Thank you for joining us on day two of the B of A Healthcare Conference. My name is Farrell Granath, and I am the Healthcare REIT analyst with Jeff Spector on the B of A REITs team. I'm joined today by John Thomas, who is currently the Vice Chair of the Board of Healthpeak Properties. He was previously the President and CEO of Physicians Realty Trust until its merger with Healthpeak in 2024. I'll pass it over to John for some opening remarks, and then we'll follow up with some questions. Thanks for having me, Farrell, and thanks for showing up. It's, you know, for a healthcare conference, we don't always get a big participation, but Healthpeak is a $25 billion or so real estate investment trust focused exclusively on primarily two areas of healthcare: outpatient medical, which is about 60% of our business, and we're the largest owner of outpatient medical facilities in the world, if you will. About 20 or about 10% of our business is senior housing, which is an area that Healthpeak historically has had a fairly large presence in, but has been selling that off over time. It performs very well. We're very happy to have it, but at some point in the future, right time, right price, we'll move out of that area of healthcare. The last part of our business, about 30% of our business, is Life Science Lab in the three core markets of Cambridge, Boston, South San Francisco, and then San Diego. We are the second or third largest owner of lab life sciences facilities in the world as well. Great. Given that we're at a healthcare conference and DOC owns, develops, and manages real estate, can you explain how Healthpeak specifically fits inside the healthcare ecosystem? Yeah, it's a great question. Again, why am I at a healthcare conference? A lot of our clients are here presenting, so I'm here both underwriting and sourcing new business for us. HCA is our largest single tenant, but it's only about 4% of our business. HCA, again, largest health system, largest for-profit health system in the country, is our largest tenant. CommonSpirit, the largest nonprofit health system in the country, is our second biggest tenant across the spectrum. I came out of, I was hired and got into this business, was hired by a guy named George Chapman, who started or was part of and led Healthcare REIT for a number of years, the largest, the oldest company in the healthcare space, in the real estate space. When he recruited me to join them, I was General Counsel of the Baylor Healthcare System in Dallas. There are a lot of John Thomases in the world, and I did not really know why he was recruiting me, because I was in a healthcare system as General Counsel. I was not a real estate person or in a REIT or a developer or anything like that. He said, "The real estate part of our business is easy. I want to have somebody who understands what is going on inside our buildings. That is what makes our buildings valuable, and that is what makes our investments valuable." He convinced me to move to Toledo, Ohio, and go to work in that space. It was my healthcare knowledge and my healthcare experience, and I did a lot of policy work, and I still do a lot of policy work in Washington, that was valuable to him. I worked with George for a number of years, helped grow their outpatient medical business until I had the opportunity in 2013 to do the craziest thing of all time, which is join a couple of guys who had a small amount of business in the outpatient medical space, 18 buildings, 500,000 sq ft, and maybe $10 million in NOI. We went public with one employee in 2013. That was Physicians Realty Trust. We were able to get the stock symbol DOC, D-O-C, which is still our stock symbol even after the merger. We grew that business from, like I said, $100 million of quote value at the IPO to $6 billion at the time of the merger. When we merged with Healthpeak, the premise was our business was and today is still great, our underlying business. We collected 99% of our rent during the pandemic, true cash rent. We sent an invoice out, we got paid. That is the whole idea of investing in healthcare real estate, it is recession resilient, it is pandemic resilient now. We can prove that. For 20 years, it has been one of two areas of commercial real estate that has grown NOI for 20 straight years. No other manufactured housing. I was going to ask you if you even knew what the other one was. Manufactured housing is the other one, which is totally irrelevant for this discussion. The whole idea of investing in healthcare real estate, and particularly outpatient medical and lab, and we'll talk about that, is just the consistency, the reliability. You know, in a recession, you may not go to a mall. In a pandemic, you may not go to senior housing. You may not go to a movie. If your child's sick or you're sick, your mother's sick, you're going to take them to the doctor, and the doctor needs space to provide that care. They're going to pay their rent. Like I said, it's just one of the most, it's not an area where we have fast growth. We just have consistent, reliable growth, and we have for 20 straight years. Great. You were just touching on it, and especially with your past experience, can you explain how your outpatient medical portfolio has relationships within the healthcare system itself? Yeah. So how do we have relationships? And part of our core values is respect the relationship. We've grown our business. Again, we went from 100 million to 6 billion at Physicians, and Healthpeak, again, has a similar legacy where HCA actually built its own REIT inside of itself 25 years ago, and then Healthpeak bought that 25 years ago. So we have this genesis, again, that's, you know, kind of my personal story, but actually our corporate stories. We have this genesis of really kind of spinning out of or having these direct relationships with health systems and then doing a lot of repeat business with those health systems. So Healthpeak's in, you know, our 10 largest markets are the markets you would think of and fast-growing markets still today. Atlanta's our biggest, one of our biggest markets. Dallas, where I was with Baylor. Houston, Phoenix, Seattle, Minneapolis. Again, markets that are still growing. Our clients are the health systems in those markets and the dominant health systems in those markets. In Atlanta, it's Northside Hospital. In Dallas, we actually have large relationships with HCA, Baylor, and Presbyterian THR, you know, in that market. At Physicians, like HCA in the Healthpeak deal 25 years ago, Physicians in 2016, we did a $750 million transaction with CommonSpirit, what's now known as CommonSpirit, CHI. We bought 50 buildings in 12 markets. They needed capital. We needed assets. It was the largest single transaction ever in this space between a REIT and a health system. The next year that relationship went so well. The next year we bought another $200 million of assets from them. We got a billion dollars of assets with CommonSpirit. We've got probably $4 billion, $3 billion of assets with HCA and all of their markets. For both of those, we continue to grow with new development. We've got a $300-$400 million development pipeline with those health systems. Not just those two, but they are part of that number. You know, again, outpatient medical continues to grow. Population, somebody quoted yesterday that population of 65 and older is going to be 20% of our population by 2030. Every day, 12,000 people turn 65. That demand is 8%-10% just mathematically, no matter what happens with Washington or commercial payers or anything else. The demand and growth in healthcare services and the need for those healthcare services is growing every day. On the topic of the supply and the demand, what is keeping other outpatient medical properties from just building their own or developing or partnering with you and expanding? Yeah, great question. I'll give you a couple of different statistics, but it's to answer your question. The average rent across our 42 million sq ft of outpatient medical space, the average rent today in our portfolio is about $23 a foot, triple net. We're about 93% occupied. To build new in this market between, you know, the past few years, inflation, construction costs, cost of capital, the average rent for a similar building today that we would want to own and a health system and a physician would want to rent and the patients would want to go to is closer to $35-$40. Again, the buildings that we're building for health systems are demand-driven, meaning they don't have an entry point, an access point in a demographic that they want, a suburban market that they want to be in. They lead with an outpatient medical building. But today that costs them $35-$40 a sq ft, depending upon the market. Atlanta's, you know, getting in that, you know, quote, the higher-end range. Phoenix is a similar, you know, price point as well, while our in-place buildings and rent is $12 cheaper. So unless you want to, unless you have a growth need or a demand-driven need to be in a specific location, you're going to stay in the building you are at $23 versus move next door for $35, right? It's just the right economic decision. In the meantime, you know, as a landlord, we want to raise our rents as much as we can, obviously, and in a balanced way, because we want to continue to grow with those health systems. Getting a 5% or 10% renewal and kind of a mark-to-market is pretty common now. For, as I said, the business has been so great for 20 years, but this is the first time in my 20 years in the business where we could grow rents more than 2-3%. We're growing rents 5-10%. The health systems are, and the physicians may not want to pay that, as we were talking about before, as your apartment search. At the same time, that's a more economical decision for them to make than it is to go to a new, which used to be our competitor, right? Retention is very high, 80-90%. It's been very strong the last six, eight quarters. Our average mark-to-market has been 5-10% every quarter in the last eight quarters. The other key point about our business has been differentiated in the last few years, which I think will continue for a long time, is, as I said, rents have grown 2-3% contractually, annual increasers for the last 20 years. Now we're moving everybody from 2-3% to 3-4%. That's just the gift that keeps on giving, because we don't sign overnight leases. We sign five-year leases and 10-year leases. If we can sign a new lease, we mark-to-market up 5%, and we can raise the increaser in those leases from 2-3% or 3-3.5%. That's just compounding growth over time. Great. I guess now switching gears to the lab portfolio, and I'm sure many people are very focused on the biotech and biopharma area. Can you give a little bit of detail around the supply and demand landscape? More importantly, how has DOC's differentiated approach in capturing that demand? Great question. As I mentioned before, we're in the three key sub-markets, core markets for lab real estate and lab business: Boston, primarily Cambridge, West Cambridge, South San Francisco, and San Diego. For 10 years, maybe 15 years, lab was, I said, talked about how great outpatient medical has been for 20 straight years. Lab is one of the best markets, our best asset classes to be in in real estate from 2009 until 2021. Part of that was just the demand and the investment as a country we were making, but as an investment of private capital that we're making in innovation and research. We've got the best scientists in the world, particularly concentrated in those three markets. We take a very concentrated approach to kind of a campus community. Interestingly enough, lawyers, which I used to be one, and business people get all, you know, cranky about IP and, you know, secrecy and everything else. The scientists want to collaborate with scientists. And we have, you know, whiteboards in parks, and we have, you know, amenities in these buildings that just facilitate collaboration. Scientists from two different organizations, it could be, I'm just making up names, but these are some of our tenants, Amgen and, you know, some startup biotech firm, go down, have lunch. They're really struggling with the problem. They just start talking about, "Hey, what can I do to, you know, kind of go to the next step with my science?" It is very collaborative. Those campuses facilitate that. They facilitate demand from the scientists who, "Hey, I want to be in those buildings in that amenity." You know, we have golf simulators. We have bowling alleys. We have bars. We have, you know, kind of these great facilities. One of the things about labs, lab buildings is you have, we have over a million mice in our buildings on purpose. We have pigs in our buildings. We have all this very sophisticated space. That is why this real estate is so expensive. We also have places for the scientists to convene, and they want to be there. These campus communities really facilitate that and the recruitment of businesses to pay our very expensive rent. These are very expensive buildings to build. The air in this building, this building probably, well, casinos probably replace their air a good bit more than most commercial office buildings. But our air in our lab buildings is replaced every 30 seconds. So they're very sophisticated real estate. It's not the back office for Amgen or Bristol-Myers Squibb or Novo Nordisk, one of our biggest, you know, tenants in our buildings. It's not the back office accounting space. This is where innovation is. It's where when they buy a small biotech where they're trying to, you know, increase their revenue because of the patent cliffs coming in 2027, 2028, it's where they want to be and where they collaborate. And again, we have, we're about 85% occupied in lab. Long-winded, when the lab business was so good for so long, the pandemic fueled a huge need for more lab space to cure COVID and other things or try to find vaccines for COVID and other things like that. So many people kind of piled into the lab business that when we came out of COVID, we all of a sudden had an oversupply and a lot of construction by people who had never been in the lab business. These buildings are $1,000-$1,500 a foot to build. There was a lot of spec buildings built in our three markets and other markets that created an oversupply of the need for lab. That has caused, you know, at least a temporary, and I am sure it is temporary, but a temporary, you know, kind of slowdown in the ability to recruit tenants. Our retention is just fine, but to recruit new tenants and then because the biotech market, and I've been sitting in these conferences, you know, for this last two days, you know, the amount of capital, again, private capital going into a biotech startup has slowed down because of what's going on in the federal government. We have this oversupply of lab real estate all of a sudden in those three markets in particular. The ability to recruit new tenants and the lack of capital coming in, you know, to invest in those tenants has slowed down. We do not have any NIH-funded tenants, but tenants 10 years from now are NIH-funded. If somebody gets NIH funding, major medical, you know, university, they prove their science, so they go out and get private funding, and that's when they need our space. Right now there's a slowdown of the future supply. If NIH gets cut or they slow down and the government slows down in research funding, it's a very temporary thing. Long term, this country has got a dominant position, the dominant position in life science and innovation. It's just a matter of time before the lab business, the real estate lab business, picks up even more. We pay a 7% dividend based on our current stock price. It's crazy. We have a low multiple because of this, you know, kind of depressed lab market, even though it's 30% of our business. If you want to play life science and invest in a very safe, diverse, you know, real estate investment, but you want to be investing in life science, buy our stock. You get paid 7% to wait for the market to return. Our payout ratio is 70% of our cash flow. REITs have to distribute all their cash flow. We pay out about 70% of our cash flow goes to our dividend to our shareholders. Today's stock price is 7%. Our cash flow is growing 3%. You're literally getting paid 10% in an asset-backed cash flow to return today if you invest in us while you wait for the, you know, the biotech and the high returns you get in biotech to pick back up in time. A lot to unpack there, a few points. First, when you're discussing about the oversupply in the lab space, can you give a little bit of detail on, I've always seen the word zombie buildings, and I've driven around through some of the key markets and have seen big, beautiful, brand new buildings that remain empty. Can you explain either what those are and maybe either why DOC is or is not within that segment? I'm happy to. One of the smart decisions that Scott Brinker, our CEO, and the Healthpeak leadership team did was three years ago, they did see this glut of new entrants into the market, into the business. Office developers, three years ago, you couldn't, you know, offices were completely empty from work from home. There's still a lot of empty office buildings in Manhattan and Boston from traditional corporate office environment, work from home. San Francisco, same thing. South San Francisco, same thing. San Diego, same thing. Office owners said, "Hey, lab is great. Look at the last 10 years of what, you know, growing rents 5-10% every year in the lab business. A lot of new entrants got into the lab office building development or tried to take their building, said, "I can't convert it to residential," like a lot of people doing, UDR you mentioned. "What I can do is convert my building, my office building into a lab building." It looks just the same. The problem with that is for lab, you've got gases in the walls. You've got all this extra stuff for that replacing the air every 30 seconds. You got to have places for mice, vivariums. You You got to have places for pigs. You got to have 14 ft of shelves or space between the ceiling and the floor plates. A lot of office, traditional office owners either try to develop new lab, to quote unquote lab buildings, or convert empty buildings, zombie buildings, into lab. It is just not working. A lot of the statistics about how much quote new supply there is in Boston, for example, if you can look at some stats and say there is 15 million sq ft of new development of lab space in the Boston market. Today, there is about 60 million sq ft that is occupied. You see 15 million quote unquote coming online. There is not that, there is not much demand for 15 million sq ft. A lot of that, like maybe 13 million sq ft of that number, is either office buildings trying to convert to lab or office owners trying to build new buildings and make them, call them lab. It is just really not competitive space. The real glut, if you will, I hate to even use that word, but the real excess supply in Boston is more like 2 million sq ft. We're 95% occupied in Boston. The other two big incumbent lab companies are highly occupied in Boston as well. You see stragglers, this new entrance into the market that either trying to convert buildings, repurpose buildings, or build new buildings and call them lab who don't have the experience, who don't have the capital. They got these buildings built. They don't have money for TI. TI in our buildings is $400-$500 a foot. You know, got a million sq ft, $400-$500 a foot of just TI is pretty, pretty expensive. We have the capital to provide that. Brokers won't even go to those buildings. They're zombie buildings for a number of reasons, but basically they're empty. They're going to be empty for a long time. They're not going to be lab ever. They really aren't competitive supply to us. As I said, we're 95% occupied in Boston. If we need more space for a tenant, we can go buy. We can either, or we can, what we've been doing is providing some loans to those new developers who got into the space, ran out of money, can't provide TI, can't pay leasing commissions. We talked about this, which is important. We've been loaning some money in some very specific circumstances because we see the demand coming back. We have an entry point to buy that building once a new lease is signed. We provide the happy money, the TI, once a lease is signed. We can grow our business that way. Great. You already touched on NIH funding and your exposure, but I guess generally that's been a big topic in these panels about macro regulatory issues. Can you also address it in anything that would be a tailwind or a headwind in the outpatient medical field? Also, how is it impacting how tenants are looking to either sign or make decisions in executing leases? Yeah. I mentioned before, we got a lot of construction going on right now. The health systems who came out of the pandemic realized that one thing they probably did not have enough of was outpatient medical space. During the pandemic, as I mentioned, we were 99%, we collected 99% of our rent because we were 95% occupied. If you were sick, you went to the doctor. We did a consumer survey. We hired a firm to go out and do this, an independent firm in our five biggest markets. We said, "If you are sick, where are you going to take your child or where do you want to go to get that care?" 77% of the people said, "I want to go somewhere at least a mile away from a hospital." The perception was all the COVID people are in the hospital. If my child injures their knee or arm or whatever, or my mother, you know, has a heart issue, I do not want to take them to the hospital because that is where the COVID people are. There has been this growing demand for outpatient medical space for years. COVID really accelerated that because people were like, "Why am I going to the hospital unless I am like in a car accident or, you know, have trauma or have a major transplant issue?" You know, the care and hospitals, government policy, commercial insurers have been pushing care out of the hospitals since 1982 when the prospective payment system was created before you were born. It has been an evolution. Now there is much more care provided in an outpatient setting than there is in an inpatient setting. The pandemic really accelerated that because consumers did not want to go anywhere near a hospital. The construction we are doing is there is some on campus with new hospitals with Northside in particular, CommonSpirit or HonorHealth in Scottsdale. Where the real demand is for new locations in demographic areas, strong demographics, commercially insured, high Medicare populations, where we can build outpatient facilities, kind of build the demand for that area. Hospitals will follow up with an inpatient facility if they need one to meet that demand. As I said before, the demographics, 12,000 people turning 65 every day, 20% of the population is going to be over 65 by 2030. The growth in the top line revenue of healthcare is 8% a year. It is just math. The government does everything they can to shift that number, but the real shift is to incentivize care to be pushed to the outpatient setting, cheaper, newer facilities we're building, and the care can be provided there safely and frankly better and higher quality. That is where the demand is. Government policy, you know, Medicaid's important, ensuring everybody in the population is important. The services that we're providing, that our healthcare system is providing, where they make their money is commercial insurance. They can make money on Medicare. Medicare growth, again, continues regardless just because of the aging population. I mean, you're legally entitled to that benefit once you get to that age. More and more people are becoming insured just from that aspect alone. That is just driving the demand for more outpatient real estate in particular. In the lab space, obviously with a bit of the overhang of the funding, how is that impacting how perhaps tenants are thinking about executing leases or with the renewals or signing of leases? How is that? Are you getting new entrants, current tenants? I guess like what's the general? Yeah. So 2024, it's all about the capital markets and for new demand in lab space. I mentioned the cutback in NIH funding is not directly hurting us. You know, the real debate around NIH funding is the overhead factor, the indirect part of the grants. The direct cost in a grant has not been slowing down. It's really a debate about trying to carve back the 50%-70% kind of indirect cost overhead factor that go along with these grants. But the direct cost is still getting funded. Rent is a direct cost. So future tenants for our buildings, they're doing, you know, science in Boston, San Diego, South San Francisco. They're still getting their research dollars. They're still getting dollars included in that that pays the rent. Again, as I said, that's not really a part of our focus of our business. It's when they advance their science and get private funding is when they come knocking on our door and when we're recruiting them to move into our buildings. Last year we signed more leases than we've ever signed. The kicking point for that, we have about 11-12 million sq ft of lab business. The kicking point for that was the capital markets, the IPO market, you know, was slow to come about, but the capital markets generally, the amount of venture capital funding was better in 2024 than it was in 2019. It's kind of been a five-year inflection point that drove a lot of leasing for us. This year with all the rhetoric or however you want to put it around lab and how much we're going to invest through the NIH and how much we're going to fund the FDA to approve drugs and through clinical trials has slowed down the fuel, the capital fuel and venture capital and otherwise. We still have a good leasing pipeline. It's not as strong as it was last year, but we still have a good leasing pipeline where people are looking for space. They need to expand. They need to grow. Again, they're looking at our buildings because the zombie building owners can't actually fund the TI that they need to build out their space in particular. We just have these dominant positions, particularly in San Francisco and Boston, to provide that space for them. It's really fueled by the capital markets. Once the capital markets open back up, more funding into round A, round B, IPOs for those tenants of ours, those biotech firms that are working through their science, they hit their scientific milestones, they get more money. When they get more money, they need more space. It's just a perpetual, you know, reliable kind of connection between capital markets funding and the growth in the lab, growth in the lab space that's needed for those tenants. I think our last question here. So looking ahead, if you could quickly go through the growth avenues for Healthpeak for 2025 and beyond. Again, we're 85% occupied in our lab business. The real growth for us is leasing the last 15% of our space. At some point in the not too distant past, we were 100% occupied. There's probably $60 million-$75 million a year in rent NOI if we lease up that last 15% space. There's real organic growth just sitting there to be had. We just need a little bit of, you know, momentum in the capital markets behind biotech, maybe eliminate some of the rhetoric in Washington. I got one more point about that in a second. You know, to help generate, we need some IPOs of biotechs. In 2027, 2028, we have a huge patent cliff pipeline or a cliff for the major pharmas that have to replace that revenue. They got to replace it by buying some of our tenants who've proven out their science and getting their phase three, you know, commercialization approvals from the FDA. That's the big growth driver there. As I said, we're very strategically investing in some of these zombie buildings, if you will, through loans and other capital, happy money to help those tenants, those landlords provide the money to tenants that need the space where we don't have the space available to do them. That's another area of growth for us. On the outpatient side, it's just, again, we've got the largest portfolio or largest platform today in the world. We've got the best platform from a service perspective. Our own employees take care of the tenants who come into those buildings, take care of the patients to get to the care that they need. We continue to grow that business primarily through construction, new development with our health system clients, 90-100% pre-lease buildings. You know, when interest rates and other things converge, we'll start acquiring more buildings as well. We're best positioned to grow in those three ways. The point I wanted to make about the government is a really good point yesterday that captured my attention more than anything in the lunch panel with the health policy experts was NIH funding, FDA funding. There's only so much the administration can do to cut it back if Congress has funded it. I mean, there's a very clear Supreme Court case about this. Once Congress funds it, the administration, you know, has to distribute it that way. If we pass the legislation that's current funding, that's fine. Most of our hospital systems, HCA and Tenet yesterday said it's not as bad as we thought it was going to be with Medicaid. In fact, it's better than we thought it would be. That's really not an issue for us and our health systems. If the life science business, NIH funding, FDA funding that comes out of appropriations comes through a continuing resolution versus this Congress actually cutting those dollars back, then Washington is growing the amount of funding going into life science, growing into NIH. It's just a matter of the administration distributing the dollars that they're legally required to do. I think there's a very positive catalyst for our clients, our future clients, and innovation in the United States. That's a great, great place to end. Thank you, everyone. Thank you, John. Thank you. Thanks, Farrell. Thanks everybody.