The conference call for Healthpeak Properties and Physicians Realty Trust begins with an introduction from the operator. The call will include presentations from Scott Brinker, Peter Scott, and John Thomas. Forward-looking statements and financial measures will be discussed, and a reconciliation will be provided in the respective earnings packages.

The speaker is excited to discuss the merger between their company and DOC, which will create a leading real estate platform for healthcare. They also announced strong 3Q earnings and will have Pete and John summarize the results for their respective companies. Pete reports solid operating and financial results for the third quarter, with strong same-store growth in the Outpatient Medical and Lab segments. They also signed significant leases with existing tenants, highlighting the competitive advantage of incumbent landlords.

In the third quarter of 2023, Physicians Realty Trust saw strong results with a 32.1% growth in same-store revenue, driven by increased occupancy, reduced labor costs, and improved margins. The company is also increasing its FFO and AFFO guidance for 2023 and its same-store guidance by 75 basis points. In addition, the company's balance sheet is in good shape with a low debt-to-EBITDA ratio and ample liquidity. The leasing team also achieved positive results with increased absorption and renewal spreads.

The merger between Physicians Realty Trust and Healthpeak Properties is expected to be accretive to both companies in terms of scale, earnings, balance sheet, capabilities, team, and relationships. The combined platform will allow for complementary strengths to be utilized, such as DOC's internal property management and PEAK's redevelopment and development expertise. The merger will also accelerate key initiatives for Healthpeak, including expanding their playing field, getting closer to their real estate, deepening relationships, and streamlining operations.

The merger between Healthpeak and Physicians Realty is a 100% stock merger based on the closing share price of each company. The ownership split will be 77% Healthpeak shareholders and 23% Physicians Realty shareholders. The company's name will be Healthpeak Properties and the ticker symbol will be DOC or DOC. The merger is expected to close in the first-half of 2024 and is not a sale for either company. There will be immediate and compelling value creation opportunities, with potential synergies of $40-60 million in the first two years. The combination will be accretive to both companies' AFFO and FFO. The strategic benefits include a strong team and platform with complementary talents and strengths.

The merger will result in broader and deeper relationships with top health systems and biopharmaceutical companies. This will increase operating scale and improve tenant diversification, with only two tenants representing more than 1% of the combined company's base rent. The merger will also allow for internalization of certain markets, which will be accretive and deepen relationships with tenants. The combined company will also support the missions of top health systems, including the largest for-profit and not-for-profit systems in the country. Additionally, the merger will accelerate the integration of medical and lab operations.

The merger between Healthpeak and Physicians Realty will result in a single operating platform and increased scale and liquidity for equity investors. The combined company will have a bigger and more liquid balance sheet, lower cost of capital, and the ability to recycle capital for pipeline opportunities. John Thomas, Vice Chair of Physicians Realty, will join the Healthpeak Board and play a role in strategy, business development, and relationships. The majority of the DOC operations and property management teams will be retained, and Kathy Sandstrom will continue to be the chairperson of the Healthpeak Board.

The Secretary of Health and Human Services, Tommy G. Thompson, discusses the current state and future opportunities in the outpatient medical sector. He mentions that demand for outpatient services is high and that rental rates are catching up to inflation. The company does not have specific portfolio targets, but will allocate capital based on opportunity and risk-adjusted returns. John Thomas, a member of the company, shares his excitement for the future and the company's goal to build a long-lasting organization that can adapt to changing healthcare needs and market conditions.

The paragraph discusses the merger between two companies, DOC and Healthpeak, and how it will benefit both shareholders and stakeholders. The acronym CARE is used to represent the culture of the combined company, emphasizing communication, collaboration, integrity, respect, and consistent execution. The two companies have a history of working together and share similar goals and culture. The merger will provide a strong platform for growth and a great return on investment for shareholders. The real estate assets of Healthpeak's lab facilities are also highlighted as a valuable aspect of the merger.

The combination of Healthpeak's lab teams and DOC's operational platform will enhance the value of their assets and relationships. This merger will focus on lab and community development, as well as outpatient medical access. The leaders of both companies have a history of successful investments and are excited to work together to further future opportunities. This merger is not a sale, but a combination that will benefit both companies and their shareholders. The goal is to build a long-lasting and resilient organization that will evolve with the needs of the healthcare industry. The new company will be listed on the New York Stock Exchange under the symbol DOC.

During a conference call, an analyst from Citigroup asked about the strategy for the combined company. Scott Brinker, a representative from the company, explained that the portfolios of the two companies are complementary, with a 70% market overlap in major cities like Dallas and Houston. While the company has historically focused on on-campus properties, they recognize the trend towards off-campus healthcare facilities and plan to incorporate them into their strategy. Brinker emphasized the importance of serving health systems comprehensively, which includes off-campus real estate. He also noted that the sector as a whole is only 30% on-campus, making it necessary to diversify in order to be a preferred partner for health systems.

The speaker is asked about the merger of equals and the talks leading up to it. They mention that a proxy with more information will be released in the next month or two. The next question is about the expected synergies from the merger and whether it will be accretive immediately upon closing. The speaker responds that they expect the transaction to be accretive to both AFFO and FFO per share. The biggest component of the accretion is compensation savings and there will also be savings from corporate overhead and increased NOI from internalizing property management. They expect the merger to be accretive in year-one.

The speaker discusses the potential growth opportunities for the combined company, highlighting the lab space segment in 2025 and the significant maturities in 2026. They believe the transaction will augment their internal growth profile and make it less volatile. The increased capabilities in serving clients, such as development and redevelopment, property management, and scale in local markets, will drive better economics. They also express optimism about the growth rate in outpatient medical, citing demand exceeding supply in the industry.

The company is expecting a strong growth rate in the medical business in the future. They have recently acquired a new asset management strategy and are bringing property management in-house to better serve their tenants and improve relationships. This will also help with synergy and increase margins. The integration is expected to bring immediate benefits and could potentially lead to further internalization in the future.

The merger between PEAK and DOC is not only financially beneficial, but also strategically important as it brings the two companies closer to their real estate. There is a lot of synergy and scale that can be put in place immediately, and there is potential for even more growth in the future. The exchange ratio is fixed and there are no planned dispositions, but there may be opportunistic sales or joint ventures in the future. The balance sheet for both companies is strong and will only improve after the merger.

The speaker discusses the potential for growth in the company's lab and medical business through existing relationships and a significant pipeline opportunity. They also mention the potential for recycling assets to capitalize on this growth if the stock is not trading at a creative level. The recent merger of two peers has shown that a larger acquisition opportunity set can lead to higher growth, and the speaker believes that their balance sheet will become more attractive to lenders and their cost of capital should improve. This could potentially lead to even more external growth opportunities, but this is not factored into the accretion or synergy numbers outlined.

The speaker is clarifying the company's strategy for off-campus and on-campus properties. They mention that the company's goal is to service their tenants and health system partners in the medical business, and that they will participate in the wider playing field of healthcare. The speaker also mentions that the company is open to opportunistic dispositions of off-campus properties, but the CCRCs are in a separate category and will only be sold when the financing markets are favorable. The focus will be on maximizing pricing for any dispositions.

Rich Anderson congratulates the company on the transaction and asks about the dilution and accretion of the deal. Peter Scott responds, saying that the portfolios are different and there are various metrics to consider, such as NOI and AFFO. He also mentions the low CapEx burden of DOC's portfolio and believes there is some accretion even without synergies. Tayo Okusanya then asks a question about the transaction.

The speaker addresses concerns about the DOC Healthpeak transaction, comparing it to the HR HCA deal from a year-and-a-half ago. He explains that the merger combines the best aspects of both companies and that DOC has always had a strong reputation for off-campus medical properties. He also mentions that the two companies have similar strategies and that the merger will add relationships and mutual benefits.

The speaker discusses the recent acquisition of HonorHealth and how it aligns with their strategy of focusing on outpatient facilities rather than hospitals. They mention the results of a survey during the pandemic that showed a preference for outpatient care, leading to an increase in off-campus outpatient facilities. The speaker also mentions that the deal is not related to any other transactions and highlights the strengths of both companies. A question is asked about the impact on the legacy peak life science business, to which the speaker responds that it is not related to this deal.

The company's recent acquisition is completely independent from their lab business and was a unique opportunity to improve their balance sheet, capabilities, relationships, and scale. The company does not see any impact on their lab business from this acquisition. As for their go-forward financing and growth plan, the combination of their balance sheets has resulted in a weighted average interest rate of less than 4%, a weighted average debt maturity of over 5 years, and a low net debt EBITDA. This acquisition is seen as a big win for both companies, shareholders, and bondholders, and will improve their cost of capital and liquidity.

The speaker, Scott Brinker, thanks the questioner for their time and congratulates them. The next question is from Jim Kammert, who asks about potential synergies between the two companies. Brinker explains that over time, the same-store growth rate will become more aligned between the two portfolios, as they have different base escalators and leasing spreads. The speaker also mentions the potential for redevelopment and the internalization of property management to benefit the combined portfolio.

The company believes that the recent acquisition will position them better to take advantage of potential distressed opportunities in both the lab and medical sectors. They anticipate seeing more opportunities in lab due to refinancing and delayed lease-ups, while medical may see more refinancing-related risk. The company believes their improved balance sheet and liquidity will allow them to compete for these opportunities.

The speaker discusses their opportunistic approach to their portfolio and their plans to position themselves for success. They also provide updates on their Oyster Point and Sorrento assets, including a recent lease and plans for redevelopment.

During a conference call, Nicholas Yulico asked about the decision to delay leasing until 2025 and whether the board considered other options besides the current M&A deal with Healthpeak. Scott Brinker responded that while capital recycling has been a priority, the current market is not very liquid. He also clarified that the merger is not a sale and is viewed as a unique opportunity. Jon Petersen then asked about the potential interest rate for DOC's debt and whether there would be any significant revenue mark-to-market from a GAAP accounting perspective.

The speaker discusses the potential impact of the deal on rents and debt, as well as their hope to assume all of DOC's debt except for private placement notes. They also mention taking on secured debt and encumbrances on joint venture portfolio. The questioner apologizes for getting knocked off and asks about any updates before the deal closes.

During an earnings call, John Thomas and Scott Brinker discuss the potential events that could occur between now and the closing of a merger. They mention that they will be focused on integrating the team and processes, and that they plan to put six overlapping markets under internal management after closing. The merger agreement will be filed in the next couple of days and a proxy will be filed in late November or early December. The anticipated closing is in the first half of next year. When asked about synergies, they clarify that the $40 million to $60 million in savings is primarily cash, and any GAAP adjustments will be on top of that.

The company expects to see a non-cash comp component of $40-60 million that will affect FFO but not AFFO. The recent entitlements for the L-Life land in Cambridge will allow them to move forward with plans for multi-family development, which they plan to sell outright.

Steve Sakwa thanks the presenters and says he has no further questions. The operator announces the end of the Q&A session and turns the call back to the presenters for closing remarks. Scott Brinker thanks everyone for their interest and invites them to attend the conference in Los Angeles in November. The operator concludes the call.

This summary was generated with AI and may contain some inaccuracies.