HEALTHPEAK PROPERTIES INC

Previous wording

Healthpeak Properties, Inc. is a Standard & Poor’s (“S&P”) 500 company that owns, operates, and develops high-quality real estate for healthcare discovery and delivery in the United States (“U.S.”). Our company was originally founded in 1985. We hold substantially all of our assets and conduct our operations through the operating subsidiary, Healthpeak OP, LLC, a consolidated subsidiary of which we are the managing member. We are a Maryland corporation and qualify as a self-administered REIT. We are headquartered in Denver, Colorado, with additional corporate offices in California, Tennessee, Wisconsin, and Massachusetts and property management offices in several locations throughout the U.S.

Current wording

Healthpeak Properties, Inc. is a Standard & Poor’s (“S&P”) 500 company that owns, operates, and develops high-quality real estate focused on healthcare discovery and delivery in the United States (“U.S.”). Our company was originally founded in 1985. We hold substantially all of our assets and conduct our operations through the operating subsidiary, Healthpeak OP, LLC, a consolidated subsidiary of which we are the managing member. We are a Maryland corporation and qualify as a self-administered REIT. We are headquartered in Denver, Colorado, with additional corporate offices in California, Tennessee, Wisconsin, and Massachusetts and property management offices in several locations throughout the U.S.

Previous wording

At March 31, 2024, our portfolio of investments, including properties in our unconsolidated joint ventures, consisted of interests in 774 properties. The following table summarizes information for our reportable and other non-reportable segments for the three months ended March 31, 2024 (dollars in thousands):

Current wording

At June 30, 2024, our portfolio of investments, including properties in our unconsolidated joint ventures, consisted of interests in 758 properties. The following table summarizes information for our reportable and other non-reportable segments for the three months ended June 30, 2024 (dollars in thousands):

Previous wording

Increased interest rates, high inflation, supply chain disruptions over the past few years, ongoing geopolitical tensions, and increased volatility in public and private equity and fixed income markets have led to increased costs and limited the availability of capital. In addition, increased interest rates could adversely impact our borrowing costs, the fair value of our fixed rate instruments, and real estate values generally, including our real estate.

Current wording

Increased interest rates, persistent inflation, ongoing geopolitical tensions, and increased volatility in public and private equity and fixed income markets have led to increased costs and limited the availability of capital. In addition, increased interest rates could adversely impact our borrowing costs, the fair value of our fixed rate instruments, and real estate values generally, including our real estate.

Previous wording

Our tenants and operators have also experienced increased costs, liquidity constraints, and financing difficulties due to the foregoing macroeconomic and market conditions, which could cause them to be unable or unwilling to make payments or perform their obligations when due.

Current wording

To the extent our tenants and operators have also experienced increased costs, liquidity constraints, and financing difficulties due to the foregoing macroeconomic and market conditions, they may be unable or unwilling to make payments or perform their obligations when due.

Previous wording

We have also been affected by significant inflation in construction costs over the past few years, which, together with rising costs of capital, have negatively affected the expected yields on our development and redevelopment projects.

Current wording

We have also been affected by inflation in construction costs over the past few years, which, together with rising costs of capital, have adversely affected the expected yields on our development and redevelopment projects. While there have been signs that cost pressures are moderating, there can be no assurance that this will continue to be the case.

Previous wording

We continuously monitor the effects of domestic and global events, including but not limited to inflation, labor shortages, supply chain matters, rising interest rates, and challenges in the financial markets, on our operations and financial position, as well as on the operations and financial position of our tenants, operators, and borrowers, to enable us to remain responsive and adaptable to the dynamic changes in our operating environment.

Current wording

We continuously monitor the effects of domestic and global events, including but not limited to inflation, increased interest rates, and challenges in the financial markets, on our operations and financial position, as well as on the operations and financial position of our tenants, operators, and borrowers, to enable us to remain responsive and adaptable to the dynamic changes in our operating environment.

Previous wording

On March 1, 2024, we completed the Merger with Physicians Realty Trust, which resulted in the acquisition of 299 outpatient medical buildings. Following the closing of the Merger, shares of our common stock began trading on the New York Stock Exchange under the ticker symbol “DOC” on March 4, 2024.

Current wording

On March 1, 2024, we completed the Merger with Physicians Realty Trust, which resulted in the acquisition of 299 outpatient medical buildings.

Previous wording

•In March 2024, we executed a $750 million five year unsecured term loan (the “2029 Term Loan”) incurred as an incremental facility under the term loan agreement. In January 2024, we entered into forward-starting interest rate swap instruments on the 2029 Term Loan which are designated as cash flow hedges and establish a fixed effective interest rate of 4.66%.

Current wording

•In March 2024, we executed a $750 million five year unsecured term loan (the “2029 Term Loan”) incurred as an incremental facility under the term loan agreement. In January 2024, we entered into forward-starting interest rate swap instruments on the 2029 Term Loan which are designated as cash flow hedges and establish a blended fixed effective interest rate of 4.66%.

Previous wording

•During the three months ended March 31, 2024, we repurchased 5.8 million shares of our common stock under our Share Repurchase Program (as defined below) at a weighted average price of $17.11 per share for a total of $100 million.

Current wording

•During the six months ended June 30, 2024, we repurchased 9.4 million shares of our common stock under our 2022 Share Repurchase Program (as defined below) at a weighted average price of $17.83 per share for a total of $168 million.

Previous wording

•In February 2024, in connection with a refinance of one of our existing seller financing loans receivable, we received a partial principal repayment of $69 million and extended the maturity date to August 2027.

Current wording

•During the six months ended June 30, 2024, we refinanced one of our existing seller financing loans receivable, extended the maturity date to August 2027, and received aggregate partial principal repayments of $74 million.

Previous wording

For a reconciliation of Same-Store to total portfolio Adjusted NOI and other relevant disclosures by segment, refer to our Segment Analysis below.

Current wording

For a reconciliation of Merger-Combined Same-Store to total portfolio Adjusted NOI and other relevant disclosures by segment, refer to our Segment Analysis below.

Previous wording

Comparison of the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 to the Three and Six Months Ended June 30, 2023

Previous wording

•a decrease in gains on sale of depreciable real estate related to lab and outpatient medical building sales during 2024 as compared to 2023;

Current wording

•an increase in gain on sales of depreciable real estate related to lab and outpatient medical building dispositions during 2024 as compared to 2023;

Previous wording

•an increase in depreciation, primarily as a result of: (i) assets acquired as part of the Merger and (ii) development and redevelopment projects placed in service during 2023;

Current wording

•an increase in depreciation, primarily as a result of: (i) assets acquired as part of the Merger and (ii) development and redevelopment projects placed in service during 2023 and 2024;

Previous wording

Nareit FFO decreased primarily as a result of the aforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from Nareit FFO:

Current wording

Nareit FFO increased primarily as a result of the aforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from Nareit FFO:

Previous wording

•gain on sales of depreciable real estate;

Current wording

•gain on sales of depreciable real estate; and

Previous wording

AFFO increased primarily as a result of the aforementioned events impacting FFO as Adjusted, except for the impact of straight-line rents, which is excluded from AFFO.

Current wording

AFFO increased primarily as a result of the aforementioned events impacting FFO as Adjusted, except for the impact of straight-line rents, which is excluded from AFFO, and higher AFFO capital expenditures during the period.

Previous wording

•an increase in NOI generated from our lab and outpatient medical segments related to: (i) assets acquired as part of the Merger, (ii) development and redevelopment projects placed in service during 2023, and (iii) new leasing activity during 2023 and 2024 (including the impact to straight-line rents).

Current wording

•an increase in Adjusted NOI generated from our lab and outpatient medical segments related to: (i) assets acquired as part of the Merger, (ii) development and redevelopment projects placed in service during 2023 and 2024, and (iii) new leasing activity during 2023 and 2024 (including the impact to straight-line rents);

Previous wording

The following tables provide selected operating information for our Merger-Combined Same-Store and total property portfolio for each of our reportable segments. For the three months ended March 31, 2024, our Merger-Combined Same-Store consists of 714 properties representing properties fully operating on or prior to January 1, 2023 and that remained in operations through March 31, 2024. Legacy Physicians Realty Trust properties that met the same-store criteria are included in both periods presented as if they were owned by the Company for the full analysis period. See “Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for additional information. Our total property portfolio consisted of 774 and 476 properties at March 31, 2024 and 2023, respectively. Included in our total property portfolio at each of March 31, 2024 and 2023 are 19 senior housing assets in our SWF SH JV.

Current wording

The following tables provide selected operating information for our Merger-Combined Same-Store and total property portfolio for each of our reportable segments. For the three months ended June 30, 2024, our Merger-Combined Same-Store consists of 696 properties representing properties fully operating on or prior to April 1, 2023 and that remained in operation through June 30, 2024. For the six months ended June 30, 2024, our Merger-Combined Same-Store consists of 696 properties representing properties fully operating on or prior to January 1, 2023 and that remained in operation through June 30, 2024. Legacy Physicians Realty Trust properties that met the definition of Merger-Combined Same-Store are included in both periods presented as if they were owned by the Company for the full analysis period. See “Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for additional information. Our total property portfolio consisted of 758 and 475 properties at June 30, 2024 and 2023, respectively. Included in our total property portfolio at each of June 30, 2024 and 2023 are 19 senior housing assets in our SWF SH JV.

Previous wording

(1)Merger-Combined Same-Store includes legacy Physicians Realty Trust properties that met the same-store criteria as if they were owned by the Company for the full analysis period. Refer to “Non-GAAP Financial Measures” above for the definitions of Merger-Combined Same-Store.

Current wording

(1)Merger-Combined Same-Store includes legacy Physicians Realty Trust properties that met the definition of Merger-Combined Same-Store as if they were owned by the Company for the full analysis period. Refer to “Non-GAAP Financial Measures” above for the definition of Merger-Combined Same-Store.

Previous wording

(5)From our first quarter 2023 presentation of Same-Store, we added: (i) 292 properties acquired as part of the Merger, (ii) 4 stabilized acquisitions, (iii) 8 stabilized developments placed in service, and (iv) 5 stabilized redevelopments placed in service, and we removed 2 assets that were sold.

Current wording

(5)From our second quarter 2023 presentation of Same-Store, we added: (i) 290 properties acquired as part of the Merger, (ii) 8 stabilized developments placed in service, (iii) 5 stabilized redevelopments placed in service, and (iv) 4 stabilized acquisitions, and we removed 10 assets that were sold.

Previous wording

Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned impacts to Merger-Combined Same-Store and the following Merger-Combined Non-Same-Store impacts:

Current wording

Total Portfolio Adjusted NOI decreased primarily as a result of the aforementioned impacts to Merger-Combined Same-Store and the following Merger-Combined Non-Same-Store impacts:

Previous wording

(3)From our first quarter 2023 presentation of Same-Store, we added: (i) six stabilized developments placed in service, (ii) two stabilized redevelopments placed in service, and (iii) two buildings that previously experienced a significant tenant relocation, and we removed: (i) eight buildings that were placed into redevelopment, (ii) two buildings that experienced a significant tenant relocation, and (iii) one asset that was placed into land held for development.

Current wording

(3)From our second quarter 2023 presentation of Same-Store, we added: (i) six stabilized developments placed in service, (ii) two stabilized redevelopments placed in service, and (iii) two buildings that previously experienced a significant tenant relocation, and we removed: (i) eight buildings that were placed into redevelopment, (ii) seven assets that were sold, and (iii) two buildings that experienced a significant tenant relocation.

Previous wording

(3)From our first quarter 2023 presentation of Merger-Combined Same-Store, no properties were added or removed.

Current wording

(3)From our second quarter 2023 presentation of Merger-Combined Same-Store, no properties were added or removed.

Previous wording

•increased rates for resident fees;

Current wording

•increased rates for resident fees; and

Previous wording

•higher costs of labor and management fees.

Current wording

•higher costs of labor, management fees, and real estate taxes.

Previous wording

The following table summarizes the results of our other income and expense items for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following table summarizes the results of our other income and expense items for the three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

Interest income and other decreased for the three months ended March 31, 2024 primarily as a result of principal repayments on loans receivable in 2023 and 2024, partially offset by mezzanine and senior loans receivable acquired as part of the Merger.

Current wording

Interest income and other increased for the three and six months ended June 30, 2024 primarily as a result of mezzanine and secured loans receivable acquired as part of the Merger, partially offset by principal repayments on loans receivable in 2023 and 2024.

Previous wording

Interest expense increased for the three months ended March 31, 2024 primarily as a result of: (i) debt assumed as part of the Merger, including $1.25 billion aggregate principal amount of senior unsecured notes, $400 million aggregate principal amount of the 2028 Term Loan, and $128 million aggregate principal amount of mortgage debt, (ii) senior unsecured notes issued in January and May 2023, and (iii) borrowings under the 2029 Term Loan which closed in March 2024, partially offset by lower borrowings on the commercial paper program.

Current wording

Interest expense increased for the three and six months ended June 30, 2024 primarily as a result of: (i) debt assumed as part of the Merger, including $1.25 billion aggregate principal amount of senior unsecured notes, $400 million aggregate principal amount of the 2028 Term Loan, and $128 million aggregate principal amount of mortgage debt, (ii) senior unsecured notes issued in January and May 2023, and (iii) borrowings under the 2029 Term Loan, which closed in March 2024, partially offset by lower borrowings on the commercial paper program.

Previous wording

Depreciation and amortization expense increased for the three months ended March 31, 2024 primarily as a result of: (i) assets acquired as part of the Merger and (ii) development and redevelopment projects placed in service during 2023, partially offset by: (i) assets placed into development and redevelopment in 2023 and 2024 and (ii) dispositions of real estate in 2023 and 2024.

Current wording

Depreciation and amortization expense increased for the three and six months ended June 30, 2024 primarily as a result of: (i) assets acquired as part of the Merger and (ii) development and redevelopment projects placed in service during 2023 and 2024, partially offset by: (i) assets placed into development and redevelopment in 2023 and 2024 and (ii) dispositions of real estate in 2023 and 2024.

Previous wording

Transaction and merger-related costs increased for the three months ended March 31, 2024 primarily as a result of advisory, legal, accounting, tax, post-combination severance and stock compensation expense, and other costs incurred in connection with the Merger, partially offset by expenses incurred in connection with our reorganization to an UPREIT structure in 2023.

Current wording

Transaction and merger-related costs increased for the three and six months ended June 30, 2024 primarily as a result of advisory, legal, accounting, tax, post-combination severance and stock compensation expense, and other costs of combining operations with Physicians Realty Trust that were incurred in connection with the Merger. The increase in transaction and merger-related costs during the six months ended June 30, 2024 was partially offset by expenses incurred in connection with our reorganization to an UPREIT structure in 2023.

Previous wording

Impairments and loan loss reserves (recoveries), net increased for the three months ended March 31, 2024 as a result of an increase in loan loss reserves under the current expected credit losses model. The increase in loan loss reserves for the three months ended March 31, 2024 is primarily a result of: (i) reserves recognized on senior loans and mezzanine loans receivable acquired as part of the Merger and (ii) reserves recognized on seller financing loans refinanced during the quarter.

Current wording

Impairments and loan loss reserves (recoveries), net decreased for the three months ended June 30, 2024 as a result of a decrease in loan loss reserves under the current expected credit losses model, which is primarily a result of macroeconomic conditions. Impairments and loan loss reserves (recoveries), net increased for the six months ended June 30, 2024 as a result of an increase in loan loss reserves under the current expected credit losses model, which is primarily a result of: (i) reserves recognized on secured loans and mezzanine loans receivable acquired as part of the Merger and (ii) reserves recognized on seller financing loans refinanced during the first quarter of 2024, partially offset by principal repayments on loans receivable.

Previous wording

Gain (loss) on sales of real estate, net decreased during the three months ended March 31, 2024 as a result of the $3 million gain on sales of two outpatient medical buildings which were sold during the three months ended March 31, 2024, as compared to: (i) the $60 million gain on sales of two lab buildings in Durham, North Carolina, which were sold during the three months ended March 31, 2023 and (ii) the $21 million gain on sales of two outpatient medical buildings, which were sold during the three months ended March 31, 2023. Refer to Note 5 to the Consolidated Financial Statements for additional information regarding dispositions of real estate and the associated gain (loss) on sales recognized.

Current wording

Gain (loss) on sales of real estate, net increased during the three and six months ended June 30, 2024 as a result of: (i) the $3 million gain on sales of two outpatient medical buildings which were sold during the three months ended March 31, 2024, (ii) the $55 million gain on sales of seven lab buildings which were sold during the three months ended June 30, 2024, and (iii) the $67 million gain on sales of 11 outpatient medical buildings which were sold during the three months ended June 30, 2024, as compared to: (i) the $60 million gain on sales of two lab buildings in Durham, North Carolina, which were sold during the three months ended March 31, 2023 and (ii) the $21 million gain on sales of two outpatient medical buildings, which were sold during the three months ended March 31, 2023. Refer to Note 5 to the Consolidated Financial Statements for additional information regarding dispositions of real estate and the associated gain (loss) on sales recognized.

Previous wording

Other income increased for the three months ended March 31, 2024 primarily due to a gain upon change of control related to the sale of a 65% interest in two lab buildings in San Diego, California to a third-party in January 2024.

Current wording

Other income increased for the six months ended June 30, 2024 due to a gain upon change of control related to the sale of a 65% interest in two lab buildings in San Diego, California to a third-party in January 2024. The increase in other income for the three and six months ended June 30, 2024 also includes casualty-related recoveries from proceeds received for water damage at an outpatient medical building.

Previous wording

Income tax expense increased for the three months ended March 31, 2024 primarily as a result of income tax expense incurred in connection with the sale of a 65% interest in two lab buildings in San Diego, California to a third-party in January 2024.

Current wording

Income tax expense increased for the three and six months ended June 30, 2024 primarily as a result of an increase in operating income associated with our CCRCs. Income tax expense further increased for the six months ended June 30, 2024 as a result of income tax expense incurred in connection with the sale of a 65% interest in two lab buildings in San Diego, California to a third-party in January 2024.

Previous wording

Equity income from unconsolidated joint ventures increased for the three months ended March 31, 2024 primarily as a result of increased income from the South San Francisco JVs, partially offset by losses on unconsolidated joint ventures acquired as part of the Merger.

Current wording

Equity income from unconsolidated joint ventures decreased for the three and six months ended June 30, 2024 primarily as a result of losses on unconsolidated joint ventures acquired as part of the Merger. The decrease in equity income from unconsolidated joint ventures during the six months ended June 30, 2024 was partially offset by increased income from the South San Francisco JVs.

Previous wording

Noncontrolling interests’ share in earnings decreased for the three months ended March 31, 2024 primarily as a result of a gain on sale of an outpatient medical building in a consolidated joint venture that was sold during the first quarter of 2023.

Current wording

Noncontrolling interests’ share in earnings increased for the three months ended June 30, 2024 primarily as a result of increased income from consolidated joint ventures acquired as part of the Merger. Noncontrolling interests’ share in earnings decreased for the six months ended June 30, 2024 primarily as a result of a gain on sale of an outpatient medical building in a consolidated joint venture in the first quarter of 2023.

Previous wording

We anticipate that our cash flows from operations, available cash balances, and cash from our various financing activities will be adequate for the next 12 months and for the foreseeable future for purposes of: (i) funding recurring operating expenses; (ii) meeting debt service requirements; and (iii) satisfying funding of distributions to our stockholders and non-controlling interest members. During the three months ended March 31, 2024, distributions to common shareholders and noncontrolling interest holders exceeded cash flows from operations by approximately $19 million. Distributions are made using a combination of cash flows from operations, funds available under our bank line of credit (the “Revolving Facility”) and commercial paper program, proceeds from the sale of properties, and other sources of cash available to us.

Current wording

We anticipate that our cash flows from operations, available cash balances, and cash from our various financing activities will be adequate for the next 12 months and for the foreseeable future for purposes of: (i) funding recurring operating expenses; (ii) meeting debt service requirements; and (iii) satisfying funding of distributions to our stockholders and non-controlling interest members. Distributions are made using a combination of cash flows from operations, funds available under our bank line of credit (the “Revolving Facility”) and commercial paper program, proceeds from the sale of properties, and other sources of cash available to us.

Previous wording

Our ability to access the capital markets impacts our cost of capital and ability to refinance maturing indebtedness, as well as our ability to fund future acquisitions and development through the issuance of additional securities or secured debt. Credit ratings impact our ability to access capital and directly impact our cost of capital as well. Our 2029 Term Loan, our two senior unsecured delayed draw term loans with an aggregate principal amount of $500 million (the “2027 Term Loan Facilities”), our 2028 Term Loan, and our Revolving Facility accrue interest at the Secured Overnight Financing Rate (“SOFR”) plus a margin that depends on the credit ratings of our senior unsecured long-term debt. We also pay a facility fee on the entire commitment under our Revolving Facility that depends upon our credit ratings. As of April 24, 2024, we had long-term credit ratings of Baa1 from Moody’s and BBB+ from S&P Global, and short-term credit ratings of P-2 from Moody’s and A-2 from S&P Global.

Current wording

Our ability to access the capital markets impacts our cost of capital and ability to refinance maturing indebtedness, as well as our ability to fund future acquisitions and development through the issuance of additional securities or secured debt. Credit ratings impact our ability to access capital and directly impact our cost of capital as well. Our 2029 Term Loan, our two senior unsecured delayed draw term loans with an aggregate principal amount of $500 million (the “2027 Term Loans”), our 2028 Term Loan, and our Revolving Facility accrue interest at the Secured Overnight Financing Rate (“SOFR”) plus a margin that depends on the credit ratings of our senior unsecured long-term debt. We also pay a facility fee on the entire commitment under our Revolving Facility that depends upon our credit ratings. As of July 24, 2024, we had long-term credit ratings of Baa1 from Moody’s and BBB+ from S&P Global, and short-term credit ratings of P-2 from Moody’s and A-2 from S&P Global.

Previous wording

A downgrade in credit ratings by Moody’s or S&P Global may have a negative impact on (i) the interest rates of our Revolving Facility, 2027 Term Loan Facilities, 2028 Term Loan, and 2029 Term Loan, (ii) facility fees for our Revolving Facility, and (iii) the pricing of notes issued under our commercial paper program and senior unsecured notes. While a downgrade in our credit ratings would adversely impact our cost of borrowing, we believe we would continue to have access to the unsecured debt markets, and we could also seek to enter into one or more secured debt financings, issue additional securities, including under our ATM Program, or dispose of certain assets to fund future operating costs, capital expenditures, or acquisitions, although no assurances can be made in this regard. Refer to “Market Trends and Uncertainties” above for a more comprehensive discussion of the potential impact of economic and market conditions on our business.

Current wording

A downgrade in credit ratings by Moody’s or S&P Global may have a negative impact on (i) the interest rates of our Revolving Facility, 2027 Term Loans, 2028 Term Loan, and 2029 Term Loan, (ii) facility fees for our Revolving Facility, and (iii) the pricing of notes issued under our commercial paper program and senior unsecured notes. While a downgrade in our credit ratings would adversely impact our cost of borrowing, we believe we would continue to have access to the unsecured debt markets, and we could also seek to enter into one or more secured debt financings, issue additional securities, including under our ATM Program, or dispose of certain assets to fund future operating costs, capital expenditures, or acquisitions, although no assurances can be made in this regard. Refer to “Market Trends and Uncertainties” above for a more comprehensive discussion of the potential impact of economic and market conditions on our business.