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is open.

Hey. Good morning, everybody. Kelvin, I was hoping to better understand the impact that the lab occupancy loss 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 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?

Yeah. So I I think it's a combination of things. We walk through the the component parts of that 12¢ impact. There's the Salt Lake City transaction that we mentioned that's a component of that. It's about a penny. From the $68 million sale at 11% cash cap rate. That's the 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 We also received a $150 million of loan proceeds at a 10% interest rate. So that's offsetting the FFO performance, and that that 12p 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 a penny to a penny and a half impact. On earnings. So that incorporates the base red reduction, the OpEx that we will absorb respect to the triple net and then some cost for releasing. So 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 start to be able to capture earnings and and growth from there.

It and 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 he expiration occurs and the financial impact? Are these planned move outs where they've gone the 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.

Yeah. I mean, part of it's also often you've got our our reported options. It's just that point in time. It's just literally December 31. So it can be a little misleading. And I get back to the point I made that our life science lease is tend to be pretty big. They're 60,000 feet. On average. So you did have a number of lease expirations in April where we got the rent for most or all of April, but then lost the occupancy. The very last day of the year. So that 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 of 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 twelve to eighteen months where the full impact is is realized, and, of course, you're now putting capital into the building. So it's really a combination of all those things that 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 it does go both ways. Right now, we're on the wrong of it, obviously. But we feel like the building blocks are there to get on the right side of it as we know, look towards 2027.

I appreciate the clarification there. And just lastly, I guess, the 1.5 million square feet, can you characterize the type of tenants looking for space? Are these large established biotech companies or more smaller kind of early stage type tenants that may have a greater sensitivity the capital markets backdrop. And that's all for me. Thanks for the time.

Yeah. Hey, Austin. Scott Bone. I mean, I could take that. Think if you look the pipeline, it's it's a pretty good pretty good cross section of the industry. You know, we're from series a companies up through you know, established public biopharmas. You know? And some of that is new tenancy with it to that would be to our portfolio. Some of that is tenants you know, renewing some of those tenants expanding within the portfolio. So it it's a pretty it's a pretty wide range. In the in the pipeline today.

Thanks, Austin. Next question.

Next question comes from the line of Rich Anderson with Cantor Fitzgerald. Your line is open.

Thanks. Good morning, everyone. So back to gateway. And Scott, you you said in a to an earlier question, you know, five years from now, we'll look back. I don't think you're 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're 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 moves quicker or slower for whatever reason versus the entirety of the life science continuum?

Yeah. So, I mean, the the acquisition's breakeven. On day one, just to be clear. So the the upside probably gets captured over the next two to three years. Best guess, incrementally. So, yeah, the five years, ten years, obviously, I'm I'm not that wasn't intended to a comment about the lease up period. So Okay. I could clarify that if that was somehow misunderstood.

No. No. Not at all. I figured that. Just wanted to it on record. Yeah. And so that okay. So to, you know, call it to two plus years to sort of recapture some of that vacancy. Or a a lot of that 500,000 square feet of vacancy. Is that about right? I mean, rough guess right now. Who knows?

Yeah. I mean, it's not gonna go to a 100%, but yes. Yeah.

Gotcha. Second question for me. Different topic for Kelvin. You got the 1.1 billion of refinancing activity for this year at a 4% rate. But then you look at your debt maturity schedule, you got a you got some chunkiness in the aftermath in twenty seven, twenty eight, twenty nine. Mostly at lower rates than the 4%. I'm wondering, is there a strategy around any of that, you know, pre preemptively for this year? Or do you let that ride out and see what what the day brings, you know, this time next year? For future debt expirations. Thanks.

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. The in-place rates are fairly attractive relative to This year, we'll focus on our maturities that are ahead of us. the new issue pricing. So we'll 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.

Okay. Thanks.

Next question. Comes from the line of Seth Pergey with Citi. Your line is open.

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?

Yeah. I can start there. This is Kelvin. So for 2026, we have about 450,000 square feet of exploration. 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 to really pull that number down. As we head into 2026. And a substantial majority of our expert our explorations are actually in South San Francisco, our biggest 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.

Yeah. No. I I think it's Kevin said. We we did address some of the twenty twenty six expirations already in 2025. So some of the ones we're working on they're later in the year or still, you know, still TBD, still probably a little bit too early to tell on some of the

Thanks. That's helpful. And then just as as you've been going through the leasing process, have there been any changes to the pipeline in terms of converting to executed leasing and conversion timelines?

Yeah. I think you're still working through a process where, you know, it's different than it was in the peak when there was no space 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 the the plans fully baked and the economics fully baked. So it is it the duration is still you know, longer than it used to be, but, you know, I think what we're seeing today is the the credibility of the pipeline is much stronger. And so much that you know, that we have more confidence in the the pipeline will transact versus if you go back to two years ago, was a lot of know, a lot of tire kicking. Versus deals that were actually gonna turn into transactions.

Thank you. Next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open.

Hi. Good morning. Just going back to the kind of the bridge from fourth quarter to first quarter. With regards to the annual 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 lap side just so we can have a clear or clean runway to start modeling for the full year? 26?

Yeah. This is Kelvin Juan. I I think maybe I'll start, and it's 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, should give you some context for 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 a dollar 72 if you take that over the 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 a penny. As you think about it. But, hopefully, that gives you a little bit of direction in the trajectory that we're expecting.

Okay. Great. And then just a question on seniors housing. I know you guys kinda commented that you'd rather not get into specifics. But just curious, on the previous 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 your 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. That piece of the portfolio.

Yeah. Hey, Juan. It it it's Scott. It's not that we don't wanna 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. So 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 we have high confidence that they're gonna turn these around over the next two to three years. So there's significant opportunity in buildings, so we're excited to capture it.

Thank you. Next question comes from the line of Wes Golladay with Baird. Your line is open.

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 exposure to, call it, higher risk preclinical Phase I companies?

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 and 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 2025 M and 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 by that. That being said, in our portfolio, we're still monitoring tenants as we always do. It's just a part of this business. There's some folks that know, we expected to vacate in the fourth quarter that didn't. Could come out of our portfolio. So 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. So I don't know, Scott, if you have anything more.

Yeah. I I think just from the in an industry perspective, too, which is fueling the capital markets, I mean, you know, that the interest rate cuts, you know, the three cuts last year, the two in the fourth quarter were were really helpful. For the industry in in from a policy perspective in DC. You know, they reached MFN deals with 14 companies Those deals had little to no impact on on share prices of those biopharma companies. So the the read through is the general impact on those deals is gonna be pretty minimal on biopharma, which is is, you know, helpful to understand and just get more more clarity there. And then you look to the FDA. The FDA approved 52 drugs last year. Which is right in line with the ten year average, a little bit below the five year average, but given all the chaos and change there, it it provides reassurance to the industry that the agency is still functioning. And hitting dates and processing approval. So we talked to our CEOs. I talked to 30 different CEOs at JPMorgan conference and asked the question to virtually all of them. You know, and the response was that the feedback they're receiving from the agency is normal and responsive. You know? And the FDA, again, if you look at this for the commissioner speaking, they're talking about process improvements and streamlining reviews and lowering costs, which are all changes helpful changes to the industry, which you know, again, isn't directly correlated to capital markets, but, you know, certainly helping the the sentiment behind the industry. And to go back to answer the first part of your question too, less than 10% of our ABR on the life on the lab side is is from preclinical. Pretty small.

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?

Yeah. You know, we we had a good quarter on the on the Devon side. We executed a 121,000 square feet of leases on our redevelopment properties in the quarter. Additionally, we we completed a 100,000 square feet 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 in ongoing discussion. On those development or redevelopment spaces today than we've had in a while. But nothing far enough to talk about in in in detail.

Today.

Okay. Thank you.

Next question comes from the line of Vikram Malhotra with Visible. Your line is open.

Good morning. Thanks for taking the questions. I guess just to clarify, clarifications. So first of all, I guess, Kelvin, can you just confirm or clarify fourth quarter, I think you had between $02 or $0.04 of know, whether it was termination income or the benefit from the occupancy lag versus the income hit, etcetera. You know, like you mentioned, in terms of security deposits. So that's, like, the, you know, $12.13 cents. But how much of that is actually still flowing into one q? Because you mentioned one q FFO is likely higher. Before we still look full in before we see this the full impact It's because 3¢ is a lot in the quarter. I just wanna make sure we understand how much of that you know, 2 to 4 or 3¢ kind of percolates into one queue.

Yeah. And maybe just to to jump to first quarter FFO. It's probably down 3 pennies from where, you know, we ended the year. So 47¢ is something closer to 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, Vic, I I think that should give you some context in terms of Trajectory between Q4 to Q1. Just to get right to it.

Okay. So there's there's some security deposit slash you know, term, you know, letters of credit that still benefit you in one q, and then they fully go away in two q onwards. Is that fair?

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 off. So that benefit's coming in in the first quarter. as well. So there are other natural benefits escalation from leases in four q 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.

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 expiration Like, what do you actually have baked in for renewal on the expirations in 2026?

Thanks. A lot of questions in there. What what was the first question, Vikram?

I we didn't catch it.

Just the, like, leads verse the leg. What's the leads versus occupied or like, economic versus lease rate? 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. We've got a couple 100 basis.

Got a couple 100 basis points of leases that have been signed that haven't yet commenced that should start in '27. That probably offsets most of the nonrenewals. Although Scott already said, we don't have full clarity on the renewals. A lot of them are back end 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 '25 to year end 2026. That is what is in our guidance.

Okay. And that's the 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 sort of a macro you need the macro to stay where it is, but you actually also see specific conversion.

Yeah. It's certainly fair to say we're looking at the macro the submarket, the lease, I mean, from top to bottom that come in putting together our guidance. What's looking at all those components. Yes. That is fair to say.

Thank you.

Next question comes from the line of Mueller with JPMorgan. Your line is open.

Yeah. Hi. Just a question for Sullivan. What's embedded you guys use for AFFO CapEx and capitalized interest for 2026? And most like CapEx split between the segments?

Yeah. Maybe we'll start. In our guidance, we had just over $500 million of CapEx in our plan. And that's a combination of redevelopment capital, the nonrecurring capital, development capital, So it 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 the amount I don't have it specifically in front of me just for the AFFO component of that, but, you know, I I think we're gonna be lighter on the capital spend this year than we were in 2025.

Yeah. There there's no material change in AFFO, CapEx in '26 versus '25, 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.

Got it. Okay. And what about capitalized interest?

Yeah. Cap interest is is flat. Actually, so no change to cap interest.

K. Appreciate it. Thanks.

Next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open.

Yes. Good morning, everyone. I wanted to go back to the gateway transaction I'm really kind of understanding it. Almost a little bit to Rich's 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 asked a question on 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 chosen the exactly, like, what are you seeing versus, like, they they kind of exiting and you're kind of doubling down and I'm trying to understand those dynamics a little bit and ultimately kind of, you know, you look at this investment three to five years down the road, how do you expect it to be performing?

Yeah. Well, 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, etcetera. You know, we're in a much different situation. You know, we're 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. 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. And, you know, we see high single digit unlevered type return opportunity in this market. As it stabilizes. So that that's pretty compelling comparison to the things that we're selling.

That's actually very helpful context. And if I would just ask one more about you know, just, like, keep turning around Janice. I just I mean, it it it all your CCRC assets going to be going into this thing, or is it just senior housing stuff? And the scene and then the skilled nursing and the memory cares to kinda remain at at at the at health

Yeah, Tyler. Let me clarify that. So when we complete the IPO, all of our senior housing assets whether entry fee or rental, would be contributed into Janus Living. So going forward, Healthpeak will not own any senior housing real estate. We'll just have an ownership interest in the stock of Janus Living.

Right. So the so the the the memory care and all the other stuff that's part of the CCRC is also going into Janet.

That's right. Yeah. Those are campuses that you we can't break them up. That that's Not that one asset. They can't be broke broken up.

Gotcha. Alright. And I guess over time, you'll you'll kinda share more details about the external management contract and things like that. Right. Outside of what has already been made public. Kyle. So if you have a question about what's been made public, I'm happy to address that here. Thanks, sir. Alright. Sounds good. All the best. Thank you.

Thanks, Kyle.

Next question comes from the line of Jim Kamrock with Evercore. Your line is open.

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 plus or minus of acquisitions in 'twenty six? What's your appetite for Opportunistic Lab now that you've already got gateway under your belt?

Yeah. Hey, Jim. We've got $1 billion of acquisition and stock buyback. Built into our guidance. We've already closed or under contract to just over 800,000,000 between the Gateway transaction and the senior housing opportunities that you 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 billion dollars to grow depending on whether we can recycle capital We're obviously not looking to issue equity. Our current stock price, but if we're, more in in selling assets or recapping assets, we 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 it's 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.

Fair enough. Understood. And then here's 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 twenty five, I guess, I should say, or should we sort of have some maybe a little further margin implications for the outpatient medical across '26?

We've got another two or 3,000,000 of square feet that we could internalize property management over the next one to two years. So there's still a little bit of opportunity, but it it's not material. Most of that 70 plus million dollars of synergies are are basically included in our not only fourth quarter twenty five run rate, but our 2026 guidance as well, June.

Okay. Thank you, guys. Next question comes from the line of John Pawlowski with Green Street. Your line is open.

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?

Hey, John. Scott here. Hopefully, we can get those transitions done by April 1. At least the target. Teams are working hard. To do that, including the operators. So 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% plus NOI growth potential over the next two to three years in our view. Highly aligned management contracts and 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, Joan.

Okay. And then last question, maybe for Scott Bone. I wanna better understand the composition of tenants that have either signed leases or that are in your pipeline kinda 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?

Yeah. It's a it's a pretty good mix. We did have some office related users signed leases in the fourth quarter. We 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 a group who, you know, we we announced it on on social media, but it's a actually, a a drone manufacturer would just raise $600 million at a I think it a $6 billion market cap. You know? So a wide variety of uses, and I think that underscores the ability within our buildings for to capitalize on the robust infrastructure that's 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 office demand increasing, you know, AI and AI adjacent. Both in office space, but also on the lab on the lab front as well.

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 users going to pay?

Yeah. I mean, 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 than a than a lapse rate. But, you know, each deal's different. You know, overall rents and economic or net effect is to tick down a little bit. But and we've seen a little bit more free rent in certain in certain deals in certain markets. But it's it's all, you know, specific. I mean, it depends on the space. It depends on the build out of the space. You know, we haven't able to to control the TIs quite well. If you look at our our second generation leasing and our renewal leasing that we're close to zero. And, you know, our our TIs on our new leasing ticked down as well. I think you so gotta look at a little bit more than just the face rate on these deals. It's the total economic package That's how we think about it.

Okay. Thanks for the time.

Our last question comes from the line of Jamie Feldman with Wells Fargo. Your line is open.

Great. Thanks for taking the question. I'm pinch hitting for John Kilachowski here. So we appreciate all the guidance and all the moving pieces on 26 for the key line items As we think about know, how those move throughout the year, is it safe to assume that 26 is a bottom for FFO? Or do you think it can still be lower in 27? 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 27?

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 isn't any impact from the IPO there, which is one reason we really liked it. As an as an alternative outcome for shareholders. The outpatient fundamentals are very strong. If anything, the growth outlook in '27 was even more favorable just given the leasing trajectory and occupancy trajectory, and we obviously see life science coming down. I mean, we said, throughout this call, we see occupancy increasing a bit. From year-end twenty five through year-end '26. 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 the building blocks of the actual portfolio sure feel like '26 absolutely would be a bottom.

Okay. Great. That 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 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?

Yeah. I mean, we only did two of the loans. Those are 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 are opportunities in '26, we 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 breakeven yield. The ability to capture a bunch of upside. It's just different dynamics. The the two loans we did, those buildings were essentially empty. So just a very different return profile where we thought the loan with a a a pathway to ownership was the right structure for those two particular deals.

Okay. Alright. Great. Thank you for taking the question.

Thanks, Jamie.

This concludes our question and answer session. I would like to turn the conference back over to Scott Brinker for any closing remarks.

Thanks for your time, everyone. Hopefully, we'll we'll see you tomorrow in Florida. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.