Healthpeak Properties Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2026

Key Takeaways

  • Positive Sentiment: Healthpeak raised its 2026 FFO guidance for the third consecutive quarter by $0.02 at the midpoint to $1.76-$1.78 per share, citing stronger leasing, delayed dispositions and solid performance across all three businesses.
  • Positive Sentiment: Outpatient medical fundamentals remained strong, with 846,000 square feet of third-quarter leasing, 81.7% tenant retention, roughly 5% cash releasing spreads and modest leasing costs. Management expects internal growth to accelerate in 2027 as expirations decline and the leasing pipeline remains robust.
  • Positive Sentiment: Life science occupancy rose 130 basis points sequentially and 270 basis points year to date to 79.8%, supported by positive absorption and improving biotech, AI-adjacent and robotics demand. Healthpeak is pursuing roughly $1 billion of strategic acquisitions at low current occupancy but expects 9%-10% stabilized yields, with leasing activity already covering about 70% of acquired vacancy.
  • Positive Sentiment: Janus Living delivered exceptional senior housing results, including 26% same-store NOI growth, 78% revenue growth and 101% adjusted EBITDAre growth. Its acquisition of 39 communities year to date and expansion from two to 13 operating partners broaden the platform’s external growth potential.
  • Negative Sentiment: Refinancing remains a material headwind, with approximately $1.4 billion of 2027 maturities— including $1.1 billion in the first quarter—carrying debt costs near 3% that will likely be replaced at higher rates. Management has secured $900 million of delayed-draw term loans and reported 4.7x net debt to adjusted EBITDAre, but acknowledged the higher interest expense could constrain 2027 earnings growth.
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Earnings Conference Call
Healthpeak Properties Q3 2026
00:00 / 00:00

There are 20 speakers on the call.

Operator

Good morning, and welcome to the Healthpeak Properties Inc. Third Quarter 2026 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star one again. Please note, this event is being recorded. I would now like to turn the conference over to Andrew Johns, Senior Vice President, Investor Relations. Please, go ahead.

Speaker 1

Welcome. As a reminder, certain statements made in this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Healthpeak believes any forward-looking statements are based on reasonable assumptions, the company can give no assurances that its projected results will be attained, and we do not undertake a duty to update any forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. We will refer to certain non-GAAP financial measures during this call, which are reconciled to the most directly comparable GAAP measures in an exhibit to the eight-K we filed with the SEC yesterday in accordance with Reg G. I'll now turn the call over to our President, Chief Executive Officer, Scott Brinker.

Speaker 2

Thanks, AJ, and welcome to our 3Q earnings call. I want to congratulate the team here on a very strong quarter operationally, which allowed us to increase earnings guidance for the third time this year, and by a total of $0.05 per share at the midpoint. The guidance raises this year were primarily driven by operations across the portfolio and the flow-through impact of Janus Living. In outpatient medical, the strong fundamentals we spoke to with the merger three years ago continue to be validated. Cost pressures are making outpatient delivery a strategic mandate for health systems across the country, and we play a vital role helping them address that mandate. The aging population is driving record demand and new supplies at historical lows. Against that favorable backdrop, we created the leading platform and portfolio in the outpatient sector with the merger.

Speaker 2

Third quarter results included positive net absorption, strong retention and releasing spreads, and modest TIs and commissions. These are the metrics that drive cash flow and value creation. We don't focus on same store because it ignores equally important items like CapEx and moving properties in and out of the pool. Our outpatient business is stronger than ever, and we expect internal growth to accelerate in 2027 given our recent lease executions and pipeline. We're also happy to have closed nearly $2 billion of fully stabilized outpatient sales, recaps, and loan repayments earlier this year at a blended 6% cap rate. More than half of that amount was joint venture recaps with blue chip LPs who chose to partner with Healthpeak given our platform. Moving to our life science business. Earlier this year, we shared our expectation of growing total occupancy by 100 basis points in 2026.

Speaker 2

That was not a consensus view at the time, but we saw early signs of an improving environment, and we were confident we'd capture market share. Year to date, we've outperformed our own expectations. Total occupancy increased 130 basis points last quarter and by 270 basis points year to date. Not sure anyone else in this sector could make that same claim. Why the success? We made strategic new hires, we own really good real estate, we have liquidity and credibility, and we can move quickly given our buildings are unencumbered by third-party debt. All of those factors will continue to drive leasing outperformance. Life science job growth turned positive in 3Q, which is consistent with the growing demand we see in our pipeline. On the supply side, we continue to see certain, quote-unquote, "life science buildings" go to alternative uses, which is soaking up some of the vacancy.

Speaker 2

The robust infrastructure of a lab building is attractive to AI-adjacent users, including robotics, because of power, floor loads, and ceiling heights. We're seeing a lot of that type of demand in the marketplace. The net effect is that supply and demand are starting to move in our favor, albeit at different rates depending on the submarket. For example, we're now fully leased in Torrey Pines versus 65% leased in that submarket just six months ago. Strong occupancy will, of course, allow us to drive better economics on future leases. We continue to make good progress at the Gateway campus we acquired earlier this year, with 125,000 sq ft of leases signed so far in the fourth quarter alone, plus 100,000 sq ft under signed LOI or in active discussions.

Speaker 2

The three acquisitions announced yesterday are buildings surrounded by existing Healthpeak real estate and add to our competitive advantage in core submarkets. It's a great time to be a buyer because most life science GPs, LPs, and lenders are upside down. Capital availability in this sector has gone from overly abundant to severely constrained. As a result, we can now buy core assets at a basis with both downside protection and significant upside. Current occupancy across the acquisitions is 41%, with a 5% in-place yield going to 9%-10% at stabilization. These are not passive investments. We're bringing our relationships and expertise to the table, and we already have strong leasing activity on 70% of the acquired vacancy.

Speaker 2

When we acquire quality real estate in our core submarkets, there's a network effect that increases the value of our entire local footprint as we become the easy button for tenants and brokers. More broadly, we entered the sector downturn in 2022 as the number three player in life science real estate. We're entering the recovery as the only company growing its footprint and adding talent. More work to do, but we're on a trajectory to become the leading portfolio and platform in the life science real estate sector. In senior housing, the lifestyle and value of our communities is driving higher occupancy and revenue. Our same-store portfolio had 300 basis points of occupancy growth and 26% NOI growth in the quarter. Entry fee sales in 3Q were simply incredible, achieving a new all-time high for the quarter.

Speaker 2

We've closed $2.2 billion of acquisitions since the IPO, and the NOI on these deals is trending in line or ahead of underwriting. Most important to the long-term strategy, we've gone from two operating partners to 13, which dramatically increases Janus' external growth as those partners are now bringing us proprietary acquisitions.

Speaker 2

Janus' success is also driving earnings growth and value creation at Healthpeak, given our unique and creative deal structure that aligns the interests of both companies. I'll turn it to Kelvin.

Speaker 3

Thank you, Scott. Each of our business segments are running ahead of the plan we set in February, and our team on the ground has delivered excellent results, leveraging our relationships to convert demand into executed leases and drive total occupancy gains. Our operating results in the third quarter reflect that execution. We reported FFO as adjusted of $0.44 per share, total same-store cash NOI growth of 3.6%, and net debt to adjusted EBITDAre of 4.7 times. Beginning with outpatient medical. For the quarter, we executed 846,000 sq ft of leases, including 218,000 sq ft of new leasing and 628,000 sq ft of renewals. That brings our year-to-date executions to 3.2 million sq ft.

Speaker 3

We delivered another quarter of positive net absorption, with new lease commencements that averaged over 11 years and included two large health system and physician practice master leases at attractive rents north of $30 per square foot on a triple-net basis. Tenant retention increased from last quarter to 81.7%, and we achieved cash releasing spreads of approximately 5% above our historical averages. Importantly, these renewals come with modest leasing costs of 9.5% of rents on average. We ended the quarter with total occupancy of 90.3%, which reflects the negative 50 basis points impact from the Brookfield recapitalization and asset sales. On a comparable basis, total occupancy increased sequentially. Heading into the fourth quarter, we expect our leasing velocity to continue, with an additional 269,000 sq ft of executed leases and 1.03 million sq ft of signed LOIs. Turning to lab.

Speaker 3

During the quarter, we executed 480,000 sq ft of leases, our strongest quarter in over a year. That brings our year-to-date executed leases total to over 1 million sq ft. These executions represent approximately 70% new leasing, over 80% with biotechnology and R&D tenants, and over 40% on vacant space. Subsequent to quarter end, we had an additional 643,000 sq ft of executed leases and signed LOIs. From a commencement perspective, we achieved a third consecutive quarter of positive net absorption. The lower rent per square foot on commencements this quarter reflects two large office leases signed in 2025 that carry lower starting rents than lab space, but also require significantly lower TIs. Renewal rents this quarter increased to an average of $72 per square foot, up from last quarter, with a modest 5.6% roll-down on a small sample size caused by a single renewal.

Speaker 3

Total occupancy during the third quarter increased by 130 basis points sequentially, ending the period at 79.8%. This represents a 270 basis points increase since the start of the year. As we close on the acquisition Scott referenced, our reported total occupancy base will reset lower, given these campuses are 41% occupied today. We view that availability as embedded upside to capture in sub-markets where we have considerable scale and a deep tenant network to draw from. In senior housing, for the quarter, Janus Living delivered same-store NOI growth of 26%, total revenue growth of 78%, and adjusted EBITDAre growth of 101%. During the quarter and through October, Janus Living completed the acquisition of 39 communities, totaling approximately $2.1 billion, bringing the year-to-date acquisition total to $2.9 billion. Healthpeak's ownership totaled 69% of the outstanding shares of Janus Living, which represents roughly $6.1 billion of market value.

Speaker 3

We'll take a moment on the balance sheet before moving on to guidance. While our credit spreads have largely held, borrowing costs have increased through the year due to treasuries, and we have taken proactive measures to utilize efficient tools to help mitigate our near-term refinancing costs. Year to date, we have originated two delayed draw term loans, a $400 million term loan, which we expect to draw in the fourth quarter, and a $500 million term loan, which we expect to draw in the first quarter of 2027, both priced at SOFR plus 80 basis points, which is inside of where we could issue bonds today. The term loans will reduce our commercial paper balances and provides flexibility as we look to refinance our $1.4 billion in maturities in 2027.

Speaker 3

We ended the quarter at 4.7x net debt to adjusted EBITDAre, and as of October 30th, we had approximately $3.8 billion in liquidity. Finally, guidance. We raised our FFO as adjusted guidance for the third consecutive quarter by $0.02 at the midpoint to a range of $1.76-$1.78 per share. The update to our guidance reflects stronger leasing across the portfolio, the delayed timing of our remaining dispositions, and highlights the strength of our operating performance year to date, including a 50 basis points increase to total same store at the midpoint to a range of 0.5%-2.0%. Our increase to same store includes a 25 basis points increase in outpatient medical to 2.5%-3%, a 100 basis points increase in lab to down 3% to down 6%, and a 250 basis points increase in senior housing to 16%-19%.

Speaker 3

With that, operator, please open the line for Q&A.

Operator

We will now begin the question-and-answer session. In the interest of time, callers will be limited to one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Rich Anderson from Cantor Fitzgerald. Your line is now open. Please go ahead.

Speaker 4

Hey, thanks. Good morning, team. Scott, I wanted to ask you about the life science acquisition sort of strategy. These are unique in the way that they kind of blend into what you already have. I am curious if you could sort of kind of communicate a pipeline of opportunities, whether you get 0 or 100% of them in the future. Like, how active is the pipeline coming at you, given that you are kind of the only game in town in terms of being a reasonable acquirer of life science assets? Thanks.

Speaker 2

Thanks, Rich. Yeah, I think the common overlap in the acquisitions we have done year to date, as well as what is under contract, is that they are cheap on a price per foot basis, but also strategic. Usually when you are buying assets, you get one but not the other. If it is strategic, it is usually expensive. If it is cheap, it is usually not strategic. Just kind of a unique point in time in life science in particular where we can buy assets that are cheap and strategic, and that is what we have done. So $1 billion, plus or minus, of acquisitions either closed or in the pipeline. If you look at them on a map, they are essentially part of an existing Healthpeak campus. So we really have no interest in going into sub-markets where we have no competitive advantage.

Speaker 2

The whole idea here is to buy things cheaply that are not leasing up today for one reason or another, and bringing our team, our tenant network, our balance sheet, our credibility to the table to lease them up. It is working. We made tremendous progress at Gateway, the campus in South San Francisco, with Scott and the team, and we expect to do the exact same with these three acquisitions. The fact is, these are unique in that we have significant leasing traction on about 70% of the acquired vacancy, in some cases before we even formally close the acquisition. Really amazing traction on those, and we feel like at the price that we're buying these, there's just a significant margin of safety. We're underwriting them at today's rents.

Speaker 2

I think you can paint a compelling picture given the difficulty of bringing new development anytime soon, given replacement costs versus rents, that there's a lot of room for rents to run once occupancy does recover, and it's clearly on that trajectory. We've said for a while we're going to be a consolidator. That's proving to be correct. We've got a highly valued outpatient business that's allowing us to recap at really strong prices and redeploy into assets at essentially the same initial yield with vastly higher stabilized yields. We're making great progress towards that goal. Next question.

Operator

Your next question is from the line of Michael Carroll from RBC Capital Markets. Your line is now open. Please go ahead.

Speaker 5

Yeah, thanks. Scott, I wanted to touch on your comment answering the last question. I believe you said that DOC has good targets on 70% of the acquired vacancy. I mean, how far along are those conversations? In your underwriting, when do you assume that these assets reach stabilized occupancy?

Speaker 2

Yeah, we're generally underwriting these in the two to three year range to fully lease up, and we're pretty far along in those conversations. I would call it active negotiations comprising that 70%. Next question.

Operator

Your next question is from the line of Jamie Feldman from Wells Fargo. Your line is now open. Please go ahead.

Speaker 6

Great. Maybe just kind of add to the prior line of questioning. Just as we think about 2027, can you talk us through kind of what's baked in terms of leases that have been signed, when they come in, and the net of move-outs? Just what that NOI stream's going to look like from some of the acquisition activity or even just some of the leasing activity?

Speaker 3

Hey, this is Kelvin. I'll jump in there. We've done a pretty tremendous job, I'd say, this year from a leasing perspective. We've got about 1 million square feet of lease executions year to date, and as we mentioned in the prepared remarks, another 640,000 sq ft under LOI or executed post-quarter end. Pretty tremendous progress. These leases probably require 12-15 months, depending on the build-out of the space and the specific requirements of that tenant before they're able to flow through into NOI and subsequently earnings. Keep in mind, as we execute these leases, there are free rent periods as well that factor into the timeline of when you start to see that cash flow in.

Speaker 3

But from an earnings perspective, you will see over the next couple quarters the executions that we have had over the last few quarters start to flow in, but it is a 12- to 15-month process to get those spaces into a position for occupancy.

Operator

Your next question is from the line of Ronald Kamdem from Morgan Stanley. Your line is now open. Please go ahead.

Speaker 7

Hey, great. Just staying on the lab piece. Just looking at the same-store NOI, asking the question sort of in a different way, does this feel like it is an inflection point from here as you talked about leases commencing obviously 12 to 15 months? Any other sort of puts and takes as you are thinking about the same-store NOI going forward, and is this sort of an inflection point? Thanks.

Speaker 3

Hey, Ron. This is certainly a base that we can grow from. I think we have been saying our focus for purposes of really guiding investors towards NOI growth and subsequently earnings growth has been total occupancy. To be able to achieve 130 basis points of occupancy capture this quarter, 270 basis points on the year, certainly putting us in the position to see NOI growth over the subsequent quarters as these leases commence and the tenants start paying rent. So, we are certainly on the right path for future NOI growth here in the lab business.

Operator

Your next question is from the line of Nick Yulico from Scotiabank. Your line is now open. Please go ahead.

Speaker 8

Oh, thanks. Just going back to the lab. Given that you are about 80% occupied in lab, and you already have vacancy in the existing submarkets where you did the acquisitions, maybe you just talk about why you think it makes sense to be adding more vacancy exposure to the portfolio. Within those different submarkets as well, if you could just talk about how HQ Point, that building's position versus the vacancy you have next door at Directors Science Park. Similarly, 100 Acorn, you have owned the asset, and the JV, there has been vacancy. Why do you feel better about it, leasing it now? In South San Francisco, 5000 Shoreline, you also have redevelopment projects right next door. Just how you could talk about the position of that space. Thanks.

Speaker 2

Yeah. There were a few questions there. I will try to address most of them. I may ask Scott Bohn to jump in as well. We think we are buying opportunity at a really cheap price. The more we can do, the better, because we are trending positively, and there is a lot of upside to capture here. I am not sure how many commercial real estate sectors there are where you can buy super core assets that stabilize in the 9%-10% range. I mean, that sounds like a development plus-plus type return with a lot less risk. You have to think about these local markets as ecosystems. What is happening in the Bay Area has nothing to do with what is happening in San Diego or Boston. The more local scale we have, the more competitive our entire footprint is.

Speaker 2

It is not a single asset, although each of these could stand alone as strong investments. You have to think about the impact on our entire ecosystem. Like I said earlier, we are the only group that is actually growing. We are doing it pretty significantly in markets where we already have a strong competitive position, and that is only getting stronger with these transactions. You asked about HQ Point. That is a bigger building, bigger floor plates, bigger users than we can accommodate at our Directors Place campus that is right next door. That is an easy way to distinguish that building from what we have in the marketplace today. The building in South San Francisco is a smaller availability, vacancy, in terms of the size of the building, so that is really not competing with our existing development, redevelopment portfolio, and there is a tenant in the building already that is growing pretty fast.

Speaker 2

That's a totally unique building. The building in Cambridge, remember, we were in a JV, but we were not leasing or property managing that portfolio. When that transaction closes, we will be able to take over the leasing and the property management and hopefully drive better leasing outcomes. There is also financing on that deal today, which, as I said in the earlier answer, that does restrict an owner's ability to move quickly and make decisions and kind of meet the market where it is. Hopefully having an unencumbered property, as well as the fact that we will be leasing it and property managing, will be the difference maker there. Next question.

Operator

Your next question is from the line of Juan Sanabria from BMO Capital Markets. Your line is now open. Please go ahead.

Speaker 9

Good morning. Thanks for the time. Clearly, things are improving in lab leasing, but hoping you could talk a little bit about any known move-outs or how the tenant credit profile, any sort of bad debt updates you could provide as an offset, just to make sure we are correctly tempering our enthusiasm going forward. If you could just give color on those two items, that would be great.

Speaker 3

Hey, Juan. Yeah, happy to jump in. I would say at this point, we are working towards continuing to execute on our stated leasing objectives, really looking at 2027 and working through renewals that we can pull forward. We have done a really great job of that over the last 15 or so months, really addressing some of the early renewals there. That plan continues. From a credit perspective, I would say there has probably been over $150 billion of capital flowing into the biotech space between IPOs, M&A, secondary offerings, and we are certainly seeing that benefit in the demand and our pipeline. The pipeline has been strong, extremely healthy, and our existing tenants have been able to access the capital markets where they have had positive data outcomes in their business. The credit profile overall within our lab portfolio has meaningfully improved.

Speaker 3

And we're looking forward to kind of capitalizing on that pipeline. Rather, further capitalizing on that pipeline to drive net absorption through the business. A lot of positives that we've been seeing. We've been echoing that same sentiment for the balance of the year, and it continues.

Operator

Your next question is from the line of Sidney McEntee from JPMorgan. Your line is now open. Please go ahead.

Speaker 10

Hi, guys. On the transaction market, given the recent rate volatility, have you guys seen cap rates move across the different asset classes? Has it changed at all how you think about sourcing more distressed deals or the composition of the pipeline overall?

Speaker 2

Yeah, it's definitely been volatile. The tenor goes from 4% to 4.5% to 5%+, and now back to around 5%. I wouldn't be surprised if the transaction markets slowed down a little bit across all commercial real estate, but including healthcare, given that volatility and people just trying to understand what their cost of capital is, especially a levered buyer that's using 60%-70% financing. That's a pretty big impact on asset values. I wouldn't be surprised to see a bit of a slowdown. I think some sectors will be more impacted than others. You think about a lower growth, longer lease term portfolio or asset that probably is more impacted by the changing rates. A sector like senior housing, probably a little bit less, just given the growth profile. But TBD.

Speaker 2

There has been a lot of volatility, and these transactions take, I don't know, six months, plus or minus, from start of discussions until a closing. So anything that's happening now was negotiated a long time ago, that it's hard to say or be precise, but we certainly are aware of a lot of transactions across commercial real estate that are being put on pause or buyers attempting to retrade. We have not done that. We commit to something, and we honor the price that we provided, but we think that we negotiated a really compelling price in the first place, which allows us to move forward. Next question.

Operator

Your next question is from the line of Michael Goldsmith from UBS. Your line is now open. Please go ahead.

Speaker 11

Good morning. Thanks a lot for taking my question. Scott, you mentioned AI, aging, and robotics uses as an emerging source of demand. Can you give us a sense of how meaningful that is within the current pipeline? And is that truly incremental demand for space that would otherwise compete with traditional users, or is it primarily absorbing space that would be more difficult to lease? Thanks.

Speaker 12

Sure, Michael. This is Scott Bohn. I can take that one. From a demand perspective, leasing to biotech is still our bread and butter, right? If you look at our pipeline, it's still over 75% biotech, whether it be public or private. But there is a significant amount of increased demand from the AI and robotics across all three markets. I think the epicenter of that is San Francisco, where we've seen the most of it. So, there is purely incremental demand from that, and taking additional space in We're in active discussions and deals on several of those users where we've got space that was either in shell condition or wasn't built out as lab that we can do a deal at a much lower TI and a very competitive rent. Economics make sense to do a deal like that.

Speaker 12

It is also taking a lot of the spaces, buildings that were set to be converted to lab, in the periphery, that probably never should have been converted to lab, frankly, and taking those out of the new supply numbers.

Operator

Your next question is from the line of Farrell Granath from Bank of America. Your line is now open. Please go ahead.

Speaker 13

Good morning. Thank you for taking my question. I wanted to go back to the three transactions that we have been speaking about. If you can touch on the pricing dynamics as well as the equity and debt or basis that you were able to structure these deals, and how does that give you a preference, I guess, going forward, of how you would like to potentially do other opportunistic deals?

Speaker 2

Yeah. For the last two to three years, when we considered making investments in life science, they tended to be more structured investments because we did not feel like the prices to buy an asset fee simple had fallen by enough to make it worthwhile for us. So we did some mortgage lending. We did one preferred stock investment. We feel like in 2026, the prices have come down to a point on a per-foot basis that even at today's market rents, we can underwrite a really compelling stabilized return, and therefore, we have shifted towards doing fee simple acquisitions in 2026. The dynamics of each deal were a little different. The lender in Cambridge essentially gets out at par, but with very little left for the equity. On the other two transactions, the lenders, the first mortgage lenders took a modest loss, so we were negotiating directly with them.

Speaker 2

Next question.

Operator

Your next question comes from the line of Nick Joseph from Citi. Your line is now open. Please go ahead.

Speaker 14

Thanks. You mentioned it's a great time to be a buyer. You talked about the attractive stabilized returns and the timeline for achieving that. Why don't you think you've seen more competition for life science assets? Maybe you could just touch on kind of the buyer pool broadly and the lending environment.

Speaker 2

Hey, Nick. I think it's mostly that so many people lost so much money in the last four years. It became a pretty hot sector to participate in, say, starting in 2017, 2018, 2019, then got turbocharged in 2020 and 2021. So there are a lot of new entrants, both GPs, LPs, and lenders. Obviously, they did not have a good outcome. Some did okay. But a lot of people certainly lost a lot of money, and it will take time for those scars to heal. It's still kind of a bad word, life science, in most real estate shops around the country. Maybe for good reason. If they came in without a platform to drive performance and the competitive advantage that a company like Healthpeak has, I think they're going to have a hard time even in today's market, which is clearly improving.

Speaker 2

I think it is just a niche business that requires an existing footprint to give tenants flexibility, to have the credibility to own, operate, develop very specialized real estate. Then the tenant relationships, not just the tenants, but the venture capital firms themselves who are driving a lot of those decisions. I think all of that just makes this a unique business where it is not just real estate, it is not just having capital. Those things are important. You also have to have the platform, and we have got all three. Next question.

Operator

Your next question comes from the line of Michael Stroyeck from Green Street. Your line is now open. Please go ahead.

Speaker 15

Thanks, and good morning. Maybe one question on the $200 million of additional outpatient asset sales outlined in the presentation. Can you just provide a bit of color on the types of assets you are selling and how they compare to your in-place portfolio? Then, you guys called out 7% cap rates on those assets. I imagine they were negotiated several months ago. Do you think if they were negotiated today, you would be able to achieve similar pricing?

Speaker 2

Hard to say, Michael. That is a hard contract with money at risk, so we felt comfortable publishing it. But we had a portfolio kind of in the Southeast where the health system was debating whether or not to renew the lease. It is actually four buildings. We ultimately decided rather than renewing the lease, that we would go ahead and sell those. They were not particularly strategic for us in the scheme of things, and they offered a fair and reasonable price for those particular assets. I would say they are below average in terms of asset quality, and we were willing to transact at that price. So that one should be done by year-end. Next question.

Operator

Your next question is from the line of Dave Rodgers from Raymond James. Your line is now open. Please go ahead.

Speaker 16

Yeah, good morning. Obviously, getting more comfortable putting equity into the life science acquisitions that you've done probably tells us that you're also getting a little more comfortable with where pricing for lease deals is. I'm curious. I think in the quarter you said negative 5.6% was the lab spread, but maybe that was one deal that Kelvin noted as opposed to a broader transaction market for you guys. So, can you give us a better sense for where maybe face rates and where economic rents have moved or are moving in the life science business and how that compares to where you guys see your existing in-place rents across the three major markets?

Speaker 12

Sure, I can take that one. This is Scott Bohn. I think I'd probably start in Boston. Probably the most pressure on deal economics still in Boston, just given that supply-demand imbalance is probably still the greatest there. I would say our portfolio there is mid-80s occupied, very little lease roll over the next 12 to 18 months. So, we feel like we're in a good position though, and our assets are in the top submarkets where the lion's share of the demand has been. So we've actually been able to do pretty well in the leasing that we've done there. San Diego, as Scott mentioned, we've brought Torrey Pines up to 100% in our portfolio, so we'll have additional pricing power there as we look to any renewals in the near term in that market.

Speaker 12

In the Bay Area, we continue to work through our dominant position there, and a lot of the deals we do in the Bay Area are deals that are with our existing tenants, kind of moving pieces around the chessboard, and where we tend to do better than the market on the rental rates. So, I think there's signs of evening out a little bit on the landlord and tenant side in pockets, but it's very deal-dependent. You're still looking at every deal is different depending on the tenant, the space, how much capital is going in, term, and all those things. So it's hard to paint with a pretty broad brush on market rents across the market, because it is very deal-specific today.

Speaker 2

We've had even a few situations in recent months where we have multiple tenants bidding for the same suite or building, which we haven't seen in many years. The market doesn't have to get back to 95% to create that dynamic. It's a tenant that wants to be in our portfolio or has an existing lease with us. It does help create tension on the leasing economics that should turn favorable for us. I just reiterate that we're underwriting the acquisitions to today's current market rents and TIs. So it's not like we're underwriting some big improvement, although we do think that's possible in the years ahead. Next question.

Operator

As a reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Your next question is from the line of Austin Wurschmidt from KeyBanc Capital Markets. Your line is now open. Please go ahead.

Speaker 17

Hi. Good morning, everyone. Have a two-parter. One, just clarifying, what does the 9%-10% stabilized returns assume for stabilized occupancy? Then separately, Kelvin, based on the 4Q implied guidance of $0.42, getting to an annualized rate of $1.68, realize you're not providing guidance, but any high-level thoughts that you could share around puts and takes next year that we should be thinking about? Thanks.

Speaker 2

Yeah, Austin, on the occupancy, then I'll turn it to Kelvin. We underwrote Gateway in the mid-80s. I think these three were more in the 90% range. But just given the size of leases in the life science space, the more likely scenario is you're either 100% or you're something below 75%. They tend to be chunky, but we have put in a pretty sizable vacancy in most of these acquisitions we've done. Kelvin.

Speaker 3

Yeah, Austin, maybe on just the performance so far this year and how that might translate next year. We've done a pretty phenomenal job throughout the year. We had the opportunity to increase guidance due to the operating results of each of our businesses, so that's outpatient lab and senior housing that are outperforming our initial expectations. We continue to get the benefit from Janus Living, from its organic growth and external growth, so that's a contributor to Healthpeak going into 2027. Naturally, as you know well, we're managing the balance sheet prudently. We have $1.4 billion maturing next year on balance sheet. We've taken some proactive measures to kind of position ourselves well and have maximum flexibility to address those.

Speaker 3

But quite a bit of work to do on the balance sheet front going into 2027, so want to make sure we highlight that, given that our cost of borrowing that's maturing is around 3%, and that's certainly much lower than where the market is today.

Speaker 2

Okay, next question.

Operator

Your next question comes from the line of Jim Kammert from Evercore ISI. Your line is now open. Please go ahead.

Speaker 18

Hi, good morning. Thank you. Again, back on the lab leasing and your constructive comments, can you sort of quantify, are these tenants new to market on average in the transactions you're engaged on, leases done, and discussions underway? Or are they bigger than neighbor from neighboring assets? I'm just curious what the overall tone for the market is, please.

Speaker 3

I can give a little bit of context, Jim. From both an execution standpoint and the pipeline, I'd say 50% of our executions and active discussions are with existing clients, 50% are with new clients. The demand is developing from within our portfolio, and it's coming from the marketplace. As Scott mentioned earlier, you're getting the benefit of just continued improvement in biotechnology demand, but also the spillover technology-adjacent demand that is attracted to our buildings that are highly flexible, that can accommodate those uses. So, the demand is certainly widespread geographically across each of our markets. It's probably proportional, I would say, to our footprint in those markets. We see quite a bit of activity in the Bay Area, just given our scale.

Speaker 3

But San Diego's been quite interesting as you look at the way in which we've been able to lease in Torrey Pines and the demand that's coming in behind that's now eyeing and circling around our West Sorrento Mesa portfolio. So, a lot of positive indications in that pipeline that we've been seeing, and now the team is hard at work trying to convert that into LOIs and executions.

Operator

Your next question is from the line of Rich Anderson from Cantor Fitzgerald. Your line is now open. Please go ahead.

Speaker 4

Hey, sorry to keep this going, but I wanted to follow up with something you said early, Scott Brinker, about same store and you not focusing on same store, and because it's kind of a fungible calculation depending on what's going on at the present any moment. How would you describe the process of taking assets out of the pool and into the pool, and redevelopment, held for sale, all those sort of forces at work? How does that impact your, even though you're not focusing on same store, how does it focus your same store pool, particularly in medical office? What would be your comment around those observations? Thanks.

Speaker 2

Yeah, I mean, we have 500-plus buildings in the outpatient space. I think we have five buildings under redevelopment, and we have nothing in held for sale. So, I do not know, what percentage is that? 99%? I do not know. It's really high. Is not in redevelopment or held for sale. If a building needs to be redeveloped, it does happen. It's more likely in lab, where you've got a full building that's been used for 20 years, and you just have to start over from the base building all the way through the TIs, and that's a process. That is a lot of money, and it makes sense to put a building like that in redevelopment. A multi-tenant medical office building, it's more rare. On occasion, we do spend a fair amount of money. We've got a handful of them. We've had great success leasing them up.

Speaker 2

But I've always felt like this whole concept of moving stuff in and out of the pool is just very misleading. I understand why same store became a metric that the real estate community monitored, but I just think it's been abused. So, I've had a very strong desire to move the culture of Healthpeak Properties to being a healthcare real estate company and making the best real estate decisions to drive bottom line cash flow and away from more of a finance accounting mindset of moving things from one bucket to the next. CapEx is another example of that. You can make the releasing spread wherever you want. Just give the tenant a massive amount of TI, and it bumps up the retention in the same store, and it all impacts the top line, but not the bottom line.

Speaker 2

And we're only focused on the bottom line cash flow, and that's how we run the business, and I think it's a disservice to the whole sector that people are so focused on same store. But we'll provide it because the sector requires it, but we do not run our company that way. Next question.

Operator

Your next question is from the line of Jamie Feldman from Wells Fargo. Your line is now open. Please go ahead.

Speaker 6

Great. Thank you. I was hoping to dig a little deeper into the comments you made on debt maturities. Can you just give us a little bit more of your thoughts on the debt coming due, what your options are, what you think the earnings drag might be to refi at the higher rates? Then, I guess, taking a step back, just kind of capital needs in general. You've done a lot of leasing. It sounds like you'll have a decent amount of CapEx to get to that NOI in 12 to 15 months. Just how do we think about the puts and takes on your capital needs over the next year or so in line with, and then your leverage targets as well, and how you think that puzzle all fits together?

Speaker 3

I'll try to unpack the questions there. But maybe holistically to start, we ended the quarter with 4.7x net debt to EBITDAre, which is a very strong balance sheet to begin with. We certainly have some maturities coming in 2027 that we mentioned, about $1.4 billion that we're working towards. We've made some proactive early decisions to kind of position ourselves with $900 million of delayed draw term loan that we can access over the next two quarters. The first will be drawn in December, and the second at some point in the first quarter of next year, which will help us reduce our CP balances and then work towards the maturities that are really coming forward in the first quarter. We have about $1.1 billion maturing in Q1.

Speaker 3

From a strategy standpoint, I would say we're obviously focused on the most cost-effective tools available to us that make sense for our business at the time to be able to kind of think about the long-term debt that we are comfortable with on balance sheet. Too early to give you exactly what those tools will be that we're utilizing, but the bank debt market has been supportive, and that is certainly the first step. Then we'll be able to utilize CP on an interim basis as we work through the decision-making around the balance sheet and long-term financing needs there. Quite a bit of flexibility that our team has put us in the position to have as we work towards those maturities. From a capital standpoint, I would say you should expect CapEx kind of consistent with years past.

Speaker 3

We brought capital down considerably from 2025 to 2026 with the leasing that does come with TIs. There will be some capital invested back into the buildings as we secure the occupancy, but do not have an expectation for CapEx dramatically in excess of where we are today.

Speaker 2

Okay. Thanks, Jamie.

Operator

Your next question is from the line of Omotayo Okusanya from Deutsche Bank. Your line is now open. Please go ahead.

Speaker 19

Yes. Good morning, everyone, and congrats on the solid quarter and outlook. Again, realize you are not giving 2027 guidance yet, but again, just thinking, when we take a look at consensus numbers, consensus is not really implying any real earnings growth in 2027 versus your updated 2026 guidance. We have kind of talked about some of the drag from interest expense, but again, we have also kind of talked about really strong operating results heading into 2027. I am just curious a little bit, what you kind of think about that, kind of where some of the puts and takes could be to end up with you guys starting to kind of generate an earnings acceleration, which has always been a goal after the past few years of not a lot of earnings growth.

Speaker 2

Yeah, it was a pretty severe downturn in life science. It was 2,500 basis points of occupancy. I mean, I think some companies in that sector, earnings are down 50% in four years. I mean, we're essentially flat. I think we've done a remarkable job in light of what happened in life science, which was more than 50% of our business four years ago. I think we've done a pretty remarkable job to keep earnings where they're at. Obviously, interest rates have changed pretty dramatically. That is a headwind. There's a lot of volatility, so hard to predict, but it's certainly a higher refinancing cost than we have in place. But Kelvin and the team are doing a great job to position us for as much flexibility with as many options as possible. But this life sciences, it does take time.

Speaker 2

I mean, we were still losing occupancy in 2025, and there's just a reality in real estate, the great pipeline that turns into executions, that turns into commencements, that turns into cash paid rent. I mean, that's a process, and it takes time because of the build-out in particular. Kelvin mentioned earlier, a plus or minus 12-month build-out for a lot of these spaces. So, it just takes time for those lease executions to turn into rent, and obviously, there's a capital cost in the interim. So, I think all of that is playing into the timing of earnings growth. But I'll just note that we've increased guidance three times year to date, and by $0.05 in total.

Speaker 2

I think we're making the most of the environment that we're in, and the team's doing a great job, and really happy with the momentum across all three of our businesses.

Operator

Your last question-

Speaker 2

Okay, operator, I think there is one more.

Operator

Your last question is from the line of Juan Sanabria from BMO Capital Markets. Your line is now open. Please go ahead.

Speaker 9

Hi. I think at the top of the call, you talked about MOB kind of core growth accelerating, so hoping you could maybe frame that and the drivers of that pickup or acceleration for outpatient.

Speaker 2

Yeah. We had quite a few big lease expirations in 2025 and 2026 that we knew about that had a temporary impact on our growth rate in that business, but we are still in the 2.5%-3% range. For the outpatient business, we are still getting great releasing spreads with very modest TIs. Important to put those two things together. And we have grown occupancy the last two quarters. Set aside the impact of transactions, like the recap, but Mark and the team have actually grown total occupancy two straight quarters. Fourth quarter may be closer to flat, plus or minus, but we see a real chance to materially move total occupancy higher in 2027. We have fewer expirations, and the leasing pipeline is terrific. So, we feel really good about the trajectory of that business, both on the top line, but also the bottom line. Okay. Any more questions, operator?

Operator

That was the last question, and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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