Good morning, everyone, and welcome to the Healthpeak Properties, Inc. Second Quarter Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Andrew Johns, Vice President, Corporate Finance and Investor Relations. Please go ahead. Welcome to Healthpeak Properties' Second Quarter 2021 Financial Results Conference Call. 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, our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. A discussion of risks and risk factors is included in our press release and detailed in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures will be discussed on this call. In an exhibit to the 8-K we furnished to the SEC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Regulation G requirements. This exhibit is also available on our website at healthpeak.com. I'll now turn the call over to our Chief Executive Officer, Tom Herzog. Thank you, Andrew, good morning, everyone. On the call with me today are Scott Brinker, our President and CIO, and Pete Scott, our CFO. Also on the line and available for the Q&A portion of the call are Tom Klaritch our COO, and Troy McHenry, our Chief Legal Officer and General Counsel. We've maintained our strong start to the year. Our life science, MOB, and CCRC businesses continue to perform well. Our balance sheet is in great shape. Our exit from rental senior housing is substantially complete, and we are having good success redeploying excess sales proceeds and have built a strong acquisition pipeline. Let me hit the high points. Operating results across all three of our core businesses were ahead of our expectations. We're down to the final $150 million of rental senior housing sales, which are all under binding contracts. This leaves us with our interest in the Sovereign Wealth JV, which we will continue to evaluate with our partner. We acquired $425 million of MOBs in Q2 and another $205 million in July, and which, combined with our first quarter activity, brings our year-to-date MOB acquisitions to $640 million, all of which were done on an off-market basis. On the development side, life science market dynamics, projected deliveries, and pre-leasing all remain favorable. During the second quarter, we signed a full campus lease for our Callan Ridge densification project, and yesterday announced Sorrento Gateway is also fully spoken for, bringing our active life science development pipeline to 73% pre-leased or committed. Earlier this month, we issued $450 million of senior unsecured bonds due in 2027 in our inaugural green bond offering. Given our operational progress, we raised our FFO-adjusted guidance by $0.01 at the midpoint and same-store guidance by 50 basis points at the midpoint. Finally, in July, we published our 10th annual ESG report. Our ESG program continues to produce meaningful results and receive industry and global recognition. Our team at Healthpeak is very pleased with the progress we've made over the last decade and are continuing to pursue and invest in initiatives that improve our overall ESG performance and support our long-term goals. Everything is progressing very well. With that, I'll turn it over to Scott Brinker. Thank you, Tom. I'll begin with operating results, then provide an update on our development and investment activities. Starting with Life Science. 2020 saw record-setting biotech capital raising. 2021 is on pace to exceed those records. Capital inflows are fueling scientific breakthroughs and leading to accelerating real estate fundamentals. Demand continues to exceed supply, and vacancies are at all-time lows, driving market rent growth of 10% or more over the past year. During the quarter, we signed 233,000 ft of renewals at a 22% cash mark-to-market, + 121,000 ft of new leases. We've already exceeded our full-year internal leasing budget, and 3Q is off to a strong start. In July, we signed 90,000 ft of new leases, and we currently have a large pipeline under signed letters of intent, including 345,000 ft of renewals, 70,000 ft of new leasing, and 415,000 ft on new developments. Same-store NOI growth for the quarter was 7.4%, bringing year-to-date growth to 7.9%. The results were driven by in-place escalators, leasing activity, mark-to-market on renewals, and burn-off of free rent from the prior year. As discussed on the last call, we do expect same-store growth to moderate in the second half of the year due to difficult comps and proactive early terminations that will benefit future years. Moving to medical office. Same-store NOI growth this quarter was 4.1%, driven by leasing activity, ad rent, strong collections, and parking income. Hospital inpatient and outpatient volumes have returned to pre-COVID levels, benefiting our unique on-campus portfolio. Leasing activity continues to outperform. We had more than 800,000 ft of commencements in the quarter, which is 200,000 ft ahead of plan. Retention is strong at 78% for the trailing 12 months, including 93% in June. Year to date, we've already completed 90% of our full-year internal leasing budget. Total portfolio occupancy declined a bit last quarter. This was driven by recently completed development and redevelopment properties entering the portfolio that are still in lease-up, plus a few recent acquisitions with lease-up opportunity. This gives us more NOI to capture in the future. Finishing with CCRCs, where performance continues to recover. Occupancy was up 90 basis points from March to June. Entry fee cash receipts were $24 million, representing the highest level since 2019, and leading indicators are now in line with 2019 levels. With current occupancy at 80%, we have significant upside to capture at least 500 basis points on the low end. Same store cash NOI growth was - 23% for the quarter, driven by the CARES Act payments received in 2Q 2020. Absent these one-time payments, our same store growth was + 23% this quarter. Turning to our development pipeline. We've executed guaranteed maximum price contracts on all of our active development projects, so we have very limited exposure to rising construction costs. Lease up continues to exceed our underwriting on both rental rate and timing. In June, we signed a full building lease on our Callan Ridge densification project in San Diego. We expect to deliver the $140 million project in the first half of 2023 with a yield on cost in the low nines based on the book value of our land. In July, we signed a binding term sheet for the entire 163,000 sq ft Sorrento Gateway development, also in San Diego. We expect to deliver the $117 million project in the first half of 2023 with a yield on cost in the mid eights based on the book value of our land. Those yields are far above what's achievable at today's land prices. If we marked our land to market, the yield on cost in the core markets where we play is more in the 6%-7% range at today's construction cost and rental rates. Moving to investments. In July, we closed the off-market acquisition of three MOBs that are leased to Atlantic Health. The assets share a campus proximate to the Morristown Medical Center, generally regarded as the number one hospital in New Jersey. The stabilized cash cap rate is in the mid 5s. The acquisition also included a land parcel on the same campus that can accommodate up to 80,000 sq ft of medical office development. Also in July, we acquired a $50 million medical building in Wichita that's 100% leased to HCA. The price represents a 6.1% initial cash cap rate. This was an off-market acquisition and expands our existing presence in the market. In June, we acquired a $16 million MOB located on the campus of HCA's Wests ide Hospital in Fort Lauderdale. The initial cash cap rate is 5.5%. Again, this was an off-market acquisition and expands our existing presence on this campus. Looking forward, we have a strategic acquisition and development pipeline across our business segments. Against a backdrop of compressing cap rates, we remain focused on using our relationships to create opportunities not available to the broader market. We also continue to advance densification opportunities across all three of our business segments, which will be a source of growth for the next decade plus on land we already own. Finally, we're balancing acquisitions that are immediately accretive with value creating development opportunities that naturally come with short-term earnings drag. As a result, our acquisition pipeline is a mix of stabilized assets, lease up properties, and covered land plays. The blended initial yield will depend on the relative mix of opportunities that ultimately proceed. With that, I'll turn it to Pete. Thanks, Scott. I will start today with a review of our financial results, provide an update on our recent balance sheet activity, and finish with a discussion of our 2021 guidance. Starting with our financial results. For the second quarter, we reported FFO as adjusted of $0.40 per share and blended same store growth of 1.2%. Two notable same store items. First, our 13 LCS-operated CCRCs entered the quarterly same store pool in the second quarter and accounted for 12% of the overall pool. Second, as Scott mentioned, our CCRCs were significantly impacted by the one-time CARES Act grants we received in the second quarter of 2020. Adjusting for CARES Act grants, pro forma blended second quarter same store growth across the portfolio was 7.6%. Until the LCS-operated CCRC enter the full year same store pool in 2022, we believe our quarterly same store results are more reflective of how our overall portfolio is performing. Last item within financial results. On July 29th, our board declared a dividend of $0.30 per share, representing an AFFO payout ratio of approximately 86% for the second quarter. Turning to our balance sheet. Since our last earnings call, we continue to improve upon our fortress balance sheet. We completed the repayment of $550 million of bonds maturing in 2025. We issued $450 million of five-year green bonds at a rate of 1.35%. We completed the repayment of our $250 million term loan maturing in 2024, and we received $246 million of seller financing early repayments. As a result of our balance sheet activity, we ended the quarter with a net debt to adjusted EBITDA of 4.6 x, providing us with dry powder for acquisition. We have no significant debt maturities until February 2025, and we have ample open maturity slots in 2028, 2032, and beyond, allowing us to fund near-term transactions with five-year and 10-year debt. Turning to our guidance, we are increasing our guidance as follows. FFO as adjusted revised from $1.53-$1.61 per share to $1.55-$1.61 per share, an increase of $0.01 at the midpoint. Blended same-store NOI growth revised from 1.75%-3.25% to 2.25%-3.75%, an increase of 50 basis points at the midpoint. Let me spend a minute level setting all the major components of our revised guidance. Starting with FFO as Adjusted, we have had a strong start to the year with $0.80 per share FFO as Adjusted, inclusive of $0.01 of non-recurring CARES Act grants. As a result, we have increased the midpoint of guidance by $0.03 per share compared to our original 2021 guidance. While we are trending towards the higher end of our revised guidance range, we feel it is prudent to maintain some conservatism given the uncertain market conditions. Turning to acquisition, we have increased the low end of our acquisition guidance to $800 million, an increase of $100 million to account for our recent closed transaction. We will update our guidance further as transactions firm up and we get a better sense for timing and pricing. As a reminder, we intend to fund acquisitions with debt until we hit our target leverage of 5.5x. Turning to CCRCs, we are reaffirming the $70 million-$90 million NOI range for the LCS CCRCs. While performance has been strong year to date, we have determined it is too early to adjust guidance given the uncertainty of the COVID Delta variant and increased labor costs. One last item on CARES Act grants. We have reduced our guidance for CARES Act grants from $9 million to $6 million, which represent all the grants we have received year to date. Any additional CARES Act funding we could potentially receive for the balance of the year would be upside to guidance. With that, operator, let's open the line for Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. So that everyone may have a chance to participate, we ask that participants limit their questions to one and a related follow-up. If you have additional questions, please requeue. And at this time, we'll pause momentarily to assemble the roster. Our first question today will come from Nick Yulico with Deutsche Bank. Please go ahead. Hey, everyone. Just first question on life science. The re-leasing spreads improved this quarter. I know you also, I guess, raised guidance for that segment. Can you just talk a little bit about what drove that? Is it a mix issue? Are you just pushing rents a lot more? Maybe you can give us a feel for an expectation on how you think life science rents could grow over the next year. Right. Hey, Nick. Scott here. Yeah, over the last couple of years, our mark to market on renewals has been ± in the 10%-20% range. It obviously varies from quarter to quarter, depending upon which leases are renewing. Just given that there is a spread across the portfolio, some are bigger than others. This quarter, we were at 22%. Year to date, we're in the high teens, and that's probably reflective of where the portfolio is overall. If we look across the 10+ years that the current leases mature, it is going to bounce around. That's our best guess as to our mark to market across the whole portfolio. With rents growing at 10%+ in all three core markets over the past year, obviously that mark to market could continue to grow. We do see demand continuing to exceed supply, at least in the foreseeable future, so we would expect to have continued success on that metric. Okay. Thanks, Scott. I guess just a second question is on acquisitions. Obviously, you guys have done a very good job of setting up the balance sheet to hit your guidance this year. You're getting acquisitions done. How should we think about the opportunity behind what's in your guidance? Meaning, your comfort range on looking at portfolios, if any of those opportunities are coming up. How you would think about maybe as well raising equity above and beyond your near-term pipeline as a way to expand the portfolio even further into the segments that you're interested in right now. Yeah. Hey, Nick, it's Tom. We've obviously seen a number of different acquisition opportunities through our relationships and scale and have driven off-market transactions. I think as I've expressed in the past, our goal has been to hit a lot of singles and doubles and an occasional triple. We do continue to see quite a lot of activity in the flow business We would expect to continue to grow as long as we're trading at a premium to NAV. We've got ±$700 million to put out that would be funded exclusively with debt to get back to our 5.5x net debt to EBITDA. I think the other part of your comment was a question, at least it probably alluded to M&A opportunities that are out there. I guess I would describe that this way. I think you guys know we look at everything that transacts or could transact within our three core businesses. We're always aware of everything that is coming to market or could come to market. Just because we look at something doesn't mean that we'll actually pursue it. Our primary focus is on flow of business and on development. Okay. Appreciate it. Thanks, Tom. You bet. Thanks, Nick. Our next question will come from Juan Sanabria with BMO Capital Markets. Please go ahead. Hi. Good morning. Just a question on the life science acquisition market. Obviously very competitive, cap rates are low, tremendous amount of capital chasing that. Have you guys thought about looking at a fund strategy or a joint venture to where you could allocate capital to the sector for stabilized kind of lower cap rate type assets? Hey, Juan. Tom again. Yeah, we've had these conversations, frankly, through the years. We're believers that you don't want too many JVs out there. It complicates the organization, and if an investment is a strong investment, we prefer typically to own it on balance sheet, 100% on balance sheet. The fund aspect to us doesn't light us up all that much. As to JVs, we felt differently in Boston where we needed to build a business, get our foot in. There was a lot of expertise there with King Street, Bulfinch that we tapped into. We would consider continuing that in Boston. There's an element with JVs and life science within clusters where joint ventures really are disadvantageous because the objective is to allow biotechs to grow and easily move between our properties within clusters. Joint ventures obviously create other interests from partners that can stand in the way of smooth transactions in that respect. That's not something that we're looking to do a lot of on the life science side. On the MOB side, those are relationship-driven deals, and we typically prefer, almost always prefer to own 100% of those deals. The time when it can occur where a joint venture might make sense is if we're doing a development deal with a player that has lots of contacts. They're identifying the business. They use their relationships. We come in with the money. They get some kind of a promote on the back end, and we ultimately own the real estate. Those are attractive to us as well. That's how we think about JVs and funds are not something that we would consider. Okay, great. Just a question on the MOB strategy and with regards to the internalization of management there. I guess just how do you guys think about why not manage your own portfolio? I get it that maybe the cost savings aren't that great if you can just outsource it and you don't have to have the headcount. At the end of the day, wouldn't you want to own the management and the relationship with those customers? Just curious if you've begun to think about that as you've now exited seniors housing and you're essentially a pure-play office company split between two asset types. Just curious on your latest thinking on that. Yeah. Juan, I'm glad you asked. It's something that I'm going to start and then turn it to Tom K., Tom Klaritch, who's the real expert. It's something we've looked at a number of times, and Tom Klaritch in his many years has done it both ways at least a couple of times. In a fairly extensive study we did about a year and a half ago, we concluded that there really is not much profitability in it, and then you end up managing masses of people within a system that causes a lot of distraction, that just doesn't have a lot of profit. Tom, you've done this for a long time. Maybe you could give a bit of color on how you've looked at it historically along with the analysis you did. Yeah. Well, Juan, as you said, there's really not a lot of profit in it, so that's really not a big factor in how we look at it. We talked about the relationships. We manage our properties in 2 levels. You have the property management companies on the ground that are dealing with things on a day-to-day basis. Then we have an asset management team and a leasing team that oversees the property managers and the leasing agents out in the field. Those guys are out meeting with hospitals, meeting with major tenants really weekly. They travel as much as 50%-60% of the time, and they're maintaining the relationships at the hospital level. We really don't lose that aspect of it. Then obviously on the system side, we have our VPs, myself, are dealing with the major systems. I don't really see it as a real negative to relationships. We maintain those pretty well. Having that structure just allows us to move in and out of markets really easily. If you look at the two larger acquisitions we did in the past couple of months, the Midwest portfolio and Harrison Street, we very easily moved into those markets, took over management, and literally overnight, we're managing those properties without having to deal with all of the personnel issues that you would have to if you internalized it. I've always just liked the third-party approach, and we'll continue to manage that way. Thanks, Tom. That's helpful color. Thanks, Juan. Our next question will come from Michael Carroll with RBC Capital Markets. Please go ahead. Yeah, thanks. Tom or Scott, I know the team has done a great job breaking ground on new life science development projects, but can you talk a little bit about what you could break on ground next? Would you be willing to start another project in South San Francisco, maybe on the Vantage site? Or would you need to have some leasing on Nexus on Grand to be able to do that? Well, the bottom line is that we'd like to see some activity in Nexus on Grand. Scott Bohn is working that real hard. We've had progress. The simple answer is, as we anchor that asset, but yes, we would consider another development start there based on the demand and supply fundamentals that we're seeing. I think there'll be more to come on that. Brinker, anything you'd like to add? I'd just reiterate that the momentum is very strong at the remaining space at The Shore as well as at Nexus. Keep in mind, Nexus doesn't open for another 18 months or more. We're pretty pleased with the activity to date, and we are shovel-ready on 350,000 ft in the first phase of Vantage while we seek entitlements on the balance of that site, well, increased entitlements. Yeah, we really like our market position there and look forward to building it. We've also got Scott Bohn and Michael Dorris on the call with us. Scott Bohn, you're working this thing 24/7 for longer than a decade. What's your read on just generally demand, supply, how you feel about where we're at in the status of this? I think people should hear from you directly. Sure. Thanks, Tom. In the Bay Area, we continue to see record levels of demand. On the supply side, really you're looking at everything that's coming between now and end of 2022 or early 2023 is probably 60% pre-leased. The balance of that, the 40% that's still not pre-leased, has a significant amount of activity or LOIs on it. We feel really good about the supply-demand characteristics in the Bay Area, and looking forward. I would say that Scott Bohn, one of the issues he deals with is just to be able to satisfy all the new tenant demand from our huge tenant base in South San Francisco. We're always looking to make sure that we've got product that's going to be coming to market to meet that demand. Okay. Can you maybe highlight some of the land sites that you have available in San Diego and/or Boston that you can break ground on? Do you need to buy new sites to be able to support new developments? If that's the case, are there anything that you're working on that you can kind of provide some maybe general views to the market? There are a lot of things that we're working on that we won't speak to obviously just yet. Maybe wait for the next conference on that. Scott Brinker, maybe you could just provide some insights into some of the, in addition to the Vantage site, which is obvious, some of the different adjacent land parcels that we've been doing a lot of work on. Yeah, exactly. One example is in the Route 128 sub-market in Waltham, a purchase that we did about two years ago. It came with a lot of excess land, either totally unimproved or surface parking, that when we made the acquisition, we always had in mind that if demand continued to be strong, there could be the opportunity to utilize some of that excess land on the campus for more density. It does require entitlements, so that process is underway at a couple of our sites. Similar example at our West Cambridge campus, The Discovery Park, where the purchase came with some vacant land and excess FAR that in terms of the purchase price, we liked the deal on a standalone basis. The cap rate made a lot of sense. The geography made sense. This added benefit of having excess land on the campus that could be densified with additional entitlements over time was pretty intriguing to us. We do have examples like that in the portfolio, and we're in the middle of that entitlement process now. That's attractive, and that land across the three core markets is trading for probably at least $200 per developable foot. If you're able to build new properties without purchasing land, that obviously makes the economics much more intriguing. Great. Thank you. Thanks, Michael. Our next question will come from Nicholas Joseph with Citi. Please go ahead. Thanks. Tom, I understand that you guys obviously look at everything, and you've been through a long repositioning process and have the company where you want it. When you do look at any M&A opportunities, what are the most important factors for you? Is it financial, strategic? I'm sure it's a blend of everything, but just can you walk through how you think about those opportunities? Yeah. Nick, very fair question. When one looks at M&A, obviously it's always enticing because you can grow your company very quickly. One of the things that we have the advantage of is we already have huge scale, and just adding more huge scale just for the sake of getting bigger is not what we're about. We're seeking to grow our earnings on a consistent basis, singles and doubles and occasional triples allow us to look at each transaction one by one to ensure that we believe that those are individually good decisions. When you take a whole company down, and I've done that a few times in my career, there's always a group of assets that you really like, maybe some that you like a little, and maybe some you really wish you didn't have to deal with. That is one thing when you do M&A that does come to mind. Oftentimes it gets very competitive in the process, as we all know, and by the time you end up being the winning bidder, if you are, you're almost at that point where you're not sure if you wish you won the deal or didn't, unless it's going to be clearly accretive, which in today's environment, MOBs are a hot commodity. Maybe they would, maybe they wouldn't. Oftentimes you'd just be playing for synergies. We do have a tendency to look at the portfolio to see how strategic it is, how does it fit in, how much real estate really doesn't fit our profile that we would need to deal with. There's always the social issues, too. There are a whole group of fine people on the other side of this that are trying to figure out their path and their career as well, and then how does that fit in. Just a lot of different things to consider with M&A that it seems so obvious that go out and get as big as you can and grow, but it comes with pros and cons. The scale is an advantage, but you got to recognize, too, it's also a disadvantage. It's a lot easier to move the needle with growth when you've got a smaller company than if you get huge. I'm not saying that we're for it or against it. In some cases, it would make sense, some cases it wouldn't. Those are the types of things we look at. Thanks. That's very helpful. If you think about just kind of operating synergies, either from an asset level or a portfolio level, how do you think about kind of the value that you create when you add MOBs to your existing platform? Well, if we add MOBs to the existing platform, we do have synergies between our businesses, which provides benefits. We're talking corporate back office transactions, CapEx expertise, leasing, data analysis systems. All these different synergies exist between MOBs and life science, so there's some true benefit. In addition to the fact that we just then end up with bigger scale and lower cost to capital. As to your question specifically, our platform is fully built out at this point, so we could easily grow that business without materially increasing our G&A load. That's an advantage when you look at the whole equation. Thank you. Yep. Thanks, Nick. Our next question will come from Amanda Sweitzer with Baird. Please go ahead. Great. Thanks. Good morning. Can you quantify how much those voluntary terminations in Redwood City and San Diego are impacting your second half life science guidance? Beyond those terminations, are there any other one-time items, like bad debt, that are holding back the life science guidance? Hey, Amanda. Scott here. I'll start and then let Pete cover the other part of your question. There are actually two proactive terminations, one in Redwood City that you mentioned, and then one in San Diego. In the aggregate, it's about 125,000 ft. These were leases that were due to expire over the next one to four years, tenants that were not going to renew, and we had growth tenants in those local markets looking to expand. From an economic standpoint, it's a very easy decision to do those early terminations. In both cases, we did get termination fees, economically we were made whole for the balance of the year until the new leases start. Obviously we don't count that for cash NOI in terms of same store, and it also impacts occupancy. The answer to your question is those two proactive terminations alone represent about 140 basis points of occupancy in the portfolio, and those are in same store. The impact on cash NOI in the second half of the year in the aggregate, it's about 170, 180 basis points. It's material to the second half of the year. Obviously, if we were managing the portfolio based on same-store NOI, we would not make those decisions. We're not. We're managing it to make the best economic decisions over time. It will be a drag in the second half of the year, but a long-term benefit. Fortunately, we were still able to increase guidance now twice in a pretty material way due to the strength and the balance of the portfolio. Pete, anything you'd add? Amanda, you asked about bad debt. We do model some bad debt when we set guidance at the beginning of the year in both life sciences and MOBs. Obviously, we haven't seen as much bad debt so far this year as perhaps we've modeled, and that's been one of the reasons amongst many as to why we've been able to raise our guidance $0.03. I will just reiterate, and as I said in the prepared remarks, we are trending towards the higher end of our revised guidance range. Given the uncertain market conditions as well as what's embedded within the high end of our guidance too is our transaction pipeline firming up. As we factored all of those things into the equation, we felt that a $0.01 increase in the midpoint made sense right now. Yeah, that makes sense and is helpful. Following up on your comments in the prepared remarks about potential development or covered land acquisition opportunities, can you expand more on how you are thinking about balancing that potential dilution and if there are any guardrails around the proportion of acquisition activity that you're willing to have come from development? We do have internal thresholds that we monitor when we think about how much exposure we have to development, both from a capital standpoint, but also just the business risk, given that these tend to be two-year timelines between commencement and completion of the buildings, given their scale. There are thresholds. I won't share the specifics on the call, but certainly when we have our committee discussions, it's not just a discussion around a particular project, but how does it fit into the balance of the portfolio. Clearly, every time we sign a new lease, like we have quite a few times this year, particularly in San Diego, it gives us a little more confidence to commence the next development project. We definitely feel like the remaining unleased portion of our development pipeline is showing great momentum as well. Hopefully we'll have more news to report in terms of new development starts. Trying to balance that with more accretive near-term acquisitions, that is a goal. We've done almost $650 million of medical office to date. They stabilize in the 5%-6% range, but not all of them achieve those yields right away. There is some lease-up potential within that big acquisition portfolio as well. It's a balance. We evaluate each individual asset and opportunity on its own, but also have to put it in the context of a desire to deliver some near-term earnings growth, in addition to the tremendous longer-term value creation that comes with these big development projects. Covered land is an interesting play because it allows you to generate some level of earnings. Given our current cost of capital, it might be modestly dilutive, but certainly not as dilutive as it would be to buy vacant land and then go through an entitlement process. We try to balance all of those different metrics as we deploy capital. Pete, anything you'd add? I think, Scott, just the thing I would point out from just a numbers perspective is, for the acquisitions we've announced to date, if you go into our earnings releases, we provide a lot of different cap rates in there. The blended yield is right around 5%. On the remaining pipeline, the yields can range anywhere from 3% to high single digits, depending upon the type of assets we're buying, from land investments to CCRCs. We're not giving specifics on the remaining pipeline, but I just wanted to at least put some guardrails out there as to what it could be. That's helpful. Appreciate the time. Thanks, Amanda. Our next question will come from Jordan Sadler with KeyBanc Capital Markets. Please go ahead. Thanks. Maybe Pete, first I'll start with you. I'm just coming back to the guide, because the low end, I'm trying to understand how you can even get to the low end at this stage of the game. You upped the contribution from the CARES Act grants and this lower interest expense coming through it, combined, I think those are north of $0.01 sequentially. How do we get to the low end? Jordan, as I said, and I'll repeat again, we are trending towards the higher end of the range there. There are a lot of different moving pieces, and I think I'll just point out a few of them. I'd also encourage you to take a look at 41 and 42, the pages within the supplemental, since we give a lot of detailed information on what builds up to the low and the high end. The penny raise for this quarter comes from a bunch of different items, right? One, we did increase life sciences and MOB same store, 75 and 25 basis points respectively. Those businesses are doing great. We lowered the interest expense a bit given the success of that green bond deal. We moderately increased our acquisition guidance. What would be the two areas where we could see some risk today? I'd say the first would be on CCRCs. If you look at where we are year to date, we're at $40 million for the LCS CCRCs. That annualizes right to the midpoint. It's $70 million-$90 million, so there's probably $0.02 there from the midpoint down to the lower end. I would also point you to acquisition guidance. We've got $800 million unidentified at this point built in. The two items of risk would be firming up that acquisition pipeline and the timing of that, as well as the yields. On the CCRCs, again, we're trending well, and that's something I want to reiterate. I think at this point, we felt like a $0.01 increase is what made sense. We'll continue to reevaluate as the pipeline firms up, and as the year progresses. Okay. That's fair. Tom, coming to you on sort of just strategy again. You guys have done a full revamp and reassessment through the pandemic, now out of all the shop. I'm kind of curious, heavy MOB investments year to date. Obviously, you've got the life sci development pipeline investments that have been very successful as well. As you think about sort of going forward, and sort of weigh, let's say you have $100 of capital to invest. How do you see yourself looking to deploy that based on the growth profile of these two different businesses? Jordan, I think it's a mix. There could be some element that's opportunistic as to what actually arises. We're constantly working on our land bank densification opportunities within life science and within the clusters that we've built and the built-in natural demand that comes from a tenant base, based on demand, supply characteristics, the continued boom in biotech, and the growth of those companies. We do believe that there's going to be substantial opportunity there for the foreseeable future, call that at least the next two to three years. We feel that we'll have strong growth in that business. In the MOB side, it comes down substantially to relationships. For the types of MOB assets that we want to add, either on-campus or strongly affiliated off-campus, those relationships are critical because you have to have an invitation from the health system or the hospital. We have people that are working those relationships continuously. We've had good success with that. We've got people that have been in the business for decades. Tom Klaritch has got about three decades in this business. I think he knows just about everybody out there. Justin Hill, others. With that, we think we'll get more than our fair share. Some of that can be through development in the MOB side, as with our HCA development program and others that we're working on with some health systems, as well as being able to go out and compete with our scale and our cost of capital at times when assets come to market that fit our investment profile. It's certainly competitive out there's no question about that, but we're very well positioned to get more than our fair share. Occasionally, there will be a CCRC that pops up, or two or three, that there could be a not-for-profit that based on their capitalization, or it could be a for-profit that would like to connect in with a well-capitalized entity, and we're the natural player to go to. Those types of transactions are going to yield 8%, 9%, even 10% FFO yields when we identify those. I think we've got opportunities in about three different fronts, both from an acquisition and from a development perspective. The same thing applies in CCRCs. We've got a lot of, we'll just call adjacent developable land to expand on these huge parcels. We've got over 150 acres of land connected with 15 different mega campuses and infill locations that are irreplaceable. We're going to move forward on a couple of those developments as well, where we've got waiting lists in our independent living units, and those are going to be profitable for us, too. Those are probably, Jordan, the plays that we're looking to make. Last one maybe for Brinker, just on San Diego. What else is available? You've had a lot of success here real recently. Is there anything else available in terms of to scale up or to build anything new? Right. Yeah. Three projects commenced in the last year, all 100% pre-leased before opening, in some cases, before even starting construction. That does take up the vacant land that we had available. We do have some longer-term or intermediate-term densification opportunities in some great sub-markets, but that is a market that the team is hard at work trying to find additional opportunity to grow, given our tenant base continues to look for space. The footprint that we have in Sorrento Mesa and Torrey Pines is outstanding, and we'd like to do more. Mike, anything you'd add? No, I think you hit it, Scott. We've got some embedded potential densification opportunities on our own assets that we are working on, but we are certainly scouring the market for more opportunities to provide us an ability to build more. I'd like to add, Mike, you're not starting from a standing stop either. You're in the middle of a number of deals within your acquisition pipeline that could certainly create opportunities to keep us busy, and have had great progress on that, so I don't want to make it sound like we're not well underway on identifying those opportunities, and I think we'll have some success. Mike, anything you'd add on that? No. That's exactly right. Okay. Thanks, guys. Thanks, Jordan. Our next question will come from Steven Valiquette with Barclays. Please go ahead. All right. Great. Thanks. Hello, everyone. I just wanted to circle back quickly on the MOB study that you presented in greater detail back at REITweek back in June, that you spent so much time conducting it. The headline results showed obviously that on-campus MOBs performed better than off-campus unaffiliated properties. I guess I was curious to hear more about how rigidly this may shape your strategy more near term in particular. Could this prompt some additional near-term divestitures as you look to upgrade the MOB portfolio, or is this just more about what you will focus on going forward, just from an acquisition and/or a development perspective? Yeah. Steven, glad you asked the question. Update people or refresh memories. We had done a 10-year study, a very extensive study. It took us, gosh, I forget now, it was about a quarter to complete it across our entire portfolio, to look at every asset that as to what the outcome had been within our portfolio on on-campus versus off-campus affiliated versus off-campus unaffiliated. Just based on our knowledge and intuition as to what our portfolio had done, we had a pretty good sense for what the answer would be. The NOI less CapEx returns, we wanted to get to a total cash flow return. We ended up across our entire portfolio at a +2.3% growth for on-campus. For off-campus affiliated, it was a +1.4%, and for off-campus unaffiliated, it was a -1.7%. Based on our sample size, which was pretty extensive, far fewer on the off-campus unaffiliated, so I recognize some others could have different outcomes. That has dictated our approach from the very beginning of MedCap before we acquired MedCap and for the couple of decades since, that we've always had a view that on-campus would perform better and off-campus affiliated would also perform quite well due to the fact that they're specialists, the stickiness of the nature of those tenants, and the difficulty in adding new supply, and in the off-campus unaffiliated especially, the single-tenant triple net lease exposure where a property can do great during the lease period, and then it can end up empty, or you're at the mercy of the one tenant. How does that affect us going forward? It does not change our fundamental view on the value of on-campus and off-campus affiliated, that we will lean that direction. Off-campus unaffiliated, it would be very rare you'll see us seeking those types of assets. I'm going to turn it to Tom and to Brinker to see if Tom Klaritch, especially, why don't you jump in first. What additional color might you have on that? This was a pretty big topic for us. Sure. You asked if we were just looking at this moving forward or looking at our existing portfolio. If you look at the non-system-affiliated MOBs, the off-campus ones we have today, we only have 13 properties. Two of those are actually in held for sale, so they'll be going away, and one has a purchase option that likely would be exercised. We'd be down to just under 3%, maybe in the 2% range at that point. The rest of the buildings are actually performing pretty well. In the near term, I don't see divesting of them. We'll probably just continue to operate them. Certainly, as Tom said, moving forward, we would not be targeting off-campus unaffiliated in acquisitions. I don't know, Scott, if you have anything else to add. Yeah. I would just quickly add that the Atlantic Health portfolio was technically off-campus, but highly affiliated. It's less than a mile from their flagship hospital, and they just signed an 11-year lease on all three buildings, showing their dedication to that campus. Assets like that with the right system and affiliated with the right hospital, we think can be tremendous long-term investments. We'll continue to look for those as well. I want to add also that you can certainly make money in off-campus assets, affiliated or even unaffiliated, with the right assets. There may be some of our peers that have a different point of view on this, and based how they've positioned their portfolio, they feel very good about a strategy that differs from ours. We've also been influenced by the dramatic increase in urgent care and telemedicine, which for the obvious reasons, has continued to expand as a way to contain increased healthcare costs. I don't want to make it seem like our study and our point of view indicates that we couldn't have peers that do well with other strategies, but this is our point of view. Okay. The real quick follow-up on this is just that at REITweek, you also highlighted you have the highest percentage of on-campus assets in the industry at 84%. I guess just notwithstanding a prior question on the internal versus external management of the MOB portfolio and everything you just talked about a second ago, are there any other ways that Healthpeak may be differentiated in its MOB strategy versus other healthcare REITs focused on this property type that are just worth reiterating, just given our discussion around this? If we covered everything, that's fine, but just throw it out there if anything else pops into your mind. Really- Tom Klaritch, anything you'd add? Go ahead, Tom. You hit two of the big differentiators. I'd say the other one is we've always been highly tenant satisfaction-focused, and we actually, our scores in tenant satisfaction have been well above the MOB index for years and continue to grow. That's another area I think we're differentiated. We're very focused on the tenant and affiliated hospital relationships. Got anything you'd add? No, I think you've covered it. Okay. Okay, great. Thanks. Thanks, Steve. Our next question will come from Joshua Dennerlein with Bank of America. Please go ahead. Yeah. Hey, everyone. Just wanted to follow up on one of Scott's comments about covered land plays. Just curious where the best opportunities, is it more on the MOB side or life science? How would you kind of utilize those to fit into your broader strategy? Yeah. The covered land plays are definitely in the life science business. With medical office, those are highly targeted with specific hospitals or development partners, and we're generally not closing on those land acquisitions or in some cases signing a ground lease until the project is almost ready to start. It's a very different profile, medical office development versus life science. It's a much shorter development timeline. There's generally significant pre-leasing, and always strong sponsorship from the hospital. Really no covered land plays there. In life science, we do have a big presence in particular sub-markets in all three of the core markets that we find to be compelling, and we want to continue to maintain, if not grow our market share. Those tend to be the focus of the covered land plays, Josh. Okay. Just one quick one on the medical office portfolio. Where is parking revenue today? Is it kind of back to normal, or is it still going to trend higher across the second half of the year? Hey, Josh, this is Tom Klaritch. It actually has popped back pretty significantly. It's not up to pre-COVID levels at this point. If you look at the results for the second quarter, 4.1% is obviously well ahead of where our typical average of 2%-3% is. About 100 basis points of that was from improvement in parking revenue. It's a big factor, and we continue to see it grow. There's still certain restrictions on visitors. Obviously, with the increase in cases, we probably would see more restrictions on visitors. We'll continue to watch that. So far, year to date, it's done very well. Okay. Thanks, Tom. Appreciate the color. Thanks, Josh. Our next question will come from Vikram Malhotra with Morgan Stanley. Please go ahead. Thanks for taking the questions. I know the MOB side has been beaten to death, but just two quick ones. First of all, I know you had started a CapEx program for redevelopment maybe a year and a half, two years ago. Can you give us an update where you are with that transformation for the portfolio? Second, maybe just your high-level thoughts on how you think inflation impacts your MOB portfolio. I'll start, then I'll turn it to Klaritch. As far as CapEx redevelopment, Vikram, when you think in terms of an MOB, it has a much longer life to the improvements that are added through a redev. When we do a redev on an MOB, those improvements last anywhere from somewhere in the low 20s as far as the years. If you went out and toured with us a before and after property on an on-campus where we're trying to maintain a high-quality product, it would become very apparent the difference that it makes in an MOB and how you can then capture rents and have a happy hospital partner, and it produces real IRR. We've been projecting to spend about $75 million a year on that, and we have been somewhere in that range, maybe a little less. At times it could be a little bit more, but it's in that range. We've been quite happy with that, and that does produce real long-term returns in IRR. As far as inflation on MOBs, that's kind of a broad question. I always think in terms of inflation with REITs in general. Why don't I just take a moment on that, and I'm not going to get too deep into it because I think everyone on this call has a pretty informed view on this topic. Maybe not everybody has the same opinion, but a pretty informed view. I'll give you my take, which is only my take. There are simply elements of any REIT that are both bond-like and stock-like. Inflation drives higher rental rates over time, but it also puts pressure on REITs in the short term, as they act a little bit bond-like as well. The interaction of that almost becomes impossible to break apart into its components. I thought Sakwa had a pretty nice study on this, by the way, whenever it was, three, six months ago, where he lined out different sectors and what the historical impact of inflation has been. I studied it. I talked to Steve about it. I thought it was quite interesting. I think it's, again, well known that bond-like, stock-like, and then how do you figure out what the interaction of those two is? It's kind of impossible. I do come back to real estate produces a yield. It produces a hedge against inflation, and it's based on tangible assets. When you think about people that are of retirement age that want a yield on their money, they want inflation hedge, and they want to be in tangible assets for the obvious reasons, real estate creates an outstanding opportunity and will continue to. I think inflation just becomes noise in the process. Over time, I think that that balances out, and it'll be a very strong investment over time. Our next question will come from Mike Mueller with JPMorgan. Please go ahead. Yeah. Hi. Just have a quick question here. I know that life science developments can be big-ticket projects. When you look at the new development pipeline, it's roughly 90/10 split between dollars allocated to life science versus MOBs. I'm curious, over the next several years, do you see that balancing out a little bit more with MOBs or staying just that heavily skewed towards life science? Mike, great. Again, it's Tom. Right now, it's heavily skewed toward life science. With the cluster concept and the inability to typically buy quality product at a reasonable price while you have a growing tenant base, fortunately, we've got some form of land bank and densification, and life science development has produced a tremendous return for us. We're still modeling even today 150 basis points-200 basis points and may easily exceed that even at current land costs. It's a natural way to invest in life science. I would say it's a natural way to invest in MOBs too, with relationship with health systems. But there's a lot of work involved in capturing those relationships, identifying the opportunities, and moving them forward. We've been successful on that front too. If you look at our pipeline, we do have a pretty good-sized pipeline right now of MOB development opportunities. I think that will continue to grow. I think life science, though, the development side will continue to be a larger opportunity. Probably on the acquisition side, we may see more activity that makes sense for us across the MOB portfolio. Scott Brinker, what would you add to that or modify? I don't know I have much to add. I think medical office could go higher. We are prioritizing that as an opportunity. Things slowed down during COVID, but we're starting to see some real activity, and it is an area we'd like to continue to grow. Just by the sheer scale and cost per foot of life science, plus the dramatic growth in that industry, I think it's fair to say that there's a larger opportunity in that market. I would expect it might not be 90/10 going forward, but it would certainly be more than 50%. Got it. Okay. Thank you. Thanks, Mike. Our next question will come from Lukas Hartwich with Green Street. Please go ahead. Thanks. Life science values keep moving up, and I'm just curious how much higher they'd have to go before you'd consider being a seller? Oh, that's a good question. I tell you what, Lukas, one of the things about being a seller is the money then has to go somewhere. I recognize there's always opportunities for special dividends and whatnot, but that's not really the play that we would typically be looking at. The fact is that if life science is continuing to have a decline in cap rates, it's because the growth opportunity in rents and the supply-demand dynamic continues to be strong. I've always said we're in the real estate business to be in the real estate business, we want to diversify between the two businesses and even the third with CCRCs, to smooth out the inevitable cyclical nature of each of the three businesses. At the same time, I recognize there can be times when there's a price that somebody's willing to pay that you absolutely cannot refuse, and that always comes into play. When I look at life science in the, let's just call it for quality product in the low four cap rates, it's because there is such an enormous demand for this quality product within these clusters. Obviously, that means our NAV has gone up some. That's a good thing. At the same time, it becomes harder to grow. Thank goodness we've got a good-sized densification pipeline to grow high-quality product and meet our tenant demand. I don't know. That's probably the topic of a 15-minute conversation because it's a great question. If I was just to give you a quick answer, that's how I might respond. Brinker, you've thought about this a lot too. You and I have talked about it. What would you add? Yeah. I think there's the initial cap rate, and then there's considerations around NOI growth and how much CapEx is necessary to produce an IRR and how does that compare to other real estate sectors. When you do the math on life science, although on an absolute basis those cap rates seem awfully low, on a relative basis to other real estate sectors or even the broader bond and equity markets, it still feels like there's a pretty compelling total return. You can't just focus on initial cap rate. We still think there's a lot of growth to capture in that business and long-term returns that will make a lot of sense. I'd add the same thing is true of MOBs. For a number of years, it wasn't the darling child of different asset classes. I remember some years back, Green Street wrote a piece that said MOB cap rates are just much too high. It doesn't make any sense relative to office and other sectors. One can look at the same thing today in MOB and life science against some of the other really hot sectors, and make the argument that these two businesses, especially with the high barrier to entry for on-campus MOBs and life science in the three big markets and the clusters are of very high quality, irreplaceable, and probably still have some value to capture to equate to cap rates in some other sectors. That's an arguable item that, again, the investors and analysts on the screen are experts in that, and that's up for you guys to decide. We still feel quite comfortable that the value is there in those assets and there's further upside. Great. Appreciate it. Can you provide an update on the shadow supply pipeline for life science in your markets? Is that mostly noise still, or are you seeing traction there? Yeah. I'm not sure I'd call it noise, but I'll give you the best estimate that we have. I might ask Mike and Scott to comment, too. If you just go one market at a time, in Boston, there's about 6 million sq ft underway that will deliver through year-end 2022. It's about 80%+ pre-leased, at least for the amounts that are delivering in 2021. We're getting great traction on our 101 Cambridge Park Drive development that delivers in late 2022. We feel really good about the near-term outlook. There is a shadow pipeline of another 6 million sq ft. The timing of that is obviously less certain. Some projects may get pushed back, some may get delayed indefinitely. Some of them may go tech, because in the three core markets, that market for tech tenants continues to be really strong. We've seen that happen in the past. It will probably continue to be the case that some of this "lab product" will end up being occupied by tech tenants. All these numbers that we quote, Lukas, do include conversions, even though in many cases, those aren't as competitive. We certainly don't ignore them. That's the Boston outlook. In the Bay Area today, there's about 2 million sq ft underway. Virtually everything that's delivering through year-end 2021 is pre-leased, and we're getting great traction on some of our deliveries in 2022, really into 2023. We feel really good about the outlook over the next two to three years in the Bay Area. There is a shadow pipeline there as well, naturally. By our estimate, it's about 3 million sq ft, subject to all the same comments I made about Boston. San Diego, there's about 2 million sq ft underway. It's about 50% pre-leased. Most importantly, our three projects, totaling almost 600,000 sq ft, are 100% pre-leased. That's the most relevant from our standpoint. Again, there is a shadow pipeline of about 2 million sq ft in San Diego that we're keeping a very close eye on. That applies to all three markets, right? There's a lot of demand. Certainly there is the potential for increased supply. It's something that we continue to monitor on a regular and very detailed basis. Thanks so much. Thanks, Lukas. This will conclude our question and answer session. I'd like to turn the conference back over to Tom Herzog for any closing remarks. Thank you, operator, and thanks to all of you for joining us today. We appreciate your continued interest in Healthpeak and look forward to seeing many of you at the upcoming industry events. We'll talk to you all soon. Bye-bye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.