Q3 2023 Healthpeak Properties Inc Earnings Call

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I would now like to turn the conference over to Andrew Johns Senior Vice President Investor Relations. Please go ahead.

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Andrew Johns: I would now like to turn the conference over to Andrew Johns, Senior Vice President, Investor Relations. Please go ahead. Thank you. Good morning, everyone. If you have not yet downloaded the press release or merchant presentation related to this call, they are available on the health peak and position of these websites under Investor Relations.

Thank you good morning, everyone. If you have not yet downloaded the press release, our merger presentation related to this call are available on the L. Pic in possession Rockies website under Investor Relations.

Andrew Johns: This morning, you'll hear from Scott Brinker, President and CEO of Healthpeak, Peter Scott, CFO of Healthpeak, and John Thomas, President and CEO of Physicians Realty Trust. Today's conference call will contain certain four of those statements, although we believe their expectations reflected in any four of those statements are based on reasonable assumptions, four of those statements are subject to risk and uncertainties that may cause actual results directly materially from our expectations. Actors that could cause actual results to differ, but are not limited to the potential benefit of the proposed merger, the expected timing and likelihood of completion of the transaction, including the ability to obtain the requisite approval of Healthpeak and Physician Realty shareholders, and the risk that the closing conditions are not satisfied. Please refer to the four of those statements noticed in Healthpeak and Physicians Realty's 10K and other SEC filings for information.

This morning, you'll hear from Scott Rager, President and CEO of <unk>, Peter Scott CFO, how big John Thomas President and CEO of Physicians Realty Trust.

This conference call will contain certain forward looking statements. Although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations.

Cause that could cause actual results to differ include but are not limited to the potential benefit of the proposed merger.

We expect the timing and likelihood of completion of the transaction, including the ability to obtain the requisite approval of healthy composition relatively shareholders Pam.

The risk that the closing conditions are not satisfied.

Please refer to the forward looking statement notice and healthcare.

Question relative 10-K, and other SEC filings for information.

Finally, this call will contain financial measures in accordance with Reg G. The company provides a reconciliation and their respective earnings packages the range and with that I'll turn the call over to Scott Brinker.

Andrew Johns: Finally, this call contains financial measures. In accordance with AG, the company provides a reconciliation in the respective earnings packages.

Thank you Andrew and good morning, everyone very excited to be here with John to discuss the merger, we announced this morning and the significant benefits to both companies. This.

Scott Brinker: With that, I'll turn the call over to Scott Brinker. Thank you, Andrew. Good morning, everyone.

Scott Brinker: Very excited to be here with John to discuss the merger we announced this morning and the significant benefits to both companies. This combination will create the leading real estate platform dedicated to healthcare, discovery and delivery, a large and attractive playing field with strong secular growth. We also announced strong 3Q earnings, including another increase to both same store and earnings guidance.

This combination will create the leading real estate platform dedicated to health care discovery and delivery of a large and attractive playing field with strong secular growth. We also announced strong <unk> earnings, including another increase to both same store and earnings guidance.

Going to ask Pete to summarize our results and John will do the same for Doc who also announced during Q results. This morning that will be back on with John to discuss the merger date.

Peter Scott: I'm going to ask Pete to summarize our results.

John Thomas: Then John will be the same for Doc who also announced 3Q results this morning.

Scott Brinker: Then I'll be back on with John to discuss the merger.

Thanks, Scott despite the challenging capital markets environment, we continue to put up solid operating and financial results.

Peter Scott: Pete. Thanks, Scott. Despite the challenging capital markets environment, we continue to put up solid operating and financial results.

I will be brief so we can get back to the merger we announced.

Peter Scott: I will be brief so we can get back to the merger we announced. For the third quarter, we reported FFOs adjusted a 45 cents per share, AFFO of 40 cents per share, and total portfolio, same store growth of 6%. Some additional color on segment performance starting without patient medical, same store growth was a solid 3.4%. During the quarter, we signed 2.2 million square feet of leases, including a 20 year extension at our Medical City Dallas campus, and 143,000 square feet of leases in Philadelphia. Shifting to lab, same store growth was a strong 3.3%. During the quarter, we executed 211,000 square feet of leases, including converting all 196,000 square feet of previously announced LOIs into leases.

The third quarter, we reported <unk> as adjusted of <unk> 45 per share.

<unk> <unk> 40 per share and total portfolio same store growth of 6%.

Some additional color on segment performance.

Starting with outpatient medical same store growth was a solid three 4%.

During the quarter, we signed $2 2 million square feet of leases, including a 20 year extension at our medical City, Dallas campus, and 143000 square feet of leases in Philadelphia.

Shifting to lab same store growth was a strong three 3% during the quarter, we executed 211000 square feet of leases, including converting all 196000 square feet of previously announced LOI into leases with.

The significant deals included a 101000 square foot lease with client therapeutics to backfill a 2023 Amgen lease exploration at our Oyster point campus.

Peter Scott: Services. The significant deals included a 101,000 square foot lease with client therapeutics to backfill a 2023 AMGEN lease expiration at our Oyster Point campus, a 61,000 square foot lease was voyaged with therapeutics to expand at our Hayden campus in Boston, and a 23,000 square foot lease with Estella at our vantage development, bringing that project to 52% pre-leased. All three tenants were existing tenants in our portfolio and underscores the superior competitive advantage that incumbent landlords have.

A 61000 square foot lease with Voyager therapeutics to expand at our Hayden campus in Boston.

And a 23000 square foot lease with Astellas at our vantage development, bringing that project to 52% pre leased.

All three tenants were existing tenants in our portfolio and underscores the superior competitive advantage that incumbent landlords have.

Finishing with <unk>.

Our strategic and operational initiatives are producing strong results.

Peter Scott: Finishing with CCRCs, our strategic and operational initiatives are producing strong results. James' draw growth for the quarter was an exceptional 32.1% driven by occupancy gains, reduced labor costs, and margin improvement. Turning now to our 2023 guidance, we are increasing our FFOs adjusted and AFFO guidance by two pennies at the midpoints to $1.77 and $1.53 respectively. Additionally, we are increasing our full year, blended same-store guidance range by 75 basis points to 4.75% at the midpoint. Please refer to page 38 of our supplemental for additional detail on our guidance.

Same store growth for the quarter was an exceptional 32, 1% driven by occupancy gains rich.

The reduced labor costs and margin improvement.

Turning now to our 2023 guidance, we are increasing our <unk> as adjusted and <unk> guidance by two pennies at the midpoint to $1 77, and $1 53, respectively. Additionally, we are increasing our full year blended same store guidance range by 75 basis points to four points.

75% at the midpoint.

Please refer to page 38 of our supplemental for additional detail on our guidance.

With that let me turn the call to John.

Thank you Pete before discussing the merger I want to take a few moments to discuss physicians Realty Trust performance during the third quarter of 2023.

John Thomas: With that, let me turn the call to John. Thank you, Pete.

John Thomas: Before discussing the merger, I want to take a few moments to discuss position for those who trust performance during the third quarter of 2023. During this quarter, position for the trust generated normalized funds from operations of 61.2 million or 25 cents per share, our normalized funds available for distribution were 60.1 million or 24 cents per share. We paid our third quarter dividend of 23 cents per share on October 18th, which represented a payout ratio of 96%.

During this quarter physicians Realty Trust generated normalized funds from operations of $61 2 million or 25 per share our normalized funds available for distribution were $60 1 million or <unk> 24 per share.

We paid our third quarter dividend of <unk> 23 per share on October 18th which represented a payout ratio of 96%.

We ended the quarter with the balance sheet in great shape, our consolidated net debt to EBITDA ratio of five three times.

John Thomas: We ended the quarter with the balance sheeting grade shape, our consolidated net debt to EBITDAI ratio of 5.3 times, and less than 5% of our debt carries a variable rate interest rate. Our two being of consolidated debt, only about 85 million or 4% matured before 2026. Our revolving line of credit is completely undrawn, providing us with 1.2 billion of near-term liquidity when combined with our nearly 200 million of cash on the balance sheet.

In less than 5% of our debt carries a variable rate interest rate.

Of our 2 billion of consolidated debt only about $85 million or 4% matures before 2026.

Our revolving line of credit is completely undrawn, providing us with $1 2 billion of near term liquidity when combined with our nearly $200 million of cash on the balance sheet.

Operations remained strong with the leasing team achieving positive absorption of 26000 square feet and renewal spreads of six 7% outpatient medical same store cash NOI grew one 5% year over year, an improvement from prior quarters as the team works to release, the incremental vacancy incurred earlier in the year.

John Thomas: Operations remained strong with the leasing team achieving positive absorption of 26,000 square feet and renewals spread to 6.7%, outpatient medical same-store cash in a library 1.5% year over year, and improvement from prior quarters as the team works to release the incremental vacancy incurred earlier in the year. New investments were modest at 16.8 million, including the funding of previous loan commitments on our patient medical facilities under construction. We also remain on track for the GNA guidance of 41 million to 43 million. Our construction team is also managing to the guidance of 24 million to 26 million for recurring capital projects. And we don't expect any surprises there.

New investments were modest at $16 8 million, including the funding of previous loan commitments on outpatient medical facilities under construction.

We also remain on track for the G&A guidance of 41 million to $43 million. Our construction team is also managing to the guidance of 24 million to $26 million for recurring capital projects and.

And we don't expect any surprises there.

We're also excited to report that the digital Realty Trust earned a score of 78 at a 100, representing a 4% year over year increase in.

John Thomas: We're also excited to report the decision-friendly trust earned a score of 78 out of 100, representing a 4% year-over-year increase, and a Green Star designation in the 2023 Gresby Real Estate Assessment for Sustainability Reporting.

And a green star designation in the 2023 Graysby real estate assessment.

Our sustainability reporting.

I'll now pass it over to Scott to discuss the merger.

Scott Brinker: I'll now pass it over to Scott to discuss the murder. Okay, thank you, Pete and John. From day one, the discussion with John focused on whether both companies would be better together than a standalone entities. That was the only transaction either side was willing to do and we accomplished that goal. As the merger is expected to be accreted to both companies from every important angle. Scale, earnings, balance sheet, capabilities, team and relationships.

Okay. Thank you Pete and John from.

From day, one the discussion with John focused on whether both companies will be better together and as Standalone entities that was the only transaction either side was willing to do and we accomplished that goal as the merger is expected to be accretive to both companies from every important angle scale.

Scale earnings balance sheet capabilities team and relationships.

John and I will touch on each of these items.

One of the benefits of this transaction that is most exciting to John and me is that we can combine the complementary strengths of the two companies.

Scott Brinker: John and I will touch on each of these items. One of the benefits of this transaction that is most exciting to John and me is that we can combine the complimentary strengths of the two companies, including docs internal property management and peaks redevelopment and development expertise just to name too. We expect this deal to fundamentally change the power of the combined platform and therefore our mutual growth opportunity. For the past year since taking on this role of Healthpeak, I talked about several initiatives we were focused on, including having a larger playing field, given the evolving nature of health care delivery, getting closer to our real estate, keeping our relationships and streamlining our operations.

Including docs internal property management, and peaks redevelopment and development expertise just to name two.

We expect this deal to fundamentally change the power of the combined platform and therefore, our mutual growth opportunity.

For the past year since taking on this role of healthy.

I've talked about several initiatives, we were focused on including having a larger claim field given the evolving nature of healthcare delivery getting closer to a real estate deepening our relationships and streamlining our operations. This transaction accelerates every item on that list.

Scott Brinker: This transaction accelerates every item on that list. There's an investor presentation on both company websites, but let me quickly do that. Let me describe the basics. This is a 100% stock merger based on the closing share price of each company as of Friday. Each doc share will be converted into 0.674 shares of newly issued Healthpeak stock. The ownership split will be approximately 77% Healthpeak shareholders and 23% Physicians Realty shareholders. The company's name will be Healthpeak properties at quarter in Denver with the ticker symbol of DOC or doc.

There is an investor presentation on both company web sites, but let me quickly describe the basics. This is a 100% stock merger based on the closing share price of each company as of Friday, each Doc share will be converted into 0.6 704 shares of newly issued healthy stock.

The ownership split will be approximately 77% health peak shareholders and 23% physicians Realty shareholders. The company's name will be healthy properties headquartered in Denver with the ticker symbol EOC or dock, we expect to maintain our dividend at $1 20 per share, resulting in an <unk>.

Scott Brinker: We expect to maintain our dividend at $1.20 per share resulting in an AFFO payout ratio of 80% or below. Closing is expected to occur in the first half of 2024 subject to typical closing conditions, including shareholder votes. Let me clarify. This is not a sale for either company. There's no cash change in hands. This is a relative value trade that we believe is beneficial to both companies. In our transaction structure allows all shareholders to carry forward and participate in the immediate and future value creation.

<unk> payout ratio of 80% or below.

Closing is expected to occur in the first half of 2024 subject to typical closing conditions, including shareholder votes.

Let me clarify this is not a sale for either company.

There is no cash changing hands. This is a relative value trade that we believe is beneficial to both companies.

And our transaction structure allows all shareholders to carry forward and participate in the immediate and future value creation.

Let me touch on the financial highlights.

There is immediate and compelling value creation opportunity that will grow over time the year, one run rate synergies should be at least $40 million with the potential to reach $60 million by the end of year two.

Scott Brinker: Let me touch on the financial highlights. There is immediate and compelling value creation opportunity that will grow over time. The year one run rate synergies should be at least $40 million with the potential to reach $60 million by the end of year two. Any increase in occupancy or rate would be upside to those numbers. We expect a combination to be accretive to stand alone year one AFFO for both companies. We also expect FFO accretion.

Any increase in occupancy or rate would be upside to those numbers.

We expect the combination to be accretive to Standalone year, one <unk> for both companies. We also expect <unk> accretion so.

So that number is subject to GAAP accounting adjustments that will be finalized just prior to closing.

Scott Brinker: So that number is subject to gap accounting adjustments that will be finalized just prior to closing. Reven more excited about the strategic benefits. First, we've already spent a huge amount of time thinking about the team and platform from top to bottom with the joint mindset that the status quo is never good enough. Both companies have already been operating at a high level. This is an opportunity to quickly go to the next level, combining the complimentary talent and strengths of each company.

We're even more excited about the strategic benefits.

First we have already spent a huge amount of time thinking about the team and platform from top to bottom with the joint mindset that the status quo is never good enough.

Scott Brinker: Second, broader and deeper relationships. Together we'll have relationships with each of the 10 largest health systems in the country. The vast majority of the world's largest biopharmus, an exciting mix of innovative biotechs and regional health systems. Those relationships are the intangible that drives out performance. Third is increased operating scale with combined 40 million square feet about patient medical real estate, including concentration and high growth markets like Dallas, Houston, Nashville, Phoenix, and many others.

Both companies have already been operating at a high level. This is an opportunity to quickly go to the next level, combining the complementary talent and strengths of each company.

Second broader and deeper relationships together, we will have relationships with each of the 10 largest health systems in the country. The.

The vast majority of the world's largest biopharma is an exciting mix of innovative biotechs and regional health systems.

Those relationships are the intangible that drives outperformance.

Third is increased operating scale with combined 40 million square feet of outpatient medical real estate, including concentration in high growth markets like Dallas, Houston, Nashville, Phoenix, and many others.

The combined footprint will deepen our competitive advantage in local markets. So we haven't included any of this potential upside in our numbers.

Scott Brinker: The combined footprint will deepen our competitive advantage in local markets that we haven't included any of this potential upside in our numbers. Four, we'll retain doc's internal property management platform and expect to internalize certain markets in our medical and lab portfolios. This will deepen our relationships and augment our local market knowledge. The internalization will also be accretive and we've included those profits in our synergy numbers. Five, improve tenant diversification. The top 10 tenants will represent just 21% of annual base rent and seven of those 10 are investment grade credits.

Four we will retain docs internal property management platform and expect to internalize certain markets in our medical and lab portfolios. This will deepen our relationships and augment our local market knowledge.

The internalization will also be accretive and we've included those profits in our synergy numbers.

Five improved tenant diversification.

The top 10 tenants will represent just 21% of annual base rent and seven of those 10 are investment grade credits only two tenants will represent more than 1% of our combined base rent.

Scott Brinker: Only two tenants will represent more than 1% of our combined base rent. HCA will be our biggest tenant at 9% and they are the largest for profit health system in the country. It's also a highly strategic relationship that goes back more than two decades. Common spirit will move from 15% of doc standalone down to 4% of the combined company. Common spirit is the largest not for profit system in the country and rated a minus by S&T.

<unk> will be our biggest tenant at 9% and they are the largest for profit health system in the country. It's also a highly strategic relationship that goes back more than two decades.

Common spirit will move from 15% of docs Standalone down to 4% of the combined company.

Common spirit is the largest not for profit system in the country and rated a minus by S&P. We look forward to supporting the mission of these two organizations and many others in the sector in a broader way than we could as standalone companies.

Scott Brinker: We look forward to supporting the mission of these two organizations and many others in the sector in a broader way than we could a standalone company. Six, this transaction will help accelerate the integration of our medical and lab operations. Independent of this merger, we're already moving toward a single operating platform as the daily blocking and tackling of property management, leasing, capex forecasting and accounting has enormous overlap between the two segments. We also see more and more of our health systems doing some level of R&D where we can be a high value at partner giving our capabilities.

This transaction will help accelerate the integration of our medical and lab operations independent of this merger, we're already moving towards a single operating platform as the daily blocking and tackling of property management leasing Capex forecasting an accounting has enormous overlap between the two segments.

Scott Brinker: Seven, increase scale and liquidity for equity investors as both companies will benefit from a larger market cap. Eight is a bigger, more liquid balance sheet with leverage expected to be in the low fives at closing and well staggered debt maturities. The balance sheet will be a competitive advantage as we move forward positioning the company to go on offense when highly levered owners are searching for answers in this new environment. Nine, lower cost of capital through more efficient GNA and enhanced liquidity making external growth more creatives and 10 will use the larger portfolio to become more active and recycling capital for pipeline opportunities, whether throughout right sales or private capital joint centers medical and lab remain attractive asset classes to institutional investors and no company will be better positioned to capitalize on their desire for exposure to this.

We also see more and more of our health systems doing some level of R&D, where we can be a high value add partner given our capabilities.

Seven increased scale and liquidity for equity investors as both companies will benefit from a larger market cap.

Eight is a bigger more liquid balance sheet with leverage expected to be in the low fives at closing and well staggered debt maturities the balance sheet will be a competitive advantage as we move forward positioning the company to go on offense when highly levered owners are searching for answers in this new environment.

Nine lower cost of capital through more efficient G&A and enhanced liquidity, making external growth more accretive and 10, we will use the larger portfolio to become more active in recycling capital for our pipeline opportunities whether through outright sales or private capital joint Venture's medical and lab remain attractive.

Asset classes to institutional investors and no company will be better positioned to capitalize on their desire for exposure to the sector.

Moving to the team and governance, John Thomas will join our board as Vice Chair and have an active role in strategy business development and relationships areas, where I've seen firsthand that Exl's. John has proven itself time and again is a leading voice in this sector and it was a driving force for growth at both healthcare REIT and positions.

Scott Brinker: Secretary. Moving to the team and governance, John Thomas will join our board as Vice Chair and have an active role in strategy, business development and relationships, areas where I've seen first hand in the excels. John has proved himself time and again as a leading voice in the sector and was a driving force for growth at both healthcare and physician's realty. In addition, we're excited to retain the vast majority of the dock operations and property management teams, many of whom are reimbursed by the tenants.

Realty.

In addition, we're excited to retain the vast majority of the dock operations and property management teams, many of whom are reimbursed by the tenants.

Cathy <unk> will continue to be our chairperson and healthy board will be expanded to include five directors from physicians Realty, including John in the former U S Secretary of health and Human services Tommy G. Thompson.

Scott Brinker: Kathy Sandstrom will continue to be our chairperson and the Healthpeak board will be expanded to include five directors from positions realty, including John and the former US Secretary of Health and Human Services, Tommy G. Thompson. After closing, our patient medical will represent approximately 50 percent of the combined company's NOI. Demand exceeds supply in the outpatient sector today and we expect that dynamic to continue given senior population growth and the high cost of new construction.

After closing.

Patient medical will represent approximately 50% of the combined company's NOI.

<unk> exceed supply in the outpatient sector today, and we expect that dynamic to continue given senior population growth in the high cost of new construction.

We're also starting to see market rental rates catch up to inflation, which is a positive sign for future NOI growth.

Scott Brinker: We're also starting to see market rental rates catch up to inflation, which is a positive sign for future NOI growth. That being said, we do not have fixed portfolio allocation targets moving forward. We'll allocate capital based on opportunity and risk adjusted returns. And we do expect the opportunity set to be significant driven by four major buckets and in no particular order. First is outpatient medical acquisitions from capital constrained owners or health systems.

That being said, we do not have fixed portfolio allocation targets moving forward, we'll allocate capital based on opportunity and risk adjusted returns and.

And we do expect the opportunity set to be significant driven by four major buckets and in no particular order.

Scott Brinker: Second is new development with leading health systems. Third is the stress acquisition opportunities and life science driven by refinancing challenges or delayed lease up. And fourth is activating our five million square foot life science land banks when fundamentals are favorable. I'm excited for J.T.

First is outpatient medical acquisitions from capital constrained owners or health systems.

Second is new development with leading health systems third as distressed acquisition opportunities in life science, driven by refinancing challenges or delayed lease up and fourth is activating our 5 million square foot life Science land bank when fundamentals are favorable.

I am excited for <unk> to provide his thoughts on the opportunity in front of us.

John Thomas: to provide his thoughts on the opportunity in front of us.

Thank you Scott when John Sweet and Mark Don asked me to join them just over 10 years ago to create a new public company focused on outpatient medical investment I was in.

John Thomas: Thank you, Scott. When John Swede and Mark Thine asked me to join them just over 10 years ago to create a new public company focused on outpatient medical investment, I was intrigued by the opportunity to work with them to build a new kind of organization with an intense focus on serving the current, but more importantly the future needs of health care providers and their patients as care continues to move from the inpatient settings to the outpatient settings.

<unk> by the opportunity to work with them to build a new kind of organization with an intense focus on serving the current bill.

More importantly, the future needs of healthcare providers and their patients as care continued to move from the inpatient setting to the outpatient setting.

We didn't have an objective then or now to build a portfolio and sell it but rather to build an organization built to last for the long term one that would grow and evolve with clinical science the needs of an aging U S population and resilient to macro and micro capital market conditions.

John Thomas: We didn't have an objective then or now to build a portfolio and sell it, but rather to build an organization built to last for the long term, one that would grow and evolve with clinical science, the needs of an aging US population and resilient to macro and micro capital market conditions. We wanted a culture to drive those goals and over time came to capture that culture in the acronym CARE. We communicate and collaborate.

We wanted to culture to drive those goals and over time came to capture that culture and the acronym care, we communicate and collaborate we act with integrity, we respect the relationship and we execute consistently.

John Thomas: We act with integrity. We respect the relationship and we execute consistently. I've had the privilege to know and work with Scott since 2009 when we were both at the opportunity to work together under a genuine mentor to both of us, George Chapman. We work with Pete since his days at Barclays and collaborated with him, collaborated with him since he joined health peak. We've had the opportunity over the past 10 years to get to know the health peak team and more in recent weeks.

I've had the privilege to know and work with Scott since 2009, when we were both had the opportunity to work together under a genuine mentor to both of US George Chapman.

We're compete since his days at Barclays and collaborated with him collaborated with him since he joined healthy we've had the opportunity over the past 10 years to get to know the health peak team and more in recent weeks.

We have common and consistent missions goals and more importantly culture.

John Thomas: We have common and consistent missions, goals, and more importantly culture. Scott has articulated, defined, achievable, measurable, and objective metrics we can and will achieve together. We are convinced this combination only furthers our long term objectives from our humble beginning to 10 years ago, but provides the best in class scale and operating platform to achieve together for our combined providers and the patients they serve far more than we can deliver separately. We are here to serve the best interests of our shareholders and stakeholders and we believe it's with all of our analysis and discussions that one plus one in this context is not only more than three but has the potential to be much much more.

Scott has articulated defined achievable measurable and objective metric metrics, we can and will achieve together.

We're convinced this combination not only furthers our long term objectives from our humble beginnings 10 years ago, but provides the best in class scale and operating platform to achieve together for our combined providers and the patients they serve.

Far more than we can deliver separately.

We are here to serve the best interest of our shareholders and stakeholders and we believe with all of our analysis and discussions that one plus one in this context is not only more than three but has the potential to be much much more.

In addition to Scott's earlier comments, there is an additional benefit to docks existing shareholders. As we are merging with the best in class lab portfolio with large footprints and lab investment platforms in Cambridge mass South San Francisco and San Diego.

John Thomas: In addition to Scott's earlier comments, there's an additional benefit to docs existing shareholders as we are emerging with the best in class lab portfolio with large footprints and lab investment platforms in Cambridge, masks, South San Francisco and San Diego. At an incredibly great valuation and time for investment in the existing lab platform is what we believe is an outsized ROI for years to come. Healthpeak's Class A lab facilities are incredible real estate, hosting some of the world's leading scientists, clinicians and discovery, sponsor by and backed by leading pharma, venture capital and academic proximity and involvement.

In an incredibly great valuation and time for investment in the existing lab platform.

With what we believe it's an outsized ROI for years to come.

<unk> class a lab facilities are incredible real estate hosting some of the world's leading scientists clinicians and discovery sponsored by and backed by leading pharma venture capital and academic proximity and involvement.

The combination of health peaks lab teams and docks operational platform further enhances the value of these assets and relationships.

John Thomas: The combination of healthpeak's lab teams and docs, operational platform further enhances the value of these assets and relationships. I've toured healthpeak's best in class lab and markets and share the vision for the development of existing land owned by healthpeak in Cambridge and South San Francisco that should generate outsized growth for years to come, folks on lab and community development but also outpatient medical access. Scott and I led under George Chapman's leadership a large investment in Cambridge lab real estate in 2010 and working together, learning lab real estate investment, development and operations together.

Toward health peaks best in class lab in markets and share the vision for the development of existing land owned by healthy and Cambridge, and South San Francisco that should generate outsized growth for years to come.

On lab and community development, but also outpatient medical X excess.

Scott and I will let Ed under George Chapman leadership, a large investment in Cambridge liability in 2010, and working together learned <unk> investment development and operations.

Together the results of that investment speak for themselves.

Obviously, Scott has taken that experience and executed consistently has helped <unk> leader.

John Thomas: The results of that investment speaks to themselves. Obviously Scott has taken that experience and executed consistently as healthpeak's leader. I'm very excited to partner with him and our collective team to further the combined companies feature opportunities in lab and of course outpatient medical. In conclusion, doc is not selling an outpatient medical portfolio to healthpeak, healthpeak not selling lab or outpatient facilities to doc. Rather, we believe we are combining the best of both organizations and an all stock merger of equals that we believe will benefit both shareholder bases and continues the mission vision and culture of each organization.

I am very excited to partner with him and our collective team to further the combined company's future opportunities and lab and of course outpatient medical.

In conclusion Doctor is not selling an outpatient medical portfolio at a healthy healthy if not filling <unk> outpacing affiliates adopt.

Rather we believe we are combining the best of both organizations in an all stock merger of equals that we believe will benefit both shareholder bases and continues the mission vision and culture of each organization as one.

This combination further as each of our goals to have and build an organization built to last for the long term.

John Thomas: This combination furthers each of our goals to have and build an organization built to last a long term. One that would grow and evolve with clinical science, the needs of an aging US population and resilient to macro and micro capital market conditions. We believe this combination leads and exceeds all of those objectives. I look forward to working with Scott and our collective team and board and as we say at doc this is an opportunity to invest in better as healthpeak. And you'll be able to find us at the New York Stock Exchange under the stock symbol doc.

One that we grow and evolve with clinical science the needs of an aging U S population.

Unknown Executive: Thank you. We'll now be happy to take your questions. Certainly.

And resilient to macro and micro capital market conditions.

We believe this combination meets and exceeds all of those objectives.

I look forward to working with Scott and our collective team on board and as we say at dock this as an opportunity to invest in better.

Healthy and Youll be able to finance at the New York stock exchange under the stock symbol dock.

Thank you will.

Now be happy to take your questions.

Certainly we will now begin the question and answer session.

Ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question again Press Star then one so that everyone has a chance to participate we ask that participants limit themselves to.

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, again, press star then one so that everyone has a chance to participate. We ask that participants limit themselves to one question and one related follow-up. If you have additional questions, please req.

One question and one related follow up if you have additional questions. Please re queue.

Our first question comes from the line of Michael question.

Citigroup Your line is open.

Michael Cliff: Our first question comes from a line of Michael Cliff. This is City Group. Your line is open. Great, thanks. I'm curious if you can kind of elaborate, maybe Scott, just on the on versus off-campus of the combined company. I mean, peak historically has been more on-campus focus, stock has been more off-campus. So they're going to be a strategy shift in terms of preference there. Yeah, I would just say that the players are really complimentary.

Great. Thanks.

I'm curious if you can kind of elaborate maybe Scott just on the on versus off campus of the combined company I mean peak historically has been more on campus focus docket has been more off campus. So theyre going to be a strategy shift in terms of preference there.

Yes, I would just say that the portfolios are really complementary I mean, theres a lot of overlap in the markets themselves something in the range of 70% market overlap a huge concentration in a lot of our big markets like Dallas and Houston Phoenix, It's a pretty long list as well as some new markets like Atlanta.

Michael Cliff: I mean, there's a lot of overlap in the markets themselves, something in the range of 70 percent market overlap. They have huge concentration in a lot of our big markets like Dallas and Houston Phoenix. They're pretty long list as well as some new markets like Atlanta. We are higher on campus. That's been a good strategy, opening years. It's pretty good results. But I think doc has high quality assets and kind of a different complimentary way.

We are higher on campus.

When it gets strategy over the years, it's produced good results.

But I think Doc has high quality assets and kind of a different and complementary way certainly health care is moving more off campus doesn't mean, it's completely moving off campus or hospitals are still busy was on campus applebees are still performing but as you think about.

Michael Cliff: Certainly health care is moving more off-campus. Doesn't mean it's completely moving off-campus. Our hospitals are still busy. Those on-campus symbol bees are still performing. But as you think about the trend in delivery, you know, progressive health systems today have 10 or more outpatient assets for everyone hospital in their system with oftentimes a strategic plan to move more towards a 20-to-1 ratio and just almost bite the fall. Most of those new assets are off-campus, trying to make care more convenient, more accessible, more affordable.

The trend in delivery Progressive health systems today have 10 or more outpatient assets for everyone hospital in their system with oftentimes a strategic plan to move more towards a 20 to one ratio and just almost by default most of those new assets are off campus trying to make care more convenient more assess.

<unk> more affordable so we still like on campus real estate, but we think we have to complement it and serve our health system partners will comprehensively and off campus just has to be part of that strategy.

Michael Cliff: So we still like on-campus real estate, but we think we have to complement it and serve our health system partners. More comprehensively, in off-campus just has to be part of that strategy. If you look at the segment or the sector in the aggregate, it's probably only 30 percent on campus. So it's just not realistic to think that you can be a true partner of choice with health systems if you're only serving that 30 percent of the real estate footprint.

Look at the segment of this sector in the aggregate, it's probably only 30% on campus.

Just not realistic to think that you can be a true partner of choice with health systems. It is only serving that 30% is one of the real estate footprint.

Got you that's helpful and then I'm just curious if you could maybe.

Michael Cliff: Gotcha. That's helpful. And then I'm just curious if you could maybe, you know, kind of give us a little color on sort of how these talks came to be, the murders of equals, you know, kind of over time had it things evolved or anything there would be pretty helpful.

Give us a little color on sort of how the product can be the merger of equals.

Over time added things evolve or anything there would be pretty helpful.

Yes, I mean, we'll put out the proxy with all of that background information in the next month or two Michael but I'll, probably defer that answer until that's made public.

Michael Cliff: Yeah, I mean, we'll put out the proxy with all of that background information in the next month or two, Michael, but I'll probably defer that answer until that's made public. Okay, well that's good for me. Thanks for the time. Yes, thanks.

Okay, well that's it for me thanks for the time.

Yes. Thanks.

Our next question comes from the line of Austin, where Schmitz with Keybanc. Your line is open.

Austin Wurschmidt: Our next question comes in line of Austin Worshman's with keyback. Your line is open. Thanks.

Thanks, Good morning, everyone. I was hoping you could provide some additional detail around the synergy components within the $40 million to $60 million that you flagged do you expect it will be accretive immediately upon closing and can you give us a sense about the magnitude of accretion you expect in the first year.

Austin Wurschmidt: Good morning, everyone. I was hoping you could provide some additional detail around the synergy components within the 40 to 60 million that you flagged. And do you expect it will be a creative immediately upon closing? And can you give us a sense about the magnitude of accretion you expect in the first year? Yeah, hey Austin, it's Pete here. It's good question. You know, as we said, we do expect the transaction to be accreted to both AFFO and FFO for share.

Yeah, Hey, Austin.

Pete here good question.

As we said, we do expect the transaction to be accretive to both <unk> and <unk> per share I will note and I think everybody knows that at this point, but <unk> has a lot of accounting adjustments, including a mark to market of the debt and that won't be finalized until the deal.

Austin Wurschmidt: I will know, and I think everybody knows that at this point, but FFO has a lot of accounting adjustments, including a market of the debt. And that won't be finalized until the deal closes. But everything I've just said is based on our best estimates as of today, and importantly those accounting adjustments do not. Act, AFFO, you know, the accretion of 40 to 60 million, I think that the biggest components of that are compensation savings.

Closes.

But everything I've, just said is based on our best estimates as of today and importantly, those accounting adjustments do not.

Impact <unk> the <unk>.

Accretion of $40 million to $60 million I think the biggest components of that are compensation savings there will be some redundancies within both organizations. There is also corporate overhead savings.

Austin Wurschmidt: There will be some redundancies within, you know, both organizations. There's also corporate overhead savings, notably some significant professional fee savings from having one public company as opposed to two. And then the increased ROI from internalizing property management across the portfolio. So those are the biggest pieces. But to answer your initial part of the question, we do expect it to be accretive in year one. Now, that's helpful. And then I'm just curious with the combined companies, the peak team is kind of highlighted the potential market growth opportunity.

Notably some significant professional fees savings from having one public company as opposed to two and then the increased NOI from internalizing property management across the portfolio.

So those are the biggest pieces, but to answer your initial part of the question. We do expect it to be accretive in year one.

No. That's helpful. And then I'm just curious with the combined companies to peak team has kind of highlighted the potential mark to market growth opportunity.

And get some 2025.

Within the lab space segment.

Austin Wurschmidt: I think it's in 2025 within the space segment. And Doc, you know, has talked about, I think it's 26 when you've got the significant maturities with an attractive market as well. I'm just curious how you thought about sort of how this would dilute that growth in the years ahead. And then kind of how you backfill that through some of the other opportunities that you've discussed and highlighted. Yeah, hey, Austin, I'll take a shot at that.

Doc.

Ben just talked about I think it's 26, when you've got the significant maturities within an attractive mark to market as well I'm. Just curious how you thought about sort of how this would would dilute that growth.

In the years ahead, and then kind of how you backfill that.

Through some of the other opportunities that you've discussed and highlights.

Yeah, Hey, Austin I'll take a shot at that Pete John May have cause.

Comments as well, but overall, we view this transaction is augmenting our internal growth profile, certainly, making it less volatile and more predictable.

Austin Wurschmidt: Pete John may have comments as well, but overall we view this transaction is augmenting our internal growth profile, certainly making it less volatile, more predictable. But in addition to just the initial synergies that that Pete just described are capabilities in serving our clients is going to increase pretty materially, whether it's our development redevelopment capabilities. These internal property management, the additional scale and the local markets that just bring this closer to the real estate, closer to attendance, that should drive better economics.

But in addition to just the initial synergies that that Pete just described our capabilities in serving our clients is going to increase pretty materially whether it's our development redevelopment capabilities internal property management. The additional scale in the local markets that just brings us closer to the real estate closer to our tenants that should drive better X.

<unk> if you think about the last 10 years in lab versus the last 10 years in medical it's not necessarily going to repeat itself I mean from where we sit.

Austin Wurschmidt: And if you think about the last 10 years in lab versus the last 10 years in medical, it's not necessarily going to repeat itself. I mean, from where we sit, our medical growth over the past decade has been in the mid two percent range, so slightly above inflation. But we have five to six year lease terms on average, and we are starting to see market rental rates catch up to inflation. There's obviously a lag given that weighted average lease term, but we are starting to see some pretty significant rent rental rate growth in doc.

Our medical growth over the past decade has been in the mid 2% range, so slightly above inflation, but we have five to six year lease terms on average and we are starting to see market rental rates catch up to inflation. There is obviously a lag given that weighted average lease term, but we are starting to see some pretty significant.

Rental rate growth and Doc has been reporting the same so I think if you look at the go forward, we're pretty optimistic about the growth rate within outpatient medical we see demand exceeding supply really across the entire industry, including in our local market. So it should be a pretty compelling.

Austin Wurschmidt: It's been reporting the same. So I think if you look at the goals forward, we're pretty optimistic about the growth rate within outpatient medical, we see demand exceeding supply really across the entire industry, including in our local market. So should be a pretty compelling future growth rate that might look different than the last 10 years in that medical business. That's very helpful.

Unknown Executive: Thank you.

Future growth rate that might look different in the last 10 years in that medical business.

No that's very helpful. Thank you.

Our next question comes from the line of Juan Sanabria with BMO capital markets. Your line is open.

Juan Sanabria: Our next question comes in line of jump one, Sanibria with BMO capital markets. Your line is open. Hi guys, congrats on getting the deal done. Just a question on asset management, I guess, for Scott Breaker. I mean, you got to tremendous scale, particularly in the lab markets, and I'm just curious on a kind of why the change of strategy about embracing the internal property management. And if you could dive a little into like, how should we think about how much and a lot of that business generation, just from a synergy or a crucial perspective.

Hey, guys. Congrats on getting the deal John just a question on asset management, I guess for Scott Brinker.

You guys had tremendous scale, particularly in the lab markets.

Just curious on kind of was a change of strategy about embracing the internal property management.

And if you could dive a little until like how should we think about how much NOI that business generates.

Just from a synergy or accretion perspective.

Yes happy to take that one one really in the last year one of the major initiatives that.

Juan Sanabria: Yeah, happy to take that one on really in the last year, one of the major initiatives that we've been pushing as a leadership team is to bring our company closer to our real estate, close to our buildings, local markets, and relationships, and having the internal property management allows us to be that much closer to our tenants in our buildings, and we feel like we're a little bit redundant, maybe one step removed in some cases with their party property managers, and we think we can eliminate that, improve the relationship, improve our local market knowledge, and doing it off the back of docs, existing platform, just allows us to do it faster, it's less execution risk, and it will have a higher margin just given we don't have to start from scratch. So it's a pretty significant part of the synergy number that Pete described some of that comes immediately because there are a number of markets that we've already identified that we can internalize right away, and then over time, depending upon how it goes, we can increase that number.

We've been pushing as a leadership team is to bring our company closer to our real estate costs through our buildings local markets and relationships.

And having the internal property management.

Allows us to be that much closer.

To our tenants in our buildings.

And we feel like we're a little bit redundant, maybe one step removed in some cases with third party property managers.

We think we can eliminate that improve the relationship improve our local market knowledge.

And doing it off the back of docks existing platform just allows us to do it faster, it's less execution risk and it will have a higher margin just given we don't have to start from scratch.

So it's a pretty significant part of the synergy number that Pete described some of that comes immediately.

Because there are a number of markets that we've already identified that we can internalize right away and then over time, depending upon how it goes we could we could increase that number. So it's one of the really interesting and intriguing parts of this merger that it's not only financially accretive in a pretty meaningful way, but it's strategically important.

Juan Sanabria: So it's one of the really interesting and intriguing parts of this merger that it's not only financially accreted in a pretty meaningful way, but it's strategically important in that it brings us that much closer to our real estate. Yeah, Juan, it's JT, I just had to that, you know, in the six largest overlapping markets for outpatient medical, Pete's always had a great high performing team in an organization, an organizational structure and approach on the ground boots, you know, boots on the ground operation property management, we have, we have doc team members in each of those large markets already.

It brings us that much closer to our real estate.

One is J T I would just add to that and the six largest overlapping markets for outpatient medical <unk> always had a great high performing team and organization organizational structure and approach.

On the ground boots boots on the ground.

Operation property management, we have we have Doc team members in each of those large markets already so theres just a lot of synergy and scale that is already we can.

Juan Sanabria: So there's just a lot of synergy and scale that's already we can put in place day one and we'll be working, you know, during the during the process towards closing to to get that plan in place and and assume those responsibilities, you know, together, day one, and then there's many more markets to come. So just a lot of upside up to any both financially, but also Scott said to, you know, get people just connected to the real estate.

Put in place day, one and we'll be working during the.

During the process towards closing two to get that plan in place.

Assumed those responsibilities together day, one and then there is many more markets to come so just a lot of upside opportunity both financially, but also as Scott said.

Give people just connected to the real estate.

And then just as a follow up.

I guess it's.

Juan Sanabria: And then just as a follow up, I guess it's maybe a little too part of here, is the exchange ratio fixed or is that variable and then is there any planned dispositions or exit of any markets with the combined companies. So the exchange ratio is fixed and in terms of disposition, it would only be opportunistic to balance you to great shape today for both companies will be even stronger post closing. We have a very high quality portfolio, we two with the vast majority of docs portfolio and feel the same.

Maybe a little too part of here is the exchange ratio fixed or is that variable and then is there any planned dispositions or exit of any.

Markets.

With the combined company.

So the exchange ratio is fixed.

And in terms of dispositions it would only be opportunistic with balance sheets in great shape today for both companies will be even stronger post.

Post closing, we have a very high quality portfolio with towards the vast majority of <unk> portfolio and feel the same so anything we do would be opportunistic there is no forced sales as a part of this transaction given the strength of the balance sheet.

Juan Sanabria: So anything we do with the opportunistic, there's no forced sales as a part of this transaction given the strength of the balance sheet. But I did make comments in my prepared remarks that we would expect to be more active in capital recycling, so doing things opportunistically, whether it's outright sales or recaps with joint venture partners. We do think that would be a partner of choice to the private capital community as well.

But I did make comments in my prepared remarks that we would expect to be more active in capital recycling. So doing things opportunistically, whether it's outright sales of recaps with joint venture partners. Because we do think that will be a partner of choice to the private capital community as well, we already have a number of those relationships if we could have more.

Because we see a significant pipeline opportunity as I described really across the lab and medical business and if the stock is not trading at an accretive level.

Juan Sanabria: We already have a number of those relationships and we could have more as we see a significant pipeline opportunity as I described really across the lab and medical business. And if the stock is not trading at an creative level, we could certainly look to recap recycle assets to capitalize that that grew up pipeline. Thank you.

Certainly look to recap recycle assets to capitalize that growth pipeline.

Thank you.

Our next question comes from the line of Vikram Malhotra.

Oh trial with Mizuho Your line is open.

Vikram Malhotra: Our next question comes from a line of Vikram Malhotra with Mizuhau. Your line is open. Thanks for taking the questions and congrats on the deal.

Thanks for taking the question and congrats on the deal.

I guess just first Glenn.

Two of your peers merged one of the thesis was that this creates a much larger.

Vikram Malhotra: I guess this first one, you know, when two of your peers merged, one of the thesis was that this creates a much larger acquisition opportunity to be set. And theoretically, the FF4 FED growth is higher. I think there was a five, six hundred basis point number at that time. Is that part of the rationale here? Do you see a bigger acquisition set and just ultimately higher? You said steady or growth, but I'm curious if you also see higher growth?

Acquisition opportunity set and theoretically the fifth floor FCB growth is higher I think there was a five 600 basis point number at that time.

Is that part of the rationale here do you see a bigger acquisition set and just ultimately higher you said steadier growth, but im curious if you also see higher growth.

Well certainly on the external.

Front, we do think that our balance sheet will be even more attractive to lenders. So our cost of capital should benefit clearly our G&A as a percentage of assets will go down so our cost of capital should improve hopefully hopefully the market responds to the strategic benefits of this transaction and our cost of equity.

Vikram Malhotra: Well, certainly on the external growth front, we do think that our balance sheet will be the more attractive, the lenders who are cost of capital should benefit clearly our GNA as a percentage of assets will go down so our cost of capital should improve. Hopefully the market responds to the strategic benefits of this transaction and our cost of equity improves as well. So certainly we would expect that the external growth opportunity will be more attractive given the doc relationships and the health peak relationships on top of that improve cost of capital, but that's not part of any of the appreciation or synergy numbers to root out line. That would be all upside.

Proves as well so certainly we would expect that the external growth opportunity will be more attractive given the doc relationships in the healthy relationships on top of that improved cost of capital.

But that's not part of any of the accretion or synergy numbers that we've outlined that would be all upside.

Okay.

Uh huh.

I guess just.

Vikram Malhotra: Okay, that's helpful. I guess just, you know, one more just, you know, falling up on the whole, you know, I guess the all furthers on campus, you know, part of what you mentioned is that the the the the the consumer, the hospitals are going more off campus, but I guess that could be, you know, that has been going on for a while. So I'm just sort of wondering why today and, you know, it's part of this, do you still see, you mentioned disposition?

One more just following up on the whole.

I guess, the all sources on campus.

Part of what you mentioned is that.

The strategy would be the consumer that hospitals are going more off campus, but I guess that could be that has been going on for a while so I'm just sort of wondering why today and it's part of this do you still see you mentioned dispositions. So do you still see a path where more of the dispositions are off campus weighted.

Vikram Malhotra: So do you still see a part where more of the disposition are off campus weighted? No, I would just be opportunistic from it's not going to be by design, but I think really from day one, 12 months ago, this management team is described the desire to have a wider playing field. If we're not servicing our tenants and health system partners in the medical business, we're not going to be we're not going to find maximum success. Um, and just given the emphasis of their strategy and both plans, we have to be a participant in that.

No I would just be opportunistic vikram, it's not going to be by design, but I think really from.

Day 112 months ago. This management team has described the desire to have a wider plainfield.

Not servicing our tenants and health system partners in the medical business, we're not going to be.

We're not going to find maximum success and just given the emphasis of their strategy and growth plans, we have to be a participant in that.

Okay. So I guess just to clarify the dispositions would then still be like more broad based including potentially the CRC that you've always had on that list.

Vikram Malhotra: Okay, so I guess just to clarify the disposition would then still be like more broad-based, including potentially the CCRC that you've always had on that list? Yeah, I would put CCRC in a totally different bucket. That that's a business that is performing well. We think it's a great asset class. We've got a great portfolio and internal team running it as well as a great, great property manager in LCS. So the feedback and strategy on that portfolio hasn't really changed when the financing markets make sense and we get a fair price.

Yes, I would put CCR season, it totally different bucket.

That's a business that is performing well, we think it's a great asset class, we've got a great portfolio in <unk>.

Internal team running it as well as a great third party property manager and Lcs. So.

Feedback and strategy on that portfolio Hasnt really changed.

And the financing markets makes sense and we get a fair price. So that's one that we'd be willing to sell and recapitalize the recycle into our.

Vikram Malhotra: That's one that we'd be willing to sell and we capitalize or recycle into our core businesses. Um, but on your specific point about on versus off-campus or lab, that will just be completely opportunistic, where we get the best pricing. Um, it's where we're.

Core businesses.

But on your specific point about on versus off campus or lab that will just be completely opportunistic wherever we get the best pricing.

<unk> is where we would look to transact.

Okay, great. Thanks, Kogan UN John and both teams.

Rich Anderson: Okay, great. Thanks again, you and John and both teams. Thanks, Rick.

Thanks, Vikram Thanks, Brooklyn.

Our next question comes from the line of Rich Anderson with Wedbush. Your line is open.

Rich Anderson: My next question comes from Line of Rich Anderson with Wedbush. Your line is open. Hey, good morning. So, congrats to everybody. You're making it clear no one's buying the other and so on, but the fact is Healthpeak is issuing, if my math is right, 168 million shares. If I'm also doing my math right, the implied cap rate on doc is in the code of load amidst sevens. And so, if you do a cost of equity, if you just do a inverse of your AF, a foe multiple to keep it simple, it's kind of nine-ish.

Hey, good morning.

So congrats to everybody.

Youre, making a clear no one's buying the other and so on but the fact is health peak is issuing if my math is right 168 million shares.

If I'm also do my math right the implied cap rate on.

Stock is in the low to mid Sevens.

And so if you if you do a cost of equity if you just do the inverse of your <unk> multiple to keep it simple it's kind of nine ish. So I guess the question is you need that $40 million of synergies to be able to talk about accretion.

Rich Anderson: So, I guess the question is, you need that 40 million of synergies to be able to talk about accretion. It's without it. It is at least marginally diluted out of the gate to health peak earnings. Is that a fair mathematical approach? There was a lot there, Rich. I'll do it again if you want. 168 million shares. I'm implied cap rate on doc of 7 and a quarter, 7 and a half, something like that.

Without it it is at least marginally dilutive out of the gate to health peak earnings is that a fair mathematical approach.

I'm not sure.

There was a lot there.

Rich I'll do it again, if you want.

168 million shares.

Our implied cap rate on dock of seven and a quarter seven and a half something like that.

So based on those two forces.

Rich Anderson: So, based on those two forces, it's diluted without the synergies, correct? Yeah, well, they're very different portfolios. We're not a pure play, medical portfolio. Today, we have the CCRCs, we have lab, and NLI is one metric you could think about. It's certainly one that real estate investors tend to point to, but it's certainly not the only metric that we think about. Capax and volatility of earnings, but Capix in particular, doc, given the nature of the portfolio, just has a very low cap expert in relative to ours.

Dilutive without the synergies correct.

Well, they're very different portfolios.

We're not a pure play medical portfolio today, we have <unk>, we have lab and <unk>.

NOI is one metric you could think about it.

It's certainly one that real estate investors tend to point to but it's certainly not the only metric I mean, when you think about capex and in volatility of earnings but capex in particular.

Doc given the nature of their portfolio just has a very low capex burden.

As to ours, so that certainly drives a lot of the accretion as well on an <unk> basis, which feels more like a cash economics enel.

Rich Anderson: So, that certainly drives a lot of the accretion as well on an AFFO basis, which feels more like a cash economics analysis to us, and I'm not sure that I would agree with your point on, in terms of AFFO, kind of the true economics of the deal, if there's probably some accretion even without other synergies range.

Analysis to us and I'm not sure that I would agree with your point.

In terms of <unk>.

The true economics of the deal I think there's probably some accretion even without all the synergies rich.

Our next question comes from the line of Tayo.

Unknown Executive: Our next question comes from the line of, how you, Aqsanya, with DOHVAC. Your line is open. Oh, yes, can you all hear me? Yes. Excellent.

Sanya.

Each bank your line is open.

Yes can you all hear me.

Yes, yes.

Excellent.

So.

Question just around the transaction.

Kyle: So, a question, just around the transaction, I mean, summer of 2022, we have the HRHPH, transactions go down. A lot of questions around someone who's primarily on campus, buying someone who has a lot of off campus, a lot of questions around someone who has a higher service to Illinois groups, so the MOB portfolio binds from one another. No response to Illinois groups profile. A lot of questions around pricing, again, your implied cap rate today is higher than the implied cap rate for DOHV.

Summer of 'twenty to 'twenty two.

We have the HR HPA transaction go down.

A lot of questions around someone who is primarily on campus buying someone will have a lot of off campus.

Lot of questions around someone who has the highest.

<unk> group for the automobile portfolio buying from one of the lowest same store NOI growth profile.

A lot of questions around pricing again go implied cap rate today is higher than the implied cap rate deals.

A lot of questions around again someone who has.

Manage their portfolio externally.

John Thomas: A lot of questions around, again, someone who has managed their portfolio externally, buying someone who has managed their You know, a year and a half ago when they were kind of struggling with the APHR deal, how do you convince shareholders this time around about the dark? Healthpeak transactions is different, especially when again, it needs to be thinking a little bit from the lab science theory that you guys have been trying to tell for the past few years.

Buying if they wanted to manage internal it just seems like theres a lot of similarity.

A year and a half ago, what kind of struggling with E E.

<unk> deal how do you convince shareholders. This time around is that the Doc.

Each transaction is different especially when again.

Used to be thinking will be a little bit from the labs Brian's story.

You guys have been trying to tell.

For the past few years.

Yes, Hi, Thomas J T.

We couldnt be more excited about this opportunity.

John Thomas: Hey, Kyle, JT, you know, we can be more excited about this opportunity and, you know, Scott and Pete and our teams, you know, said that and can be evaluated the opportunity. We looked at it as really combining the best parts of both organizations and kind of the different strategies. Everything was on the table to evaluate what was the best go forward strategy for, you know, all the questions you just asked is, you know, I've talked about a lot.

Scott and beaten and our teams sat down and can be evaluated.

The opportunity we looked at it as really combining the best parts of both organizations.

Kind of the different strategies everything's on the table to evaluate what was the best go forward strategy for <unk>.

All of the questions. You just asked is talked about a lot. This question has come up a lot today is.

<unk> always been had the reputation as the off campus outpatient medical.

John Thomas: This question is coming up a lot today is, you know, Doc's always been had the reputation as the off campus, our patient medical read, you know, we're 50% on it's 50% off. The assets we've helped finance to develop over the last five years have been off campus and have won awards and are full and, you know, released the best health systems in the country. Pete's been doing the same thing so it's really not a difference in strategy, it is adding relationships, adding a lot of cases mutual.

We're 50% on 50% off.

The assets, we help to finance to developed over the last five years have been off campus and it won awards and are full and leads to the best health systems in the country.

<unk> been doing the same thing so it's really not a difference in strategy. It is adding relationships, adding a lot of cases mutual on our Hilton great mutual client of ours.

And Scottsdale, and we're doing more growth with them on and off campus. So truly what meets the needs of the providers and the patients that they're serving.

John Thomas: I'm on our health, a great mutual client of ours and in Scottsdale and we're doing more growth with them on and off campus. So truly what meets the needs of the providers and the patients that they're serving and, you know, during the pandemic, you know, you've heard me talk about this a lot. We did a survey and people didn't want to go anywhere near hospital for the routine care if they didn't have COVID.

During during the pandemic.

You've heard me talk about this a lot we did a survey and people didn't want to go anywhere near hospital for the routine care. If they didn't have COVID-19 and that really is driven a lot of health systems to evaluate their strategies I mentioned before kind of thing.

John Thomas: And that really has driven a lot of health systems to evaluate their strategies mentioned before, you know, kind of 10 off campus outpatient facilities for every hospital. And that just continues to grow in the pandemic showed the need for even more of that. So it's not so much is, you know, changing one strategy the other it's about is about looking at each other strategies and maximizing the combined opportunities that we have in front of us.

And then off campus outpatient facilities for every hospital and that just continues to grow in the coming showed the need for even more of that so it's not so much is changing.

Changing one strategy the other it's about it's about looking at each other strategies and maximizing the combined opportunities that we have in front of us. So.

We're not going to don't really need to talk about other transactions I would just say.

John Thomas: So it's, you know, we're not going to don't really need to talk about other transactions. I would just say very different structures, very different way to put the companies together, very different strategies. You know, this this opportunity makes sense for all of us without leasing one more fit because we, you know, effectively 95% least already. The outpatient or excuse me, the lab business is highly leased as well. So it's great opportunity for the doc shareholders to, you know, work with invest in one of the best lab businesses and portfolios, you know, in the world and opportunity for the teacher holders to get the combined strengths of both. Okay.

Very different structure is very different where to put two companies together very different strategies.

This opportunity makes sense for all of us.

Without leasing one more foot because we.

Effectively 95% leased already.

The outpatient or excuse me the lab business is highly leased as well so it's a great opportunity for the <unk>.

Dr shareholders to work with.

Invest in one of the best lab.

Businesses and portfolios.

The world an opportunity for the teacher holders too.

Get the combined strengths of both teams.

Okay.

Okay.

Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open.

Adam Kramer: Your next question comes from line of Ronald camping with Morgan Stanley. Your line is open. Hey guys, it's Adam Kramer on for on congrats on on the deal. Congrats to everyone involved here. Look, just, you know, it's been covered a little bit, but but maybe I'll ask a little bit of a different way, which is. You know, look, obviously this deal is focused on our patient medical, wondering kind of what readers we should have if any towards the legacy peak life science business.

Hey, guys its Adam Kramer on for Ron Congrats on the deal congrats to everyone involved here.

Yes, it's been covered a little bit, but maybe I'll ask a little bit of a different way which is.

Look obviously, the steels focused on outpatient medical wondering kind of what read through we should have if any towards the legacy peak life science business.

Yes, I mean, it really is completely independent of the lab business.

Adam Kramer: Yeah, I mean, it really is completely independent of the lab business, which are confident in that platform and portfolio and segment has never been stronger. This was just a unique opportunity to make the company better in pretty much every important way, balance sheet capabilities, relationships, scale, it's a pretty long list. So I wouldn't have, I wouldn't make any read through to the lab business, this is just something that made sense independently as a unique opportunity, fortunately because of our balance sheet and relationships, we were able to put together an execute, so no read through at all to the lab business.

Rich.

Our confidence in that platform and portfolio and segment has never been stronger. This was just a unique opportunity to make the company better.

And pretty much every important way balance sheet capabilities relationships scale. It's.

It's a pretty long lost so I wouldn't have.

Make any read through to the lab business. This is just something that made sense independently as a unique opportunity Fortunately because of our.

Our balance sheet.

And relationships, we were able to put together and executed so no read through at all to the lab business.

Got it that's helpful. And then just on kind of the go forward.

Scott Brinker: Yeah, that's helpful. And then just on kind of the go forward, financing, kind of gross plan, you know, I guess how do you think your cost of capital, you know, in terms of the kind of the combined entity, you know, or is this kind of more of a kind of capital recycling story, right, big graph at base now and you can kind of focus more on capital recycling, you know, versus kind of a cost of capital kind of accretion plan.

Nancy kind of growth planned I guess, how do you think your cost of Cowen. Thank you for your cost of capital in terms of the kind of the combined entity.

Or is this kind of more of a kind of capital recycling story right bigger asset base now and you kind of focus more on capital recycling.

Or versus kind of a cost of capital kind of accretion client.

Yes, I think one of the things we haven't talked about yet.

Scott Brinker: Yeah, I think one of the things we haven't talked about yet, that's a very big, you know, competitive rationale for doing this was the combination of our two balance sheets and doc as a great balance sheet. We think we have a sector leading balance sheet as well, and we're not levering out to do this. In fact, if anything, we're modestly de-leveraging with this energy, so we have a little bit of dry powder.

Very big.

Competitive rationale for doing this was the combination of our two balance sheets and Doc adds.

A great balance sheet, we think we have a sector.

Sector, leading balance sheet as well and we're not levering up to do this in fact, if anything we're modestly deleveraging with the synergies. So we have a little bit of dry powder, but when you look at our combined basis, we've got a weighted average interest rate of less than 4%. We've got a weighted average debt maturity of greater than five years almost no.

Scott Brinker: But when you look at a combined basis, we've got a weighted average interest rate of less than 4%, we've got a weighted average debt maturity of greater than five years, almost no secure debt liquidity of, you know, approximately $3 billion, we did put a new term run in place, which enhances the liquidity of the pro-form combined company, and our net debt diva does in the low five. And as Scott mentioned, we've got less GNA improved cost to capital. So, from a balance sheet perspective, from a cost of capital perspective, this is a big win for both companies and for shareholders and for our bond holders as well.

Secured debt liquidity.

Approximately $3 billion, we did put a new term loan in place, which enhances the liquidity of the pro forma combined company and our net debt to EBITDA is in the low fives and as Scott mentioned, we've got less G&A improved cost of capital. So from a balance sheet perspective from a cost of capital perspective. This is a big win for both.

Companies and for shareholders and for our bondholders as well.

Great. Thanks, so much for the time and congrats again.

Adam Kramer: Great, thanks so much for the time, and congrats again.

Our next question comes from the line of Jim camera with Evercore. Your line is open.

Jim Camer: Our next question comes from the line of Jim Camer, with Evercore. Your line is open. Thank you. Good morning. I appreciate all the color regarding the potential synergies on the OM side, but I just want to, could you help me walk through kind of a map a little bit? I mean, Pete just reported first quarter, pardon me, third quarter, I think 3.4% seems to into eye growth from the medical office, and I believe Doc just reported about 1.5% for the third quarter.

Thank you and good morning.

All of the color regarding the potential synergies on the OEM side, but I was just wondering could you just help me help me walk through kind of the math a little bit I mean peak just reported first quarter pardon me third quarter.

Three 4% same store NOI growth from the medical office and I believe Doug just reported about.

One 5% for the third quarter.

400 basis are you, suggesting that.

Overall combined portfolio could be.

Jim Camer: So, on a pro-form basis, are you suggesting that the overall combined portfolio could be, you know, at kind of like Pete's operating in a performance level or greater, just trying to understand how the synergies work through and what your quantifying with that impact is. Thanks. Yeah, I think we'll bring the same store growth rate more in line over time. I mean, there's a couple of differences. We do have a higher base escalator than Doc, we're in the high tubes, they're more in the mid tubes, just given the nature of their portfolio, but over time as we restripe this is what expected, we know that escalator.

Kind of like peaks operating outperformance level of greater I'm, just trying understand how those synergies were true and whats youre quantifying what that impact is.

Yeah, I think we'll bring the same store growth rate more in line over time I mean, there's a couple of differences, we do have a higher base escalator the dock or in the high twos Theyre more in the mid twos, just given the nature of their portfolio portfolio.

But over time as we restrike leases, we would expect to bring those escalators.

More in line they have had better re leasing spreads than us.

Jim Camer: There's more in line. They have had better releasing spreads than us in part because they had the lower escalators, so there's just a bigger mark to market opportunity, those things usually go together. Obviously, but we do have the redevelopment capabilities as some of their older properties. Make sure we would expect to bring our redevelopment capabilities to this portfolio as well, which means that they're really not part of the same store pool either on the downside or the upside.

Part because they had the lower escalators, so theres, just a bigger mark to market opportunity those things usually go together.

But we do have the redevelopment capabilities at some of their older properties.

Mature, we would expect that we would bring our redevelopment capabilities to this portfolio as well.

Which means that they are really not part of the same store pool, either on the downside or the upside and doctors have a different model. So I think that that will change as well.

Jim Camer: And doctors have a different model, so I think that that will change as well, and then clearly the internalization of the property management should be a benefit to the portfolio as well. So I do think you'll see those two numbers look more in line and consistent among the two portfolios over time, Jim.

And then clearly the.

The internalization of property management should.

It should be a benefit to the portfolio as well so I do think youll see those those two numbers look more in line and consistent among the two portfolios over time here.

Okay, great. Thank you and the second one.

I think you've touched upon this in different aspects on the call but.

Jim Camer: Great. Thank you. And I could a second one. You know, I think you touched upon this in different aspects on the call, but is there not potentially more distress, if you will, evaluation wise in lab and just trying to figure out how the company came to the decision to maybe just the opportunities presenting itself, but you know, pivot a little bit incremental exposure to O M in my perception is that the new distress component is less so in O M versus lab.

If theyre not potentially be more distress, if you will evaluation Y and lab and just trying to figure out how the company came to the decision to maybe just the opportunities presenting yourself, but pivot a little bit of incremental exposure to OEM and.

And my perception is that the distressed component is is less so in AUM versus lab.

I'm just curious why now to make that kind of allocation there is going to be opportunities in both segments I think having a bigger balance sheet and cost of capital just allows us to be better positioned to take advantage of those opportunities whether it's in lab or medical but no question and we will start to see distressed opportunities.

Jim Camer: Here's why now to make that kind of. There's some of the opportunities in both segments. I think having a bigger balance sheet and cost of capital, just allows you to be better positioned to take advantage of those opportunities, whether it's in lab or medical, but but no question in lab, we will start to see distressed opportunities, whether it's from your financing risk or delay. So that hasn't started in earnest yet, but I would expect of the next 12 to 24 months, but there is quite a bit of opportunity.

Jim Camer: And I just don't see any way that our company isn't better positioned to capitalize on those opportunities as a result of the steel, just given the balance sheet, the improved DNA, improved liquidity. So I believe this is a positive step in position there ourselves for that distress, which I think is coming, but we haven't really seen much of it yet. And then in medical, I wouldn't call the operational distress, but there will be plenty of refinancing, related risk in the coming years in that sector is given what's happened with interest rates and cap rates.

Whether it's from refinancing risk with delayed lease up.

So that Hasnt started in earnest, yet, but I would expect over the next 12 to 24 months that there will be quite a bit of opportunity.

And I, just don't see any way that our company isn't better positioned to capitalize on those opportunities as a result of this deal.

Just given the balance sheet, the improved G&A improved liquidity.

So I view this as a positive step in positioning ourselves for that distress, which I think is coming but we haven't really seen much of it yet and then in medical I wouldn't call the operational distress, but there'll be plenty of refinancing related risks in the coming years in that sector, just given what's happened with interest rates and cap rates.

It was harder for us to compete or not to compete for that matter when secured financing rates were in the 3% to 4% range and ltvs were at 70%, but guess what like that world is long gone and a lot of the private market has in place financing with those exact terms and its not going to look like that even remotely when they refinance so I think.

Jim Camer: It was harder for us to compete or dock to compete for that matter when secure financing rates were in the 3 to 4% range and LTV were at 70%, but guess what, like that world is long gone. And a lot of the private market has in place financing with those exact terms, and it's not going to look like that even remotely when they refinance. So I think you'll see a lot of opportunity there as well, but more driven by refinancing and operational distress. So Jim, we're going to be opportunistic across the whole portfolio. I wouldn't view it as one or the other. Hopefully we're position ourselves to do both. Terrific. Thank you.

You'll see a lot of opportunity there as well, but more driven by refinancing and operational distress. So Jim we're going to be opportunistic across the whole portfolio.

I wouldn't view it as one or the other hope.

Hopefully we are positioning ourselves to do both.

Terrific. Thank you.

Our next question comes from the line of Nick <unk> with Scotiabank. Your line is open.

Nick Yulico: Our next question comes from a line of Nick Yuliko with Scotia Bank. Your line is open. Thanks. Yeah, just first question is on the health peak side related to just the existing portfolio. I was hoping to get an update on just oyster point if you remind us how much square footage is still you have to lease there. And, you know, how you're thinking about rents on that space, and then also for Serrento, you know, if you have any update on, you know, outcome you're expecting from the bankruptcy, and then also any activity you're seeing on the development asset there.

Thanks, just first question is on the health peak side are related to just the existing portfolio I was hoping to get an update on.

Oyster point or if you could remind us how much square footage is still you have to lease there.

And how are you thinking about rents on that space and then also for Sorrento.

Do you have any update on outcome youre expecting from the bankruptcy and then also any activity youre seeing on the development asset there.

Yes, maybe Nick I'll hit on Sorrento first and then I'll have Scott Solomon.

Peter Scott: Yeah, maybe Nick, I'll hit on Cerento first and then I'll have Scott follow and touch on Oyster Point. On Cerento, you know, we got our rent paid in October, no update yet since it's still October on November rents but no matter what happens on that outcome, you know, we're prepared to release those assets and we have a plan and we think the rents are, you know, still full of market on those operating assets. So at this point in time, we received our rents. But no additional update beyond that.

Touch on Oyster point.

On Sorrento, we got our rents paid in October no update yet since it's still October on November rents, but.

No matter what happens on that outcome.

We're prepared to release those assets and we have a plan and we think the rents are.

Still below market on those operating asset. So at this point in time, we've received our rents, but no additional update beyond that obviously, we did announce a nice lease at our Oyster point campus of 100000 square foot lease with <unk>.

Scott Brinker: Obviously, we did announce a nice lease at our Oyster Point campus, a hundred thousand square foot lease with client therapeutics. I'll turn it to Scott. He can talk about what else is going on on that campus. Yeah, I mean, yeah, I mean with the lease with client on the campus, we took another hundred thousand square feet off the table there. So, you know, the 940 thousand square foot campus, we've now completely spent about 70% of that.

Client Therapeutics I'll turn it to Scott you can talk about what else is going on in that camera yes.

Yes.

At least with.

Client on the campus, we took another 100000 square feet.

Off the table there so.

940000 square foot campus, we've now completed lease none about 70% of that we've got the 170000 square foot building that is currently in readout that we got back at the end of last year.

Scott Brinker: We've got the one 70,000 square foot building that's currently in redev that we got back at the end of last year. And now we have two buildings that total about 189,000 square feet that we'll get back in January of 24th. But both those buildings will go into a relatively extensive redev in 1912 months. So, you were talking about not leaving it until 2025, so some time there. All right.

Two buildings that total about 119 89000 square feet.

Nick Yulico: Thanks, guys.

I'll get back in January of 'twenty for both of those buildings will go into a realm.

Relatively extensive reader.

12 months. So you were talking about not losing out until 2025, so some time there.

Alright. Thanks, guys. Second question is just again on the <unk> side, if you could tell us a little bit more about how the board.

Scott Brinker: A second question is just again on the health peak side. If you can tell us a little bit more about, you know, how the board. So about this decision to few MNA right now versus, you know, whether there were other options considered, right? Like, you know, to maximize shareholder value. I mean in these situations where, you know, stock price has been impacted, you know, with or other considerations about maybe trying to sell your company or selling assets, doing, you know, something else besides this MNA as a way to kind of address the future of the company.

What about this decision to do M&A right now.

Versus whether there were other options considered right Mike.

To maximize shareholder value I mean in these situations where.

<unk> stock price has been impacted were there other considerations about maybe trying to sell your company or selling assets doing something else.

Sides. This M&A as a way to kind of address the future of the company.

Yeah, we've already.

Had some asset sales this year with other things that are potentially in process. So certainly with the stock trading where it's at capital recycling has been.

Scott Brinker: Thanks. Yeah, we've already had some asset sales this year. We have other things that are potentially in process. So certainly with the stock trading where it's at, capital recycling has been on the list of priorities. It's not a highly liquid market today, just given the financing environment. But, you know, neither company is viewing this as a sale. This is just a combination based on relative value that made sense in and of itself is a unique opportunity. So no, this isn't a situation where we're considering a broad range of options. We just thought this was highly compelling for all the reasons that we mentioned both strategically and financially. Thanks, Scott.

On the list of priorities its not a highly liquid market today, just given the financing environment, but.

Neither company is viewing this as a sale.

This is just a combination based on relative value that made sense in and of itself is a unique opportunity. So no. This isn't a situation where we're considering.

A broad range of options, which is office was highly compelling for all the reasons that we mentioned both strategically and financially.

Thanks Scott.

Yes.

Our next question comes from Jon Petersen with Jefferies. Your line is open.

John Peterson: Our next question comes from John Peterson with Jeffries. Your line is open. Great. Thanks. As we do these merger models, we have to deal with some annoying gap accounting rules. So I realize this isn't cash. But, you know, I know we're not to mark the market docs that, if you have any thoughts on what the interest rate there might be seems to me like it would be probably very high. And then I was just curious on the revenue side. Are those rents below market? Do we think there would be any significant revenue market that we would have to think about from a gap accounting perspective? Again, I realize this is not. Cash.

Great. Thanks, as we do these merger models, we have to deal with some annoying GAAP accounting rules. So I realize this is in cash, but I know, we're going to have to mark to market docks that if you have any thoughts on what the interest rate there might be it seems to me like it would be probably very high sixes today and then I was just curious on the revenue side.

Are those rents below market do we think there would be any significant revenue mark to market that we would have to think about from a GAAP accounting perspective again I realize this is not cash.

Yes, no problem Jonases, Pete I'll take that.

Peter Scott: Yeah, no problem, John, this is Pete. I'll take that. You know, first of all, we do have to re-straight line the rents as of when we would anticipate this deal to close. I know Doc has some public disclosures out there that you guys could do your best to come up with some estimates there, but you know, straight lining is almost always positive when you do it in these types of transactions. Second, you know, the least mark to market, you know, where you do compare it in place.

First of all we do have to re straight line rents as of one we would anticipate.

This deal to close I know docker and public disclosures out there that you guys could do your best to come up with some estimates there but in a straight lining is almost always a positive when you do it in these types of transactions second the lease mark to market, where you do compared to in place rents to market rents.

And more often than not in these deals there is a positive adjustment. We do think there will be a positive adjustment as part of that as well, although not as significant.

Peter Scott: This rents to market rents. And more often than not in these deals, there is a positive adjustment. We do think there will be a positive adjustment as part of this as well, although not as significant as perhaps the straight line rent adjustment. And then the third one you mentioned, which, you know, works against you is the debt mark to market. Importantly, though, you mark that to our cost of debt, not to docs cost of debt.

Perhaps the straight line rent adjustment and then the third one you mentioned, which works against you as that debt Mark to market Importantly, though you mark that to our cost of debt not too dark cost of debt and I think we would be sort of in.

Six and a quarter to six and three quarter range, depending upon the term and again that's as of today.

Peter Scott: And I think we would be sort of in the six and a quarter to six and three quarter range, depending upon the term. And again, that's as of today, we will do that mark to market as of the date of the close. So that will fluctuate between now and the closing date, but that's probably the best guidance I can give you. And then from an assumption perspective, I would say our hope is to assume all of docs debt except for the private placement notes.

We'll do that mark to market as of the date of the close so that will fluctuate between now and the closing date, but that's probably the best guidance I can give you and then from an assumption perspective, I would say our hope is to assume all of docs that except for the private placement notes there is no ability to assume no.

Peter Scott: There's no ability to assume those, but our goal would be to assume all the bonds that are outstanding absent the private placement notes and then the term loan as well. And then we take on the secured debt, you know, a lot of that, which is encumbering the joint venture portfolio. That's it. Very thorough. Very helpful. Thank you. Yeah.

But our goal would be to assume.

All the bonds that are outstanding absent the private placement notes and then the term loan as well and then we take on the secured debt.

A lot of that which is encumbering that the joint venture portfolio.

That's great very helpful. Thank you.

Okay.

Our next question is a follow up from Rich Anderson with Wedbush. Your line is open thanks.

Rich Anderson: Our next question is a follow up from Rich Anderson with Wedbush. Your line is open. Thanks.

And I was going to say Scott I totally got you on the <unk> response to my previous question.

Rich Anderson: And I was going to say Scott, I totally got you on the AFFO response my previous question, but I got knocked off. I want to know if there was what happens between now and closing, you mentioned just just guys went through some of these accounting adjustments, transaction costs, break fee. You know, what's the stop a third party to kind of come in and take a look or what how would you respond to some of those, you know, potential events between now and closing.

But I got knocked off.

I want to know if there was.

What happens between now and closing.

And just Scott just went through some of these accounting adjustments transaction costs break fee.

What's to stop a third party to kind of come in and take a look.

How would you.

Respond to some of those.

Potential events between now and closing.

Hey, rich it's J T.

We're going to be focused on.

Rich Anderson: Hey, Rich, just JT. I think we're going to be focused on, again, integrating the team, integrating processes, taking, I don't know if you heard, if you got knocked off. But, you know, we have six markets at overlap where we already have. Doc and team on the ground and we will put those markets all in our internal management going forward and be planning to do that. Hopefully, you know, day one or very early on, you know, right after closing.

Again integrating team integrating processes taken I don't know if you heard if you have knocked off we have six markets that overlap.

We already have.

<unk>.

Docking team on the ground and we will.

Put those markets all in our internal management going forward and we plan to do that hopefully day, one or very early on right. After closing so besides that one would just be working through the process with the SEC and our shareholder vote, Yes, I think on some of the specifics there rich in addition to what Jay just said.

Rich Anderson: So besides that, what would you be working through the process with the SEC and get our shareholder vote? Yeah. I think just on some of the specifics there, Rich, in addition to what JT just said, you know, the merger agreement will get filed in the next couple of days. And then you should expect a proxy to get filed probably late November, early December. You'll get a lot of information in that anticipated closing would be in the first half of next year.

Merger agreement will get filed in the next couple of days and then you should expect a proxy to get filed probably late November.

Early December you have got a lot of information and that our anticipated closing would be in the first half of next year.

We would all prefer it to be.

Earlier part of the first half of next year to help with the integration and to kick that off as quickly as possible, but I think the best guidance. We would give right now is first half of 2024.

Rich Anderson: And we'd all prefer it to be the earlier part of the first half of next year to help with the integration and to kick that off as quickly as possible. But I think the best guidance we can give right now is first half of 2020. Four. Okay, sounds good, thanks. Yeah. Our final question comes from line of Steve Sakwa with Evercord ISI. Your line is open. Yeah, thanks.

Okay sounds good thanks.

Yes.

Our final question comes from the line of Steve <unk> with Evercore ISI. Your line is open.

Yes, thanks, sorry to beat a dead horse on the synergies I just want to be 100% clear the $40 million to $60 million that you're talking about is that cash savings and then anything on mark to market says $1 41, and then the debt mark to market would be pluses and minuses on top of that.

Stephen Sakwa: Sorry to beat a dead horse in the synergies. I just want to be 100% clear. The 40 to 60 million that you're talking about is that cash savings and then anything on mark to market says 141 and then the debt mark to market would be pluses and minuses on top of that. So the gap adjustments are on top of the 40 to 60 million. The vast majority of the 40 to 60 million is cash.

So the GAAP adjustments are on top of the $40 million to $60 million. The vast majority of the $40 million to $60 million is cash there is a small.

Noncash comp component that would not flow into <unk>, but I would say.

Stephen Sakwa: There's a small, you know, non-cash comp component that would not flow into AFFL, but I'd say, you know, the 40 to 60 all that would hit effectively FFL. Then you have the gap adjustments on top of that. And then, you know, the vast majority of those synergies. Hit AFFL. Does that make sense? Yes, great. Yes, it does. Thanks. And I know this is kind of far in the future, just given the challenges we're seeing in life sciences today, but you did get these approvals for the LWIFE land and the up zoning.

40% to 60, all of it would hit effectively <unk>.

And then you have the GAAP adjustment on top of that and then the vast majority of those synergies hit.

That makes sense.

Yes, great yes, it does thanks.

And I know this is kind of far in the future just given the challenges we're seeing in life Sciences today, but you did get these approvals for the life.

Land and the Upselling is this any comments around that what it might mean.

Stephen Sakwa: Just any comments around that. What it might mean, you know, do you jumpstart anything with multi-family? Just, you know, what are the, I guess forward look on that project now that you've gotten these new entitlements. Yeah, the team really did a fantastic job with the entitlement process to really become an established partnership with not only the city and the city councilors, but a lot of the local stakeholders and neighborhood advocates. Just really proud of what our team has done in a high barrier market like Cambridge.

Do you jump start anything with multifamily just what are the I guess forward look on that project now that you've gotten these new entitlement.

Yes, the team really did a fantastic job with the entitlement process to really become and establish a partnership with not only the city and the city council errors, but a lot of the local stakeholders and neighborhood advocates.

I'm, just really proud of what our team has done.

In our high barrier market like Cambridge, we think it's a great outcome for the city in terms of the mixed use and infrastructure that will come into that sub market in residential housing. In addition to the overtime lab opportunity. So just a really really great outcome, but now that the rezoning is done that was the big discretionary entitlements that we needed.

Stephen Sakwa: We think it's a great outcome for the city in terms of the mixed use and infrastructure that will come into that sub market and their residential housing in addition. To the overtime lab opportunity to just a really, really great outcome, but now that the rezoning is done, that was the big discretionary entitlement that we needed. So we, we would look sooner than later to recycle some of the multi-family parcels that's obviously not our core business.

So we would look sooner than later to recycle some of the multifamily parcels. That's obviously not our core business and we have no intention of being a.

A multifamily developer, but theres a lot of recent.

Stephen Sakwa: We have no intention of being a multi-family developer, but there's a lot of recent apartment development in that sub market that's been highly successful. So we do think that there will be a long list of participants that are eager to participate. Sorry, and just one quick follow up on that Scott, would you look to actually monetize those or would you stay in as a joint venture partner or just sell them outright? The multi-family parcels, we would sell outright. See. Okay, great, thanks.

<unk> development in that sub market that's been highly successful.

So we do think that there will be a long list of participants that are eager to participate.

Sorry, and just one quick follow up on that Scott would you look to actually monetize those or would you stay in as a joint venture partner or just selling outright.

The multifamily parcels, we would sell outright.

Steve.

Okay, great. Thanks, that's it for me.

Okay. Thanks.

Scott Brinker: That's it for me. Okay, thanks. The Q&A session has now ended. We'll now turn the call back over to our presenters for closing remarks. All right. Well, thank you for your interest today. We're really excited about this and look forward to speaking to you. So if not this week and next, then hopefully in Los Angeles at the conference here in mid November, have a great week. This concludes today's conference. We thank you for your participation. You may now disconnect.

The Q&A session has now ended I will now turn the call back over to our presenters for closing remarks.

Alright, well. Thank you for your interest today, we are really excited about this and look forward to speaking to you.

Not this week and next and hopefully in Los Angeles at the conference here in mid November have a great week.

This concludes today's conference we thank you for your participation you may now disconnect.

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I would now like to turn the conference over to Andrew Johns Senior Vice President Investor Relations. Please go ahead.

Yeah.

Thank you good morning, everyone. If you have not yet downloaded the press release, our merger presentation related to this call are available on the healthy and possession Rockies website under Investor Relations.

This morning, you'll hear from Scott Rager, President and CEO, Peter Scott CFO, how big John Thomas President and CEO of Physicians Realty Trust.

Today's conference call will contain certain forward looking statements. Although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations.

Factors that could cause actual results to differ include but are not limited to the potential benefit of the proposed merger.

We expect the timing and likelihood of completion of the transaction, including the ability to obtain the requisite approval of healthy composition relative to shareholders and the risk that the closing conditions are not satisfied yet.

Please refer to the forward looking statement notice and healthy.

<unk> 10-K, and other SEC filings for information.

Finally, this call will contain financial measures in accordance with Reg G. The company provides a reconciliation and their respective earnings packages.

And with that I'll turn the call over to Scott Brinker.

Thank you Andrew and good morning, everyone very excited to be here with John to discuss the merger, we announced this morning and the significant benefits to both companies as.

This combination will create the leading real estate platform dedicated to health care discovery and delivery of a large and attractive playing field with strong secular growth. We also announced strong <unk> earnings, including another increase to both same store and earnings guidance.

Going to ask Pete to summarize our results and John will do the same for Doc who also announced during Q results. This morning that will be back on with John to discuss the merger date.

Thanks, Scott despite the challenging capital markets environment, we continue to put up solid operating and financial results.

I will be brief so we can get back to the merger we announced.

The third quarter, we reported <unk> as adjusted of <unk> 45 per share.

<unk> <unk> 40 per share and total portfolio same store growth of 6%.

Some additional color on segment performance.

Starting with outpatient medical same store growth was a solid three 4%.

During the quarter, we signed $2 2 million square feet of leases, including a 20 year extension at our medical City, Dallas campus, and 143000 square feet of leases in Philadelphia.

Shifting to lab same store growth was a strong three 3% during the quarter, we executed 211000 square feet of leases, including converting all 196000 square feet of previously announced LOI into leases with.

The significant deals included a 101000 square foot lease with client therapeutics to backfill a 2023 Amgen lease exploration at our Oyster point campus.

61000 square foot lease with Voyager therapeutics to expand at our Hayden campus in Boston.

And a 23000 square foot lease with Astellas at our vantage development, bringing that project to 52% pre leased.

All three tenants were existing tenants in our portfolio and underscores the superior competitive advantage that incumbent landlords have.

Finishing with <unk> our.

T J and operational initiatives are producing strong results.

Same store growth for the quarter was an exceptional 32, 1% driven by occupancy gains.

Reduced labor costs and margin improvement.

Turning now to our 2023 guidance, we are increasing our <unk> as adjusted and <unk> guidance by <unk> at the midpoint to $1 77, and $1 53, respectively. Additionally, we are increasing our full year blended same store guidance range by 75 basis points to four.

75% at the midpoint.

Please refer to page 38 of our supplemental for additional detail on our guidance with that let me turn the call to John.

Thank you Pete before discussing the merger I want to take a few moments to discuss physicians Realty Trust performance during the third quarter of 2023.

During this quarter position fairly chest generated normalized funds from operations of $61 2 million or <unk> 25 per share our normalized funds available for distribution were $60 1 million or <unk> 24 per share.

We paid our third quarter dividend of <unk> 23 per share on October 18th which represented a payout ratio of 96%.

We ended the quarter with the balance sheet in great shape, our consolidated.