Healthpeak's Lab Occupancy Rises To 79.8% While Rent Starts Lag

Healthpeak’s November 3 earnings call reported lab occupancy of 79.8%, up 130 basis points from Q2 and 270 basis points year to date. Q3 lab leasing totaled 480,000 square feet, according to the transcript published by Motley Fool.

Management described a 12-to-15-month interval between signing leases and rent commencement. Build-out and commencement timing mean occupancy, signed leases and cash rent should be modeled separately; the interval is not a guarantee of cash rent at month twelve.

Healthpeak’s own Torrey Pines portfolio was 100% leased, up from 65% six months earlier. This is not an occupancy claim about the entire Torrey Pines submarket.

The three acquired campuses were 41% occupied. Management described an approximately 5% in-place yield and a 9%–10% stabilized target, based on underwriting assumptions and future lease-up. The target is not assured income growth.

Our read: test tenant build-outs, free rent, commencement dates and lease-up costs separately. The experience of a few lenders exiting acquisitions at par or modest losses does not establish how all lab debt will resolve.