PEAK - Earnings call transcript Q1 2019 | Healthpeak Properties, Inc.

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Operator

Good morning, and welcome to the HCP, Incorporated First Quarter Conference Call. All participants will be in a listen-only mode. [Operator Instructions] And as a note, this event is being recorded. I would now like to turn the conference over to Andrew Johns, Vice President of Finance and Investor Relations. Please go ahead.

Andrew Johns

to quarter welcome call. results and you, HCP's financial first conference Thank conference forward-looking certain will Today's contain statements. call

subject exhibit our we in Although believe discussed statements that financial measures statements. assumptions, measures risks are financial over to actual do we factors from detailed Herzog. will results an the forward-looking any this and President Officer, accordance available to www.hcpi.com. be are requirements. may also the forward-looking differ reconciled we have cause at is site of in on to Executive Reg filings X-K the forward-looking of furnished SEC, expectations statements with non-GAAP at not on based our our call to uncertainties with will risks expectations. Web materially G reflected now update the in a Tom Certain the exhibit measures in the I to most our non-GAAP discussion A This We included and is In risk SEC. and undertake Chief duty and turn press directly our release all call. any reasonable GAAP comparable with

Tom Herzog

Scott, our With Troy Also our good Klaritch, and Chief our and are the are for of Scott call Officer and Thanks, Andrew, Development Counsel. Operating McHenry, Chief Tom the our and me available Chief today Officer; morning here everyone. Financial and Officer. Pete Brinker, General Investment Q&A portion

cash NOI both quarter portfolio property and full-year adjusted our and FFO total first expectations, last night, Our were our we reaffirmed in results with line same guidance. as

launched all investment XXXX, of three front we lines four with first on the business. During the were of month across activities active

investments primarily tier strong have and with by allocation top our driven capital Our partners. relationships been

not position yet We acquisition are provide but advance additional to in detail. discussions are opportunities on also

strategic summary, demand creates at significant This investment Oakmont program had A of additions market with and excellent Class group with by start In two from top relationships the that HCP make records we preferred HCA allows our of has as improve and And with markets. Discovery benefit pre-leasing strong year. to expertise strong anchor Scott tenant. relationships long MOB provide successful HCA track campuses These attractive fundamentals successful operators are expand In on to with tier most the confident acquisition Life towers Life have from acquisition recent HCA yields bringing previously our development quality high future the closed potential we on Benefit offer and projects activity. Science, sector in and Office, Park funding to the new to in forward on Drive In ATM $XXX close completion. result through of approximate And a for Boston, South our our In portfolio transactions of raised program, initial to this Cambridge strong Science there as opportunities. Point added capacity identification assets Housing, plus them our strong Senior we San meet Francisco. of advanced portfolio of opportunities we Medical However, in the total are quarter development are infrastructures, three Sierra with in transactions million. assets. some these upside track necessary pleased the new with announced and the the the of will to new and SHOP our operators. operators. we their longstanding both

store track. are same on performance earnings and Our

senior housing businesses fundamentals, and softness bit our in expected. are MOB housing to senior Life relatively better while Our Science in line than was our performance continues there with a And expectations. be performing

attractive an locked goals We acquisition XXXX acquisition our have in have and pipeline.

balance in commitment. progressing expectation. And ahead line sheet with of our are stated is Our out tracking development projects

last board our our our of in Pete, who it Pete years to Rhein, the from acknowledge Sullivan turn and directors I joined contributions two like our XX Joe our of annual since ago board our Director at IPO I week XXXX. who meeting. would Before retired

to We from benefited our Pete? prospective having for personally are And the will With over sage and board. to turn thankful their advice. miss I many I fortunate feel HCP. truly And to have it will them contributions I on that, Pete. very

Pete Scott

Thanks, Tom. start. our off are Starting results, to with we a strong

of FFO the For we and reported of X%. NOI quarter blended same share XXXX, first growth adjusted as $X.XX cash store per

backdrop And more drugs details to three increased of increasing XX markets in a our our led are XX. we some has and major increased in biotech from And tenant around we the tenant highly of Science, cycle. is has low provide is Starting up market strong virtuous XXXX, Capital me historically high favorable. approved have Life segments. with vacancy between for a Collaboration in entry in resulting to and This barriers Let rental functionally the pharma demand exponentially. all-time FDA our rate rates. the average midst that very funding

XXX,XXX the backdrop our science leases market signed ground. is in of XXX rent each which requirement with NOIs market. square market. steel Life escalators. mark-to-market, including signed of very executed represents tight also factors over we leases strong pool, looking XXXX,XXX a their in space over finished we robust clients strong life remains occupancy of points same NOI feet a strong often quarter and in up of times increased driven before We of momentum XX%. Within contractual development the segment, was many see basis within wide a lock our totally occupancy, such, to getting and Science XX% is resulting throughout by As square early positive coming lease We of with of XX% our combination positive This In reported core our successfully growth cash the quarter, store X.X%. feet portfolio from

same-store in of as NOI a cash Turning we X.X%. focus campus resulted rate tenant evident which pool, to consistently NOI strong was XX% in retention the quarter XX% growth first our a of growth. retention leading medical and achieved and market of office, has represents high on steady This rate

Additionally, City of one campus Dallas HCP. million in X integrated an City our growth MOB feet It opportunities. basis additional over $XX And of estate feet trophy XXX generates million square currently care contributed campuses. points X is excess our of of to with Dallas for square our segment. consists expansion of health of within the Medical real Medical NOI million

the before. We to a are greater structure success allows And strong the each from such the the have mutually been has is rate of with than fortunate to of lease HCA and growth of partnership today the ever us of campus. benefit it

of view can it to you irreplaceable website. portfolio. within property better get understanding strongly to so encourage short Dallas of will our We video the a on our a you have Medical City added office featured I this medical properties

in our our growth SHOP expectations positive was the first-half X.X% NOI as XX% but same-store XX% line first expected pool, Moving challenging in more was now senior to represents X.X%, in we with quarter. X.X%. The was which senior pool, a declining same-store which housing, of with year. cash our by of housing of performance line represents triple-net declined the

portfolio a imbalance SHOP our new to supply/demand transition deliveries. from as well as portfolio Our by to due continues impacted be

is encouraged by typically, transition our XX% the However, quarter albeit we in first the portfolio are NOI. quarter sequential for a growth seasonally high positive

Recognition credit X.X the over EBITDA rating really during repositioning cost to be BaaX. resulted quarter profile of past have an these of our capital. sheet, quarter of the improved We of times. balance couple much efforts and ended net a to the first to in years debt our upgraded achievements Turning stronger now a the credit with adjusted

our the from development capacity pipeline the acquisition and We the the liquidity utilize as Shoreline of have transaction. metric year through leverage line course debt high under availability with times XXXX do our expect support created We five we ample the billion to of excess increase $X.X of credit.

$XX a share. through During agreement part net taxed the approximately of the above million forward raising April, and the we $XXX issuance price sales with first ATM quarter early per at

STP to As $X.XX we per X.XX% noted, pipeline. intend FFO adjusted NOI cash use of are our reaffirming acquisition these total Tom of Finishing our our guidance, range as proceeds share portfolio to X.XX%. with and fund $X.XX we to full-year now to

perspective. near future of have guidance for opportunity our the quality growth the approximately X% range more stabilized asset end. fully as guidance million cash CAAP within the and our the lower is we and which acquisition plan term across is $XXX not the With initial sources identified rate rate stabilizes. On regards are a a nature basis, We at ahead approximately initial at CAAP balance and The acquisition CAAP is of high of reflective updating unidentified acquisitions, the which the is customary. property rate The are of we but leases see year X%. to of from cash the

I would to to details additional page guidance XX our the of supplemental. that, find call can Scott. on on You With turn our over like

Scott Brinker

demand with the building, allowed additional to will Nashville, company. million. still repositioning pipeline, for-profit in on occupy With the medical X sites markets the for Oakmont. to the world's real-estate the attractive Okay, we're a markets. behind of to are cost quality expect and blended capital and actions end office, us, improved Across in excited above will all the successful of housing And stabilized Kansas our range. in thank our up high high you to each and the announce I'm to In strategy of we court $XX with the three in to drive developments the and Milan life activity, senior which X.X% start of of HCA, balance three entire leading our reduces their company line us The details risk are own again. tenant Yields hospital lease including range. of the office, spend to science, be pleased HCA roughly medical these HCA HCA be medical share Pete. investment growing space. XX% XX% commencement office cost of number aggregate City, has

First in life active also was science. quarter

$XX Boston. we Cambridge closed of XX As previously in million Drive acquisition the Park announced,

even Our plan adjacent achieve for about up gives acquired in opportunity February development is that business confidence the XXXX a and track on stabilized $XX us more million. parcel in we the to yield to on land X%

in will the South square Sierra the are exceed supply. second hub, $XXX science to A foot Towers acquisition. million life Francisco, will life to Point on X This Class where San what continues to a leading shore the science campus quarter, market forward Looking towers to a position demand become million at extend campus we're our Sierra track exciting at Point. an addition close The

pipeline fully stands On the total plan. our billion, development which is our at front, $X.X within funded

XXXX are all XXXX. prerelease over pipeline We pre-released delivering for starts. projects recent when including the And XXX% entire and our in on XX%

of projects. a few Let me highlight the

remain construction We we seeing First strong square and at That demand. and an Sierra feet. to for, three. deliver came Point is all XXX,XXX delivery. space for on second and project us XX. short NAV schedule parking quarter, projects commenced we the here the early generate new for pages to at the The the development. allowing and code, are expect XXX% the track XXX%. two stabilization. we the completed structure, Again, XXXX the site XX, space significant which We phase three. code earnings that at square In on is XXX,XXX The commence stage will remains work for foundation tenant These accretion foot are

diversification, price These The senior business, focus strategy, plants, senior strategic housing, and we're relationship with acquisitions from million. Discovery is Oakmont state our where in alignment, we and expertise. experience just of growth has housing high towards real-estate. average to three The operator quality to operations. to years. recently where Discovery development growth are with range we're years accelerate markets extensive including driven higher The a announce eight $XXX Florida, companies six amenities the modern to an both purchase and improved designs, a and properties in to modern properties unmatched offer best-in-class concentrated Discovery physical independent Moving weighted portfolio and excited age taking just and and living opened regionally in acquisitions was

range in up expect X% by three, to stable. fours, the run initial low as the We yield lease year properties an

very to in co-invested with the the incentivized come portfolio return. expect Discovery for management generating agreement. to a strong highly to growth and and total pretty agreed CapEx little attracting years portfolio NOI We

$XX there's alignment million So to outstanding interest. providing Discovery. financing of developed core properties of being We're junior up by also

acquisition will rate, million X.XX% current with return a at quality We creating along a $XXX options a receive purchase high cap pipeline. mid-XXs

predetermine in today, average. real mid-Xs the light purchase very form consideration XX% assume of quality CapEx low this X% debt. acquisition, price and assets also well consider Importantly, not estate obligations assets. of full attractive old the issued We're excited one-by-one memory on partner third-party each we years are the is operating $XX and Capri of and project, occupancy million mid-Xs exercised each above to property we of and California, three a a has just $XXX are offer are under in care. given the projects in may The The the just the underwriting. of occupied these a options, purchase the share properties campuses record where through unrivaled to acquired expansions track continuum Roughly of success. the the living is conservative the initial are campus the downgrade are yield given of just we as was independent of units announce be at of Three threshold. age to which which allow a per state and portfolios of Oakmont three in located Oakmont prove $XX the four million our

incentivized negotiated agreement. also We a highly management

alignment. partnership senior active this asset grow XQ desire management. is mutual strong for There's also quarter the to a has relationship. So housing an

to and transform partners. relationships our We're key tackle making place fully continue and platform on angle. We positive the is in operating and have the proactively infrastructure. from our importantly, team progress we Most challenges with business rapid every

barbell relationships. concentration and this We quarter, an asset science sale. initiative life move $XXX the on mass means operator growing, exiting over enough characterized demonstrate critical properties the important cap that success X.X% to non-core end Eliminating quarter our which portfolio. parcel of operator we end. and one first there's on The us by exit The land million that each real continue out to blended rate initiative for assets one other had more not an small Historically, allowed and sold has three quality come. barbell housing the senior relationships. announcements low tackling XX on to isn't or either this a sale In is and eliminate downsizing estate we and

are proceeds addition strategic the and assets non-core In relationships. into sale being recycled

leases a HCP. We to properties CNL ago converted Sunrise annual estate conversion for third-party that also were highly NOI XX Sunrise. they a direct management our the decade the RIDEA structure. more complex some of cumbersome deal RIDEA to and have with The in eliminating acquisition. is now a by contract we net real good particular and the than In structures control triple proactively inherited million candidates $XX and outcome These we properties at from

lines City leases triple XX quarter XX Oakmont our current good with to assets quarter, high NOI next properties and XX% driven are more easily In competitive performing this of And guidance. chose four up real XXXX in We the Washington business closings that the were strategy. attractive year-end nearly are the to to partner structure. in we annual properties advantage closing, the conversions XX all choosing million FFO, by in and by assets including convert upside. is the located Bay leading these the days. will modest full-year NOI. net expect convert converted quality, in to should conversion Also the and our with and that business first operated to of second roughly we Oakmont Final by to DC provide benefit Los SPP comes the to included The with staggered push key replicate. XX is across produce the from their Los Area XXXX. fab HCP in the high from providers Sunrise Angeles team has cannot markets licensure. three California a the addition, assets $XX properties nice convert in we The a In and advance three RIDEA of the enter believe of submarkets shop Angeles, and occupancy in a a think mid-XXs, estate New Also MSAs. as in XX York takeaway are portfolio major

Now, back Q&A. for the to Operator

Operator

Our first ahead. question-and-answer [Operator KeyBanc. the Sadler session. comes now Jordan go from begin Please will Instructions] We with question

Jordan Sadler

morning and out there. good Thanks,

talk First a I day. but here. had coverage and know as catalyst can there the busy to slipped know was spoken in about little you had The on of structure. a bit you'd apologize the a past late, conversion, on this, question, funky Sunrise, just pop I I bit I

was curious of sort this of staging and event transaction next phase the least there So, the and of I'm anticipated? XX if the what catalyzed that an default conversions of essentially at and Thanks. are then

Scott Brinker

we ultimately This events always very end assets. leases They about traditional in markets. waterfall was to that rent and XX I paid, the maybe and of rent well. making these real There listen wasn't these complex did net encourage call; the XX these that had booking that waterfall had were of the that detail overall, D.C. Hey, would us default. Jordan, It's definitely although determined manager of always in by tenant properties they and how most completely so ago they're a net the HCP that is we here. but ended that in in in with the HCP we reporting our triple about in subject because York, said third-party but that's that should acquisition attractive all contract more years, here and They we Scott we've up we as own conversion good the that's management and And Sunrise we was old, but from are view, indicative third-party don't were any terminated good the cover who day shape have the end good roughly to More Sunrise what to rent into CNL total year. years net morning. deal XX decision always like was much counterparty. I'll arrangement, coverage to to They good We've completely Angeles, and than by Sunrise's was assets. they're why a we that the good eventually half a of Washington, was determined a structure was And portfolio those was estate was it really triple opportunistic good as the in the not inherited paid, the a Brinker earnings. not each function so very go choice ventured our at years half was ability sense. reported the thing estate triple bit. decisions a more RIDEA, on very complex of an contract for our They're that the tenant, a bucket assets. to this Los tenant what And than NOI they're Sunrise They're rent, -- have NSAs they in this leading XX and about comes pay convert those of the the have really proactive a balance Sunrise real New make like The this Sunrise, the converted, of conversion. XX ultimately. already with Sunrise, an make to to with think was agreed is cumbersome you now and operator. the aligned of leases, into been we important convert

we choice. other So, the because our background, choice, opportunistic. and but This not underwater had that's was are the rents was no this XXX%

Jordan Sadler

I get it.

You because the contract like the be underlying So to The or your tenant it missing, the the what seems good terminate is had a with able you like will caused decision piece I'm they ability sense terminate on I to makes economic feel to that breached contract? at guys the contract? that point to me.

Scott Brinker

forward. think what reasonable conclusion didn't well should the There was were I that allow, Sunrise outcome mean, the as I about or reach conversation did breach we of the to avoid contract but we able us allowed no with any contract. and to third-party move tenant as a

Jordan Sadler

on I'll then guess and Okay. in a just then And Discovery, the follow-up queue. hop I back

years. the totally struck on seniors' bit guess you And some I investment surprised, your surprised. by a discussed guess recovery think CCRCs, things, longer-tailed. around like of your the housing know look I'm and big surprised be and thought in think in doubly, little because just two then CCRCs as I I And you activity pretty little these could I I seniors' that I they I'm -- bit housing, were assets, but with know history quarter, in kind not we've are acceleration were particularly so bit high-quality these a I'm and the of but one, the the a I are, as focused little view over

thinking can the you you for of frame a your just then attractive that maybe potentially changed ahead became world a and of So bit and your now, here view recession? up little CCRCs these what on

Tom Herzog

I'll one. take that Hey, Jordan, it's Tom Herzog.

me entrance So, of fairly a in-depth just it continuum The from and typical thing. SNF assets. But it These care clarify housing aspects. are so assisted first let I'll that's a have the question, so fairly memory number just common, assets me just clarify care, first, nonrefundable and They're of doesn't on that. touch component, doesn't a which it care senior not let have one of are across definitely independent fee continuum whatnot. CCRC

I big we're that's mix the As quite think the about to critical. investment how picture thinking from perspective,

I XX% science, with and of a know, with the housing, which a businesses to life paid quality senior we private little everybody around split owning balance in We current a knows, MOB, strategy established clear housing. portfolio between is ago as think two senior and high life you mix, MOBs. the three XX% and of the science As our years intention over like

similar a probably I this forward; think bit allocation think time I But and opportunities. we'll ebbs over flows balance. depending going a maintain on

game change front. on that in no So, plan our

housing dollars a of senior senior dollars announcement reallocation housing to portfolio of and represent reallocation of Oakmont, senior Discovery As the our our investments than rather yesterday, within these housing. acquisitions within to a

about think So let how context me provide you that. to on some

$XXX announce with assets, clear, housing of queue $X.X the our five be housing to senior high did the year we our share rebalance quarters, the weighted the operators, Over last of housing yesterday pipeline additional months. million be importantly, focused is in assets. a acquisitions. for of senior And these we And will disposition the coming some toward we Still, critical. billion housing our portfolio senior over only senior have sold quality of opportunities and we've expected increasingly modern strong that new to as predominantly XX% portfolio will of of assets some balance think on markets which allocation housing in great XX% portfolio remain level our the is in with senior

Now in relationship-driven in is when but housing beyond going current given from rates going may that to with XX% redevelopment, science pipeline make from lower the still within non-core plan senior simple by forward, strategic MOB are our given frequent, that. development couple a probably which acquisitions development the to forth. fully large I opportunity then pivot and some last given come housing, XX% think the business to life of pipeline which is to we lot and we're our that positioned, you've investments the have mix over and of the set businesses, portion noted strong the uniquely with our senior staying addition And which the capture that from this, value of other recycling we to target to the targeted core, appropriate a of in those really, and cap segments, -- growth going market unique to the years, we

that some for the very right is working plan on with it seen just transaction years. two-plus in that much side, that So, fact line toward despite volume last we've the the you've been

Jordan Sadler

you. thank Okay,

Tom Herzog

You bet.

Operator

comes question ahead. Nick with Please Scotiabank. go next Our from Yulico

Nick Yulico

thanks. Okay,

Are little pricing I at $XXX,XXX it's separately, Going Discovery in high back about end a look seeing the the couple housing type yield over hopefully sector a to be for which yield. you down the actually found cap past lower lot you unit, next on about you year. a more making here the you're you exit get would years? if than And market talk senior implicitly anything the could asset of at assumption mean, buying cap that's we why to to be four the to X%. a of capital this and attractive. the acquisition, suggesting than this was low rates of it, bit an rate a could an pushing institutional fixed transactions Are coming that just over of

Scott Brinker

Nick, one. it's Scott. price, as take posted replacement awfully I'll it's Hey, a cost. that the Yes,

Discovery our it we've similar it through much speak, would in for and these to is are what projects price what in construction these sense as we a markets. deal our with of really got this costs so pretty good pretty purchase of quality You to cost build line building today

as or different because So price sector be that's always may is it well below a good valuation well just locations. metric unit average the per across properties XXX,XXX, the XX-year-old in

as So relevant. that's always I don't know that

a of portfolio think a rate in In think we that preference, important stabilization to, with the that's at we Oakmont projects here, I these think a X% will bit rates, well. time. last which of just always quickly, what And awful we fully little development turns easily set of you don't then have an terms purchase then [indiscernible], provide Those of get campuses true of X% cap at X.XX% we four that to of whole to And strong is three, is that the expansions not growth projects important. little actually CapEx cap awfully of there We yield, into economies thereafter. leakage. really whereas like piece really building, sixes be cap as sheet, because as that Discovery the point long start are the are because rate release. out really a it's leakage. about development doing be We is developer lot as stabilized very That's Those the junior three on cap are and wouldn't a option And cases as no these CapEx X% -- don't press X% projects portfolio attractive first the do year going the a aren't scale. will options. certainly that's purchase big pretty properties but for bought. just into owner in the expect with think attractive There's high on those great a our financing acquisitions not if in they and are a could we four the our is turn And we balance hold virtually bigger, exit about and at least when think XX-year-old cap, well.

new properties So of existing the build. benefit that actually the as well as should the margins

So thrilled over not investors, then Tom, showcase attractive we time well. but returns to really are to as for we to be that think you wanted ultimately this And own is something? only one and add will going provide

Tom Herzog

one add thing that two trough capture we I deals while would to able fact these is sector Nick, in at that the is the Yes, cycle. operating we're a other the like

portfolio plus. Given the and circumstances, consider our our moving major of pieces a we this

senior this about, considering seeking market his it's move talked we dynamic -- we've where an assets was with in portfolio we're the team to higher and some to Richard, and which the think, really opportunity. quality at housing As really thought within we portfolio some operators,

So that was the other part.

Nick Yulico

helpful. that's Okay,

are? fair dynamic on How think supply markets the are I some which of on you about the impact sort of comfortable supply these get that Florida, Gulf question of mean, portfolio, the are other a the facing? Coast new underway. one Just assets in the that with to them has talk the I we assets can supply do amount

Tom Herzog

a Yes, good question. that's

is So the the California about And bit Either a is the And communities. sure, Florida Discovery full not easy is. are very and scale one XX expansion, unit think that quickly, has XXX What in Western the easy even like end portfolios demographically but campuses, based is haven't the Florida market Naples barrier couple leased differentiator high we is just we XX to not Discovery portfolio that but will little that of been it's time, two those different. markets. are for to marketplace going being a for we there as growth, differentiated the West post these in properties really offer to of the that Fort unit, today build but a operating are good, to and where especially reason as be units. Florida, XXX that product new the in continuum. And or XXX it's build a off in importantly, think And over some attractive up South and years. is that's high Myers, supply of marketplace, in

we like just that know feel state they anyone that standpoint. market about in every So from a better housing senior than

Nick Yulico

it, thanks. Appreciate

Tom Herzog

Yes.

Pete Scott

Thanks, Nick.

Operator

comes with Joseph Nick Citi. ahead. from question next Please go Our

Nick Joseph

Thanks.

You on between about discussions it and near-term being advanced acquisitions, does in segment? the break talked three pipeline the what's how an down

Tom Herzog

is this Nick, again. Herzog

announced, correct? just potential that talked You that is we've which the to pipeline beyond

Nick Joseph

Correct.

Tom Herzog

it put would way this broad strokes. I in

repeating I like. do myself know assume that I date bit. the have think the a relatively and put mix I'm mix, But stay with we would we that looking overall we're as which for what over you little that we we but together in term, you current our be at that that beyond opportunities will tell this some I signal the near it move premature time, As you to at look but us at can line and at

you So as far can bit see not but little short-term a deviated. movement, always of we're just as movements,

us you life science. deliveries and there just we'd looking that mix what the building office, some perspective generation of to significant other going remember But portfolio the mind like portfolio, housing. and improve pretty we're it different life don't science. the go we're and medical see and of some science Tom real operate seek the that looking you've Scott in Klaritch - comes look You at are Peter a our to to got opportunities we President I as get we've also course team the that room at us and got pipeline we at us leaves to to for infrastructure, the Not coming some of next how there's to be are capture. Glenn there or et working When in are but upside cetera, you senior causing for from handle gang to when life be opportunity to HCA communicated. how think previously to mix deals, outside

Nick Joseph

issued the forward that on have year. And quarter last is ATM from the capital late plan equity funding on a Thanks. then just equity you the still basis before in you

remainder the where the I of term, equity sheet the think how issue today? that and for capital is year? the So do near needs your given balance you think in additional

Pete Scott

Yes, Hey Nick, Pete. it's

remarks high sheet as the to forward in And XXX, issue we we mention first issued quite do about. perspective those I fives contract. the from we more the then, right of to we'll source's quarter the our right the a from it's quite a we the a can the talked that under then now settle lot is that about times. We acquisition a go So forward perspective. at ATM now, closed at Sierra prepared we've X.X source's Towers pipeline up beyond at did already could our extent and we little where we acquisitions feel we've other opportunistically little which of as equity the capacity doing under but bit feel of we good a we bit good in balance well grew, today for so, end did end where anticipate my we're Most into high April this more of as that Point contracts, a the access are that it quarter, markets

Operator

question ahead. with Capital RBC Our Michael Carroll Please go next Markets. comes from

Michael Carroll

touch to of stabilized know senior I thanks. just over lot that a implemented you'll I'm good closer improvement. transition Yes the rate those that, you and side labor portfolio the portfolio on and wanted on have that's expense streamlining portfolio that the transition time? trend been the mentioned core a operating the is I by specifically initiated run margin simply operator see or already Scott housing contract we of to to assets should of previously using a it's all the lot expect on just

Scott Brinker

I but in closer financial there's the it's even labor Michael, number a Scott here. overtime, stabilized say XQ. to contract fair from statements getting would of amount a and still

so of level that still long started but it's there's to maintenance still a acceptable So which not at it lot a term. was XXXX, and similarly opportunity elevated normalize in repair certainly we think is

that So things think through I least especially corporate two financials at for as elevated. quarter. There's improvement impacting category quarter that I and expense another expect well as in or support will expenses is operating further overhead well. other the flowing continue would are And this that still

a So the a at we're expenses right not direction. they're a I in where say level -- we're point are not but getting that would at normalized the at definitely closer. trading They're

Michael Carroll

And you side. take that to mean expenses one is to or that? next really stabilize be should long than XX revenue year we the it those the over I guess portfolio streamline Okay. and on then how some expect able longer I early does next or months to it

Scott Brinker

of the for mind that I Michael, Yes, assets transition think in half of the those actually transition. XXXX. of so one and transition second-half keep Only first-half in the is XX they important about thing XXXX in balance the

months do the we the properties takes So get back number. stabilized and think it fully transition to to around XX expense

assets the the the in late are that from are expenses. some process in process late the still that ones XXXX suffering that So the improvement of mean biggest the ones the transition showing were early transitory transition in and

through starts the XXXX, later climb year-end of that. produce that into on in growth. we still of entering That and to the XXXX of need right that the by terms we probably side But showing year-over-year nice in wrong of So trough out to we're think half we now went in portfolio results. XXXX some XXXX, starts

Pete Scott

just forth guidance Which set has also we for the clear. to that year, been included in be the

Michael Carroll

Thank you. great. Okay,

Pete Scott

Thanks.

Operator

with Please ahead. question SMBC next Our from comes go Nikko. Rich Anderson

Richard Anderson

morning there. Thanks. Good out

Tom Herzog

Hey, welcome Rich and back.

Richard Anderson

much. Thank you so

XXXX, guidance be kind last year willing. does moving the of things, perhaps of million big I expensive that say in how chunky the the XXXX? then you transformation think when on. on a all share for does of fund different $XXX growth here, this leverage lot of to the question Discovery, into add of little going the fair that but looking So year next gets you in dispositions company you're to development, XXXX of of lot million all of to how acquisition work acquisitions, environment but stuff of But have the transition of the metrics stuff had is linger like is $XXX raising not that done more bit the linger, a implications got in a generally talked that the perhaps parts done it going through just work value perhaps a are Is you terms course unless of per about

Tom Herzog

company. earnings The average in. was million the kind they're turn then cap acquiring year going assets Yes, and of rate year is a let for there's Tom spillover this going good little lingers. certainly baked going is Now to Rich, some $XXX final higher that But me Herzog to of also I'm on Pete. to some talk going start at the lower a XXXX with it is of dispositions, that that bit fill of picture and can cap I'll XXXX. Pete course in have of to come some to the last which transformation again. rate be

some earn-in to that's long So the going a spoken on it's from coming due developments tweak going we've to earnings that upside. bit. going an since to some The to to got that's debt perspective, see we're going back our that's acquisition be development. some We've

see well. look into the can some to as we do are will are the also have offset But that? though that timing you coming that your positives take that XXXX to in So But going the XXXX, a those I fall in, that fall parts. some to with of items going naturally number will repositioning that items have guys through as just from a remaining we're Pete, away stabilize in perspective. models. of start know moving forward you move out we And we as numbers of

Pete Scott

transition is XXXX and this nice that's as to known, in really pretty well we assets Tom a say opportunity of well in escalators this ramp-up the on We've and across year a There's it point on next covered for mid-year disclosures you I in years has at life one year the to dispositions got there's yielding year. head runway the headwind here life the think as this that those. refinance mark would We a housing science a XXXX saw nice of our market the is are lease through cap as place We've X.X% of next bond MOB quarter as X.X% the think just as assume as mention. within but we I then But lot well. a just positive I increased upside some Rich obviously couple upside nice higher to And those. thing, the senior assumption. future pretty said, platforms then sciences, portfolio opportunity our online. We other that would with well. developments well. coming funded well into bit think Yes, you rate

but do much certainly So I upside Rich those headwinds. have we offset more potential that headwinds think some have we

Richard Anderson

rate in in I've Okay stable perspective been asking then your you other medical environment? on been is in on stuff it sort specifically great. up quality noticing curious you question, just cap terms And of movement of world rates a calls, the given office have office that own. medical or any higher down I'm the cap or just

Pete Scott

we'd business, to and rates I love stubbornly would that we we it. grow are say, it grow cap low. love and spend the challenge The

a more rate, just something. cap suggest low that the anything seems office that quality But that. we rate. Tom market market add wanted seen to to or medical off the reflects three invest unaffiliated, the or that been last lower that that change in the or higher at quality, XX think asset including to demand. they institutional haven't two quarters, ones higher And, basis at see points today, view, assets, you especially declined, on cap transactions or running, are We in we come campus quality a just high if still on least fives than the anything in think or keep has campus do least our than the to I demand at So, so has in in

Tom Herzog

activity transactions, that we you that that centers and have very at certain environment saved when outpatient going the et will be I'd and do look to the housing it that extent Rich and the So the competition to in campus institutions, cetera. be be yourself to we probably but we can from only see thing the these you've as you a but where, saying and of many add have there's is see we been as do and portfolio for far believe we specialists to the for care important, we protected with retail the good efficiencies also very consider especially strong health Not somebody very, hospital current they're what delivery strategically be in urgent spend we on much in Korean them. else, center, settings, location high not that like absent of quality setting. in on clinics And campus noticed institutions,

portfolios at have it So number how on come that's caused those different strategically. market based us from to a to of that just steer we look away

Richard Anderson

Okay, okay, much. great. Thanks very

Tom Herzog

Thanks, Rich.

Operator

Our next question comes from ahead. go John Kim BMO Please Capital. with

John Kim

outperformed morning. On it science, this Thanks. life quarter. Good

down there you have occupancy the outs Are remainder of that any expiring. year? large lease bring the would X.X% year, move For known for the this

Pete Scott

that. Yes, John. step I'll hi at Pete It's take here. a

was vacate Merck knew as those. have day that that actually we for which and we've Qualcomm, but particular, we've known square now been under campus, backfill Hayden the because positive know, we the do XXX,XXX expires end that, this is on of actually the in going years redevelopment two do with we point a some actually at have lot towards time year. in that good that The You LOI feet news we've to front to of mark-to-market, vacating at well, able nice about backfill

and is LOI quarter as into So turned this a actually that leases lot year of XXX,XXX some that actually is well. remaining under of

have we finish it So as bit a does little the down work a that to number time year the TI will new for take But the and vacate, couple, no of do tenants. progresses. come

So XX, you tick head back from XXXX. we expect XX then to a little down tick bit but to up into occupancy as

John Kim

quarter same the your is can fact… know Pete NOI the high sequential Okay, store not the and case? also discuss the you then seasonally but I you that's improvement that in first I mentioned Given think LOI, shopping

Pete Scott

and is is want seasonally that that also, a the rent that here. that high Scott only good basis increase in it's for John, are in XX a fact get quarter. quarter a utilization. expenses. charge nice X, based expenses January the rate first Hey, daily the the on of quarter a has the the part mean, a but they region But very increase always on of revenue, operators And so fourth or on lot it wasn't I to quarter either monthly most of you so use days

for the March going increase. NOI looks you part, X of an elevated So first so dollar full the expense with quarter. increase be number the always you the second standpoint in annually absolute that it's to most plus from to wages up just is really the in not And on quarter, benefit end good sequentially but fully get rate revenue

that transition portfolio all that we're the being pleased the said, in moving still right So, direction. is

John Kim

Great, thank you.

Tom Herzog

Thanks.

Operator

from comes go Hughes Raymond James. Jonathan question Our ahead. Please with next

Jonathan Hughes

with morning lower out that housing to there. Discovery good know highlighted industry but quality about transaction I the potential the operators. Oakmont curious reach Hey driven for that have your relationship a of shortage portfolio articles new acquisitions Scott, led were senior volume. operators from sources seen expanding subsequently I've

the be to expanding operator would there any great Just hear you thoughts have base? about Thanks.

Scott Brinker

we of part call, is to happy operating of on have. of partners and the for and our that cover mentioned family the part critically senior is I strategy that number right reducing of important partners that housing the getting operating Yes,

is with business of that exists confidence portfolio their the for also partner. mass partners. but the estate lot can estate real them systems on but the And really operating partnership not critical that very the to with have operating a dependent and is successful their operating the strategy just between select partners also really their REIT relationship people goal is and in and the that relationship quality have because it have have that a group a of a usually the REIT Our not we to means the only team of we but real

progress lot we're making So on a that. of

possibly housing The is housing more upside than fact to a time. will we senior business differentiator for be over now, do have enormous that is there think in I our could you senior fund. opportunity right things

about do of is Oakmont the think in picky there in we list, the unique anyone what pretty top be we Discovery where So at to good can I rose as they a what we're the in do. position

Jonathan Hughes

Okay, Maybe that maybe yes. have how What's today? have number your to like many operations in of portfolio. do you target

Scott Brinker

and any XX so to us properties, than XXX and XX static But assets XXX down concentration point partners to there's really don't Yes, with we've got XX quality We're high each portfolio, got have we really partner. have the strong so we've had that XX some where about important a year I'd hopefully they're to mass important we've got them. ago. all one more more But to if just we to at with of one a today love a critical of them, properties.

Jonathan Hughes

great. of over you year share for can housing one you, And terms just since or built the processes then capabilities Okay updates you any platform a more changes out on in been ago? or senior a that little joined

Scott Brinker

needs on that team that pretty opening with That's we have report, those I'm a a relationships helping way a on every the to strategic plan single up I'll change be the out top They're single the with bottom here. with we quality operator assets. that to way team extremely the asset that. that way of with operating partners with we isn't filled. piece. we a important pleased we've in that and forecast, got own and a great build team. Yes, start There dramatically really for come

and a I time. continue improve and better of on up happy from business first to now that that progress intelligence I'm running, side. got made But would really we've the over really, now the technology platform think even think the platform version year I the we've with be that platform

Jonathan Hughes

forward it. more looking Thanks me. All for That's right, for to the hear time. it about

Scott Brinker

Thanks, Jonathan.

Operator

Malhotra comes go Morgan Vikram Stanley. ahead. from with Our Please next question

Vikram Malhotra

expand Scott, had prior for maybe these RIDEA with? the Thanks the contracts, the or these like you experienced conversions. the from contracts you mentioned question. how taking and ones different in creating you've that upon Can alignment bit more are that newer new talk others

Scott Brinker

we're and when upside lessons up learned owner, investing Yes, would operating is And decade and and lot contracts them to really in in and the an in sign as real that RIDEA a downside. says of bit willing and say to that meaningful in forward that's their way. of to partner really, the over to participate in dramatic to in a long to estate upside kind abilities downside a sharing contract there's moving confidence the think let lot, willing set partner are of sharing the pretty the the just and a operating potential a a a us projections tried willing structure participate little meaningful their I they as the have I that way more they

The other thing industry ownership, change five is a operating similar in everything certainly cultures my companies going experience, what time. work new in XX-year worked the new the the of XX if the year something well not of well the as very standard, to case may the be least lot a new but, ago over years concept contract management contract, seems of we an time, over That's is and management companies hotel at contract. today. housing fine with companies change to And structure. the management the contract that's in All business senior management, I life wanted transition think

prioritizing are there that they with some contracts move examples but the in been of with relationship So, place to to companies long the sides. happy excited on. are flexibility about. much And they we've both not If able are management are not shorter term maybe really contracts

us So, for of in to that's important one been it. incentives an terms aligning

doing have really want to with your sit down they an didn't this You keep together. partners; to on annual basis

I drives think that positive behavior way. a in

Vikram Malhotra

a can XX you buckets Who just follow to or coverage? us the there rent that as then and are up, so the remind major triple-net or And of expiring can helpful. segment? that's you million back of the in expand rent Okay, just tie

Pete Scott

RIDEA, million so least XX Aegis, share, properties on slightly they out million one. quality XX coverage rent rate. see X.XX that that times, really about coverage just above of X.XX There's was XX that. The renewal super Seattle, -- was of high eliminate with The it's converted We bookmarked or Sure. with of million or is the provider anyone. X have to that management After strong. there

those. but obviously choice capital with assets senior good living is Of then or are that the real around or to doing living are their and would living, own look is capital given capital senior operating with period are that about another really on And almost actually the million not I nine, like with next sell certainly then We expect wouldn't expect renew the lease. depending But whether don't X.X-X.X don't quite It's lease I assets, coverage produce them just the to nine times that matures two We we'd senior late NOI. to happy real balance its estate. the XX the six partner. year. be good estate. other much lease three leased. it's time They

but I There XX% buildings think really the that's if that covers not million. XX small may be XXX%. a of handful

Vikram Malhotra

you. thank Okay,

Operator

Please Okusanya ahead. Our next from from go Jefferies. Tayo comes question

Tayo Okusanya

science spend at of were CapEx, lighter cross running what when recurrent like Good a last has quarter. year. been afternoon. crop, Good and this the the life it I looks Page you look XX than Hi. little CapEx of bit quarter MOB,

curious about context think Just should driving that that in and of what's we the how AMFO?

Pete Scott

Hey That's this our CapEx the We year lower a I expect whole one the in would Tayo, did here. some bring quarter. four not guiding Good individual over perspective. on payout was Yes. at period our of it's quarter up and you Pete quarter. a because what guide back. over perspective obviously point from look ratio current we it stage

the the CapEx and guidance in divided be spend Sometimes in little I might the a evenly It's it we'll little fourth lighter the just bit year and first focus throughout the not but bit little first that quarter. light heavier but would quarter, a on is the in catch CapEx a quarter up.

Tayo Okusanya

clarification. net you, And year? question, confirm positive or it's That's helpful. you the Sunrise, FFO Got of that first just impact from quarter that Oakmont to this to to are is okay. again, triple The that transitions the RIDEA, a net just then be now other happening going to

Pete Scott

that as on Yes. modestly question good us, bad basis. neutral Scott for it's because remarks, on I Tayo, an don't his mentioned it's here, a FFO Why in actually, accretive day take prepared a and

of Oakmont Oakmont, about XX XX think million you had NOI, If million of rent.

pickup million When to our but back that FFO structure, immaterial. go we perspective, CapEx, So that from about there's to quite bit a the you of CapEx we've little a complicated of receive sunrise $X was is $X as it it's it's million of about, an but talked rent portfolio. payment net within

a FAD been at again, now. full-year few conversions converted all FFO, XXXX, accretion, for but And beginning capital, a and time FAD, of FFO on about modest neutral will If we've about you on to means, on back working look only bit it's perspective, And these importantly, we basis, into pickup of think did. a if to a there's the a the some though, the not that these and FAD what quite importantly with penny. when little from neutral a converted shop, into this, to CapEx year, so of that's you that we've regards go touched

portfolio headwind into the baked which it XXXX in beginning as helps redevelopment, up year of of and fully ramping into and to transition also then baked the was guidance as it also development the So was some our well. offset known, guidance of and our the our

neutral an perspective, wanted from FAD but perspective. just accretion aspect I FFO to clarify the a from So the

Tayo Okusanya

done a forma Got with of all pro of kind transitions is on be basis. I overall have your may reviewing? to you. How much portfolio these going

Pete Scott

handful over going are in properly overtime see may to I To I be We're it's I triple-net. lease. say more forward, rental as the the RIDEA do going properties. happy leases, if convert RIDEA don't so and about rent going We as net cash equally HCP longtime. a is adequate goes for triple-net going don't long not to those those keep see I you think are tie that also exit say we do despite fair functioning of have Mexico, interest would to alignment we to today low likely not historical, structure RIDEA wishes it paying think structure. tilted any that towards the flow after what know, triple-net have towards the it's leases triple-net portfolio to in there's balance certainly meaning careful of real-estate, that be versus to a And goes structures There just to them a we're zero. been exactly that but think convert it's the as well to that the like under shift will us very data the we payment, you're we'd quality it the We're acquisitions the tenant collecting happy to continue

Tom Herzog

done calcs. some would have we of add I those

a As clear remaining that become the next of you or provide quarter can are couple moving actual breakdown. then two, and imagine, there to be over able pieces more the will we'll

Tayo Okusanya

thank you. Great, Okay.

Tom Herzog

Thank you.

Operator

Our next from Street ahead. go with question comes Please Green Advisors. Hartwich Lukas

Lukas Hartwich

guys. just on Hi, Thanks. I'm what curious thoughts your are in-house. shop developing

Tom Herzog

and Well, can -- Scott I I'll you in. can start jump

shop at structures, with output the The are of different in-house. go period that of development it, purchase debt a lot with, long round participating to a Lukas be period debt structure then the of thought up development options, be we have a that it up we a and could asset of or to There these partnerships. few or the time, which lease junior drag. ways creates a do Here's fairly just it we do could relative extends for ultimately. And long comes size a could shop could

So that that arrangements fully like with it drag, on one course of thus drag. becomes I have a enter on earnings in shop some drag, when on drag either mean reduced developed to shop, decision less I but these assets, other dilutive opportunities of basis to did, we we speak get same which place, to one just us of take when or like a into the acquire much

this just decision the ground stay to typically point, development SHOP up on away book. we've from at made So, of

So, our rationale. been that's

Lukas Hartwich

the you are on confident about can And of hitting us X% of for SHOP, the Discovery kind thinking a then the sense And you portfolio? how of that? Great. timing give yield

Scott Brinker

of The get is fours high it's yields of and Lukas, XXs. built over. them the either nine It's didn't low and by been those and year nicely they months A initial are took X. occupancy build it X% opened, approximately the in -- -- on, to one. newly we're today Hey, quarters. improving am that The properties actually newly happy not Scott projecting past Discovery in here. the the to of take number I couple three to were actually

in move totally a historical sort new of and Discovery's given performance. XXs occupancy a as low operator have to state margin the we taken awhile mid is achievable expecting which with to think we But high XXs are is ultimately place there in well. So those the wise

incentivized are contract have return we a and our protection management NOI. place in pretty on we very So, confident, also got that provides

Lukas Hartwich

you. Thank Great.

Tom Herzog

Thank you.

We so got people with let's two more the have queue, in Thanks. continue questions.

Operator

Bernstein from One. Capital next Our ahead. question comes go Please Daniel with

Daniel Bernstein

kind Thanks Life for they trend over not at now taking are asking bit [indiscernible] can are And because that's Housing. know there it. those lease seeing Senior Science the to know that I I or to with in quarter, deteriorated Senior think at you portfolios? portfolios? quarter any about but through little you coverages killing a RIDEA kind up not will contemplated bit the Brookdale, to you are you rears, little back one looking the look regard you question. dispositions transitions a of of those I'll they is the the about How I of When guidance in at XXXX year? more are I'll talk apologize trend you for go quarter in picking

Scott Brinker

start as Hey, have Dan. will Senior It's Capital -- well. comment covered Scott. I I I have Living. some comments already

to process HRA that one. It's back them already Four HRA that go in of portfolio. XX with have won't I assets. With the being of we dialog active about sold. are So

under distraction amount seven or three the I more under would the the be buildings. the And today. quality will we lease. expect had we half NOI we don't two produce lower or the eight term. will think likely quality HRA. triple really over to number coverage we the those sold. properties are decline They are And with operator Brookdale, HRA less year. what with that for in net with about right left These long anyway. I of And have But assets. are and past be to -- fair reasonable just think It's And be continue the think a a rent much those

or geographically really more Over estate been likes standpoint. from stable. the real so, quarter a Brookdale last portfolio it's that and quality

we Brookdale. lease that change with are expecting master any So, not in

Daniel Bernstein

real terms any Okay. Discovery in exclusivity in developer down again, development with? exclusivity a the or on partner you And [indiscernible] of of them Florida, just rights funding in kind future? is then the develop future Discovery know to any with so have any junior that quick I mean do beyond I four you are

Scott Brinker

say a desire I right to talking to contractual from We future operators. and with about I clearly grow would And the buy would away four. stay mutual Oakmont. the just contractual have rights But probably with there both Discovery is

Daniel Bernstein

hop I'll okay. you. Thank off. Okay,

Scott Brinker

Thank you.

Operator

next Michael ahead. Mueller JPMorgan. with Please comes Our go question from

Michael Mueller

Sarah is Mike. Hi, guys. This for on good morning

Tom Herzog

Sara. Hi,

Unidentified Analyst

question Yes, Science. results. There congrats a Life on on the is

the today's what think guys So your XX%, [indiscernible] this see you were do overall spreads I mark-to-market quarter portfolio? lease

Scott Brinker

Yes. Sara. Hey,

positive Francisco, the all little in bit a and net probably Diego, maybe the mark-to-market markets. we about the San I my think which is I XX% it's across in accurate. mark-to-market XX% as think of see few for spreads couple it's And in quoted XX-insh our high expiring We've what that the prepared blended lease percent through robust we not lease the at said look are as which as but had before a remarks, higher It's is you San generally next positive next pretty we years. probably years.

Tom Herzog

Any further questions, Sarah?

Operator

At are this time, there questions. no further

Tom Herzog

for Thank our appreciate call in of HCP. all Bye-bye. joining We interest Operator, thanks continued your today. you always you, and

Operator

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

Healthpeak Properties (DOC) 2 May 192019 Q1 Earnings call transcript