Healthcare Realty Trust (HR) 26 Oct 182018 Q3 Earnings call transcript

Company Profile

Participants

Caroline Chiodo	Senior Vice President, Finance
Scott Peters	Chairman, CEO, and President
Robert Milligan	Chief Financial Officer
Amanda Houghton	EVP, Asset Management
Chad Vanacore	Stifel
Karin Ford	MUFG Securities
Tayo Okusanya	Jefferies
Todd Stender	Wells Fargo
Vikram Malhotra	Morgan Stanley
Eric Fleming	SunTrust
Lukas Hartwich	Green Street Advisors
John Kim	BMO Capital
Mike Mueller	J.P. Morgan
Daniel Bernstein	Capital One
Tayo Okusanya	Jefferies
Doug Christopher	DA Davidson

Call transcript

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Operator

Good day, and welcome to the Healthcare Trust of America Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Caroline Chiodo. ahead. go Please

Caroline Chiodo

documents welcome quarter and release Healthcare of close. Trust our Thank our earnings for found the or days. the to call call. being third These the next after SEC. XXXX supplement section earnings be We be America's financial will this with webcast, that you, XX yesterday website the can filed and and on note available Relations the is Investor of Please for replay our

take to prepared happy be questions at our will We of conclusion your remarks. the

During statements. the management us. based current course make of to the call, of These on we will beliefs and forward-looking available are information currently forward-looking statements the

Our uncertainties, predict. ability actual unknown to affected that and control known risks, and or results trends, will are be by factors beyond our

that they differ Although, future future our guarantees of actual reasonable, Therefore, materially results could assumptions expectations. not are performance. current are our and our we from believe

risks, on Scott of of a Relations will and our found Scott? be site. to the Web potential detailed now Healthcare of CEO SEC Chairman description America. can I turn please call For the of refer our over which to Peters, our section Trust Investor filings,

Scott Peters

morning America's today joining you thank Healthcare Trust call. for of Good for you. third Thank conference and earnings quarter us

Joining Amanda Chief today Houghton, me on of are and Management. the our Financial our President Officer; call Robert Milligan, Asset Executive Vice

increase developments. medical quarter past longevity 'XX system We're growth, opportunities next fundamentals healthy specific revenue and level in tailwinds convenient universities per concession XX long-term services cash same-store our continue performance move over more individuals XXX,XXX XX,XXX relationships. on the located To turns lower never sector square remains quarters. medical of third leasing costs X.X%. overall healthcare systems, office and greater. growth to to as to our to of XX over results, Healthcare being life well been X.X%, quality specific solid. the highest third and metrics groups the at line growth The years. Development MOB needs in X.X% buildings. medical remains and address of eight driven results, Total TI was rental seeing with strong. of physician the locations, and limited rate at by day MOB costs seen for with our are quarter for outpatient several releasing revenue of population academic This for focus fundamental future involved the primarily speculative XX%, projected the continues. be on outpatient life leasing has can solid a the the healthcare XX sector report in to in with we retention in demand are strong continue quarters. check As influencing spreads totaled demand was with The Tenant office feet accelerating Leasing new in to looks

of fourth quarter. an From on artillery to and $X.X investments our to perspective, The track investment year. improved of acquisition X.X% of development. lease expect yield continued Park lease Forest We entered the our campus, XX% and XX,XXX brings leasing rate to up. campus leases in rates to for new we than XXXX the billion on up is This budget. on favorable over achieve volume of lower the into at last square feet Dallas our at this X.X% is leasing transactions

to especially XX high attract about capital cap private month, the keeping the fundamentals last as assets. XX over they have sector, the pretty much we continued However, on happen the to into strong quality talked rates same

ability basis assets investment recognized challenging. is this on to quality Our patient, We to accretive disciplined an the strategy be environment. become focused in has and that acquire

is advantage of a our our great operating metrics. However, Greenville platform example. in that markets recently Gateway assets continue take key we to and leverage recycling pursue our

where XX with are gaining development we of and now flexibility efficiencies. long-term given of capabilities ahead and Duke and -- taken and XX to increased have today's strengthened can X.XX% clearly HTA strategic the underway. of remainder our significant the portfolio our to acquisition created largest the Duke X.X% on months. is traction to positively has impacted relationships deepened developments positively within of steps the layered which we have Assets from significantly look the results, past with important it our reduced positioned growth. to assets have public last that operating seen We leverage review office best-in-class on-campus this be over over presence our growth We investments, our the been both has balance and We platform As be acquisition position which sheet future markets, medical and key on year, And increased This owner growth, our REITs. drive yield three created in to internal last XXXX, strength active to in of into months XXXX XXXX is we the future the the in the performance a our and positioned operating operating and the market. for

where quarters. of future. market and do enabled us not assets, out selling on All focus value a we our steps long-term these position solid in of put have or in should conditions enable to HTA future to us Current maximized non-core have outperform of financial strategy have strategic

as the rural million properties our we quarter, markets. MOB by non-core includes cap of market $XXX five This markets. of did from of the at exit a as in During low South secondary this Carolina complete in over Greenville, disposing well sales rate

of advantage a a third in markets. in proceeds repay about out for continue continue will in invest this pay our window debt, to recycle appropriate. demand of take development to net-debt-to-EBITDA, October million in mortgage in $XXX of repurchase maintaining utilize million to will opened. We strong on to disciplined non-core our share X, acquire $XX and X.Xx including $XX proceeds, million immediate quarter when down million use prepayment sector and This to markets remainder debt, manner, We cash. the utilize leverage in our when program of assets lowered while $XXX or over key markets The we

will our in that adjusting near be as patient in environment. diluted knowing rates significant a This value execution maybe a are in markets liquidity term. We the has raising

However, the over course creation. of Amanda. strategy the value lead real this over significantly outperformed estate and turn cycle, to will to now has I call

Amanda Houghton

Scott. Thanks,

a portfolio of of very feet had bringing percent resulting in same quarter We strong strong and last to with Starting our and XX%. assigned, Our year ground and rate focused health square leases tenant occupancy, quarter. demand well teams in This expense third new portfolio. care We service the over efficiencies. the our value on growth continued activity store resulting result providing with remain on over best-in-class basis XXX our XXX, in points of tenants and leasing perform a XX.X%. square lease leasing. We our up was within relationships renewed retention XX over feet to XXX,XXX for

for the Our quarter up leases re-leasing were X.X%. for spreads renewals

We remainder believe re-leasing spreads will into of to for X% into continue remain XXXX. the and to the XXXX X% range

on X.X%, and year leases. averaging costs $X.XX on new on annual escalators remain just renewals year renewals Our averaged term low per term new TI while leasing $X with our over and per

Dallas progress great made have Park at Forest we Importantly, campus.

to XX% campus the the This hospital. in an over to rate primarily we we XX,XXX the the expect and brings signed During on to our three XX%, get next quarter, additional feet, with six leased lease months. square

takes occupancy leases above the and growth revenue signed leases these the XX% quarters. and are to as average Importantly, rate help move being at coming over full will portfolio our us drive rent

we this in of economy using our show On days increased the expense total expenses utilities, same-store These to expense XX of operating savings have over engineering primarily average the by our tax prior years in to of groups of our several up Denver XX% reporting quarterly engineering XXXX over generated overall use five or perform now front, are operating nearly year tempters we by of benefit quarter, ability higher and were our continue have able we worth our to increase that our platform, noting integrated lower last markets. refunds the fully peer internal X.X%. and in benefit Huston generated operating driven acquisitions, were the quarters, and property scale average the to X.X%, and despite savings cooling internal while versus expense which same-store appeals X.X%. It's services our the platform, an degree our with

tenant service in will perform to now the Our us over quality the ability without is drive for financials. for as ultimately efficiently dollars I we or and what to investors. operate discuss bottom to Robert to line sets sacrificing our our believe call we market, the turn apart

Robert Milligan

strategic our best the ending we Thanks, we third positioning on Amanda. started we’re since and with balance with financial From the the cash have our position, sheet low leverage had balance quarter process sheet.

over we year, returns since over capital lowered in us have one market. with leverage debt-to-EBITDA, full last deploy positions volatile announced our turn strategically and to by half the This our acquisition. flexibility Over this XXXX significant we of

However, today, accretive maybe the more better in future. the will and be recognizing patient, deals

We near-terms of as the will do this performance this thing the do dilution to company. is despite the potential any earning right for long-term

specific Turning results. financial to

per was flat sequential million. the from a from leverage basis. was constant, $XX decreased Funds year. on to flat XXXX. the of prior would on to quarter have is basis relatively X.X% first majority $X.XX, second FFO cash older up a include diluted share our was of year-over-year. NOI This been reporting. down Third quarter investments we was new the quarter and performance quarter normalized third Same-store Holding year-over-year the This growth And and from distribution growth in the the to rental compared between of same-store our the revenue X.X% we XXXX portfolios. by driven consistent

Our and of on operating basis, also year-over-year our platform demonstrating of expenses economies the down capabilities a our scale. were

year XXXX This initial was and However, down related related investments XXXX has impact minimal our our to XXXX period. had baseline slightly the primarily limited some metrics. to period, our to in throughout accounting ago in the on was total our margin impact

range Our in XXXX Philadelphia reaches final XX% ended was mid yielding over X.X% G&A revenue. the $X.X the million, was acquisitions which X% of the the reach X% once quarter pace on to approximately for occupancy. development period

G&A be expect to fourth $X We quarter. close the in to million

SG&A of most in to we As the of at $X XXXX, to or per internal quarterly hit This we costs. capitalize compares a earnings than will will by quarter. $X currently would've rate capitalized third majority of at leases between approximately to the leasing the expensing related quarter, million statement the approximately Nonetheless, on million are by do in-house look costs. on to completed per paid capitalization and team and $XX and these income our ASC X% XXXX, per lease XXX more will expenses million impacted $X impact our by conservative rule and $X per share, Year-to-date quarter. the bringing one value. to million accounting these we total gross in in be We $XX.X our our million we commissions million party leasing XXXX change penny

expenditures space, former Forest in improvement increased has the capital related uptick with Our expenditures. shell of to our up the our condition. during tenant first lease primarily This is generation period in an remained Park which

Our XX% in typically of recurring NOI. our quarter cash expenditures around increased ran third and capital the

ended For We quarter less XX% XX%. the market capitalization. year though, net-debt-to-EBITDA, than and X.Xx leverage we net-debt-to continue with of to at remain the

the million sheet, amendment We the XXXX. quarter maturity XX due our our pricing to optimize by we XXXX. basis an on term-loan also over extended reduced of the $XXX million cash. into in further had $XXX This points To closed and balance

to ability and capacity and used manner markets proceeds adjust. the deliver an as We the had can funds have to these even to further. our accretive use continue in We lower

acquisition through from We through points markets to key XX yield that also to basis in where platform invest XX greater XX our acquisitions our can to and above and funds current points also incremental drive XXX basis generate property we growth, management development use pricing.

to also after even will repurchasing opportunities itself. million a shares total, new increase the manner, become attractive including measured repurchase in more end. in We quarter million or $X albeit started should present and It pricing have $XX purchase,

deployment our important this that of always, will is be measured As it capital. and to patient in note

in that for accretion allow we terms. liquidity the Given the cash over rates, and longer of the believe significant move flexibility that medium significant to

quarter. I may it fourth be turn the now dilutive short However, period to it back time over for of will Scott. included in

Scott Peters

Thank up And will it you, questions. now open Robert. for we

Operator

you. Thank

the question-and-answer Instructions] [Operator Stifel. Chad The ahead. question from Vanacore with We will go begin Please comes first now session.

Chad Vanacore

to would expect market the more an update given along more into that So see disposition we early you've year this that outlined Any in and acquisition helpful. be view or XXXX, should then assets sells HTA retire the terms? environment, during way debt

Scott Peters

as hand, And growth some certainly, be challenging some considered an environment, assets assets this that, of to what have us quality talked our that long-term sell our feel now, other right find high-quality markets -- we think now there maximized I its that on in we basis. for accretive call, about the for think, to the been in also years. are doing the we We've and I indicated on XX non-core opportunities had I assets may the that value. to

And opportunity to reach And is time for take take a they that what have their good move think us. the certain so, always thought value a they most materialized companies or this would. they through not I think assets

opportunistic or do more I some you'll think months. see the certainly be assets So six us sell over next

Chad Vanacore

with that target any right, think All And dispositions should we markets about? Scott.

Scott Peters

that type we think growth certain in some We something markets. other had Midwest markets that are to before public, stuff along the We've that acquisitions of we are that that two in have out we that portfolios moved there a assets. or we Milwaukee. bit we came little left think talked one and with of out came us allowed move There sold is there past Typically of along were there. And we in markets get the the that some of there that secondary that don't larger are we would.

that assets good perhaps some it local to in now advantage, to Dayton gotten time take would about be have to be a XX% We And occupied. have XX% a buyer.

would an to strategy, as strategic XX to XX% our markets. is invested say X years the continue us investment overall goal over from see you'll into company X I a be to next our So what key in

million relevance We’re thing Board focused to the our company platform, on our one a number management the grow that ability asset it's of that X, have growth. store focused. thing, the a to in and is from I and we think, produce markets we continue feet to to one think The for platform, years, XX going management the Directors and the and on what to is team have next same take a of square get think really are XX, advantage we what from solid

going really that's So strategy our forward.

Chad Vanacore

is for it first, fair that to next, usage for repayment, think in cash, of anything the missed? repurchase, then, there I of debt share And else and

Scott Peters

Well, development. we have

for Duke what year couple year, that I HTA to or the our largest I the of one the quarters that all big MLB owner, the and largest company that in in acquisitions from the second an take that we’ve was MLB think really step of think is perspective. I that thing the were thought to our XX% talked markets; us markets. us step assets And were our about last to the opportunistic in And prior was a grow for us. acquisition for a was they time

from. into markets begin to weren’t we started and moving we So that had over with

the So development surprise a for has big us. been very

generate for remarks. opportunities tremendous continue that are prior our to basis Robert to XX talked his in that there the have that and think we markets us XXX relationships in points about ourselves align I with to

dollars that’d million couple us, a be year. a For hundred

Chad Vanacore

CapEx elevated to related One last Do It are those run to normal a is looks about? this XQ? and the return to, Or like Forest probably Park one. better in TIs rate back think leasing.

Scott Peters

we up, first expenditures. at next within as, should No. there’ll back of rate quarter spaces Forest fourth we Certainly Park saw run the lower as year. to We couple the from go run quarter us assets shelve lease be certainly the to that prior you fourth see earlier capital this expect But kind expenditures space a year. the see rate you’ll quarter, a that in of

Operator

from with ahead. Securities. comes The go Please Karin MUFG next question Ford

Karin Ford

new commencing Park? theme, Forest you your can on you that Can at about leases read -- new on rents start that about talk And going was a when just into HTA that? there by I that talk MOB construction Sticking facility. does under

Amanda Houghton

So the next in we first to the second of rents expect and commence quarters year.

beds specific from of they’re and construction, HTA revenues the that announces that, the generally continuing in the till see of that’s be the you’ll So specialty start to in year. wait first announcing, quarter to some probably hospital pickup And they'll regarding add invest to and to leasing. also plan we the the when but next new

Karin Ford

on second stock question the just my is buybacks. And

you balance lot here, cash the So capital dry a of a of have obviously sheet. warchest on great

why You What’s bought more? back of XX driving volume million recently. do your not But on decision your repurchases? share

Scott Peters

pragmatic accretive. So be very I think, about said it. We also to be We always we we’ve opportunistic. believe to to be be want to we although want want

your so, from of original the assets, I MOB perspective. We largest -- couldn’t out positioned. many quality think, XXXX better owners. sheet is I think we’re And a I question MOB move best We that, think do don’t balance from with be up

Second, performing we acquired that’s platform indicated we have when as a Duke. we

about the to of we’re move that can so and came can I this and think X.X, that up. X.XX the we’re seeing acquisitions they move to they take then overall platform's that, was that continuing big questions the do one up to And continue was, working. it and

will So this do? person that We would we'll time is what will we I logical the it's any appropriate. think three repay at debt take steps where

We for development. use will it

find. will We

with side our there be will to accretive think, opportunities selected prospectively are And stocks can be, think we and found, of be will size. markets the and in utilize I appropriate silent we with acquisitions. sheet because that continue the do We buyback to appropriate to will it. we it's won’t balance we these we the then where asset completely equation management

Operator

question ahead. comes Please with next Our Jefferies. from Tayo go Okusanya

Tayo Okusanya

from me. Two questions

the of this that I what decline? same know the to the added being this all, what unique, quarter-over-quarter just store the what again, is confirm assets were that contributed kind to I quarter pool again, specifically decline by number, want on wanted of And a changing. basis, same-store driven First all that

Scott Peters

think, I we to we for Well, this expect to our about same-store the in X% growth X% as talked be year, range.

continue think of midpoint the us -- to that get range. really I you see your

I we've think this what been quarter. encouraged about

to good portfolio. leasing continue entire and see is the of growth positive throughout kind We traction going revenue

our are X.X% revenue we of So X.X%. growth growth seeing putting you’re and same-store

I think positive we trend that see as us. a for

we of some that for added the Specifically, this two pool, And the that quarters. five look first bring of owned our of there's in comparison troops or the asset, investments acquisitions. bit a especially XXXX new where of of acquisitions accounting is same-store place not four take the as we majority quarters into a size, period, at you anytime the we little

a to of related see there is X% of So to growth really noise little bit strong we a But that. continuing. overall, X% trend same-store

Tayo Okusanya

-- maybe again, I with your those some growth, that but particular, again, peers. I your so think, most appreciate around comments. sensitivity of same-store much NOI But Yes, in of

assets it's think, you kind brought what same-store versus your pool? NOI fully, differences between old kind of helpful I fully lower which at were I probably understand just to I’m that in, of the decline. really understand not so the

Scott Peters

pools, with pretty consistent the XXXX They compared I -- the we were the think compared, what a both of our did. the perspective. investments from portfolio what actually certainly growth as saw in legacy did growth

around I think actually right were trajectory they X.X% growth both there. the

overall pretty both and between the we were from on an acquisitions that they legacy basis. consistent brought So portfolio the

Tayo Okusanya

drop. bps But a you still XX saw

Robert Milligan

see So X%. I I going think, to think, ebbs mean, we’ve you’re said and X% that flows. to is there yes, I Tayo,

have markets, square square XX We feet wherein five. another million million square consistent. now in in feet XXX,XXX I it's think XX feet

talked and X%. this MOB continually. five remember talking about about sector, we've the I the I when years was ago about growth think, it average with

to has to seen ebb think, revenue you've of portfolio on quality, think spreads. move I quarter-by-quarter. continued then, do about. I quarter-to-quarter X%. you been X% what move focus, portfolio growth, the flow size, is going Robert us It's this the up as And is talked and on those just product a rent through We’ve of basis. to this But

anticipate to portfolio to where see So the performance. the X% range. that's you’re And I going think X% we in us

Tayo Okusanya

see that idea me management look general, a stable there’s allocation people then what earnings happens seems this kind REIT in commentary typically, mind, kind hold. anytime get have, Scott, decision pause the And next I like kind as it the balance kind at the creates I appropriate a of around near-term something may think, But all when take or what some delever that. second appreciate I And future to some sheet I think, see that -- The the to feels capital of again, And fairly in again, teams with way question they're dilution. of MOB cycle. of I uncertainty think I it space my your it seeing about of I'll space.

in kind demographic -- just or talk the pause of am I tailwinds of curious kind stable -- everyone industry? why have viewpoint about? that’s the some that the uncertainty the positive of I fairly that seems the it's think So that the when actually basis, agent Is given general to just fact demographic

Scott Peters

Well, I completely agree you. with

-- sector still are MOB the and at think tailwinds. MOBs I the the of forefront

So for going five XX think to tailwinds I or continue years. the are

dynamics seven $XXX this to averaged that. or we come billion even and think we change But about think before is year. favor. the I size last in for healthcare our MOBs we where hospital and million further, that, are, of years even of is I election bought the $X.X when the November going eight look to and We'd up, at systems going

performed that time. So acquisition from We we quality a portfolio highest made a at the We perspective. huge bought step. the platform on

space, the equity move We've of MOB equity. I that is at you XX-year XX unseen cycle. a value think space. MOB look the pausing, guess, for at a or seen We've rates you about, say comment that's in when had by seeing pause And pausing say look I next a the there is pause that you environment. years. really It's three tremendous when a if private private the your in I not six not something months, would the in interest

quality. that portfolio continued X.X% not people on There to We to now, we of are that our They're think note are see They’re product year, frankly. are growth chasing haven't to generate of going we seen this the a basis. some X% same-store assets that right Duke products markets. the in compared products quality there, out

articulate, will that And what we setback next we a in XX presented be lot position be if grow to focused and you would a of tremendous continue forward been think, then think are five or that last markets balance or XXXX of pause, allows in dedicated, to some I opportunity we a the more owners had I MOBs are So my when I opportunities for a very that that's which we than good we moving sheet years, putting have to balance is that XX a and sheet, a going else, say pretty itself. place had XXXX, because tremendous over remember money on our anyone years.

we’ll So patient, relates I to as value. and it prudent think to disciplined be shareholder continue

Operator

will Todd go of Wells Stender ahead. Fargo. question be Please from next The

Todd Stender

base QX? the you Amanda, I X% spread see success better expectation. you about did the in in rents highlighted X% than QX talk if the in that than a you I Can QX. QX. But right, heard lower expiring re-leasing to rent did that and obviously were

maybe share? that So is further just were or they wonder there just market some I brought to up color literally Thanks. you if can

Amanda Houghton

will reflected rates see we where or the more were higher And or in what California, several renewal you square in did we spread. a in feet renewal generally So to medical. several of feet leases, medical XXX,XXX higher square and administrative XXX,XXX Florida, Austin, of executing feet re-leasing maintained XXX,XXX use, over were a office have and leasing, square There that's generally. in X% converting in

Todd Stender

Any how in like visibility what the can on Okay. look about, any And color you provide QX? QX? QX and rents on

Amanda Houghton

Yes.

situations that's unless quarter, that have and some X% continue as be, to in change you've where we standard. range just the X%, this use. have We And see our to you generally a those will of a portfolio, knowing got that

Scott Peters

that either from one that, Todd, the on seen we is of things their quarter the at from extensions while they most blend you fourth out leases. are And existing a think, and for I is reached favorable used term thing the or tenant be healthcare extent, to several look systems the by first to the other to business, they prospective doing of interesting activity were favorite it. gee-whiz, the us And reach get know -- out something this looking of is side they reaching quarter that renewals when seeing had we've we've interesting to more out. the let's try and

in critical seeing markets. some pricing these We’re increased some of key power locations, in

will think continue see so I spreads. And some favorable leasing to we

Todd Stender

same And Any term the at point? increasing the …

Scott Peters

And the five, a stopped, are for the they construction the are into we've or from time all from the assets for longer; that But results time we’ve rolling longer trying looking that where are Sure. three, the dollars a seven the that escalators are the there they tenants seeing positioning to do we of What taking I from they mean, is little a is appropriately Certainly, where up major and recognition through putting term. are renewals about sure that space. the are we're heard seen coming is years. longer. perspective three, a -- little make thing a the next economy. the that's you're it seen expectation inflation little the permitting we've in is cities is other

Operator

from Next Morgan question Stanley. comes Vikram Malhotra with

Vikram Malhotra

categorized around of the the you of a terms any being on quality? color or and CNL in allocation, safe different are portfolios landmark any patient a us more those just give portfolios large or you to comments be bit just in whether the other capital how of And could maybe say Scott, of would all not there. it you interested it's

Scott Peters

I Well, not Vikram, the guess, process portfolios. of are I we say looked that in those would -- at we've

quality of well those of portfolios. very aware I think the we're

fitting platform into larger think markets. not necessary secondary you not will also into It we folks the is appropriate going because, into what look long-term we think that has as But the at particularly They’re systems that know, markets. if to portfolio, for get is key assets in in somewhat and not CNL portfolio were and think, and too, an we think we’re REIT. specific know of differentiation fragmented. in assets, the job I a of some And traded management whole, in repaying But those I done value of that are they’re non-MOB to in markets someone And the great our last assets biggest from the close anywhere it as think because that folks has, don’t it what assets a is build-to-suites acquired them I assets, whole they in there, to come you some whoever But not price. for it it. we quality I know up think fitting a I’m also us, healthcare and our they believe, asset going requires I make we landmark great quality not locations. year. well, again have pretty view group.

pricing would very the think I interesting. be

up back that one, think entity public or two will it. we’re well I alright, we pricing sometimes chasing this larger today's last is that and chasing in only and I the private folks they not another reflect But on how portfolios. marketplace, year. view those mean, equity what think ends ends chasing says, that if did I how see quality? that do other steps up here very what

Vikram Malhotra

year. expansions be, of One to likely in to and of believe, big look in are changes expirations might early like? renewal any in I in be expiration terms that renewal there to And probably next X% St. then indication kind you spreads or just Are lease? Joseph, appears it’s mentioned that range. that X% your of what Any

Scott Peters

quality. I change. that Cyprus talk very fortunate, and be had and higher-quality regarding down a change, system And bit talk -- you we’ve that that is read about systems. MOB that Forest and are tenants we to because and renewals to had the on want a longer you went healthcare some our We two now extensions, we Robert again, I went actually time yes, healthcare recent the course, both group through going has credit some had that a little up. a through through took cases, that participant positive HTA that’s when moved to gone in some out there always with we a up we because going think, in of of let than assets of closed wood. HTA. to same something and And down it's a But And move be HTA force. a that that’s Park been healthcare we you And higher came had clearly we’re our But going And And, campus North knock something in credit moment. little it's say the quality credit. we’ve hoped us leases -- to transition. of a rents to a through I’m the system. transaction taking a gone In occurrence high these to on have just going of bought the risk to And had transition. I

associated do risk So in come I looking for of survive. specific that’s part that, the at, because and ability the we've your what’s question plays investors the quality and big the to and portfolio I’ll that let I but about location quality, our to a credit such first, pool we when you’re assets the the think I as what’s mark through, for it's the the again, think try looked with portfolio, growth And what’s through the that. of same-store Robert then biggest that what’s is of think talk really we've question.

Robert Milligan

we Yes, market. of one very providence, markets years mentioned I California think, assets several tight Joseph certainly Viejo, ago, their largely that the the country, you bought moving in best real St. estate Mission

to today space ability campuses. to opportunity the the think weigh I at potentially look we lease we some as there, ability with redevelop of always our the

of So great right the U.S. in next hospital ability, interest markets system, as the to we look don't renewal of a one feel simple -- we renewals at tightest kind

options feel have. the very about we we good So

Vikram Malhotra

one then, and you Webster asset touched And the to the was going be that just my Scott, bigger upon maybe broader strong credit of question on the Okay. questions, portfolio. a

or dealer, And increasingly The sort a guaranteed special because a credit level? these you the heard that is of are the purpose taking your I for locations, into community off-campus that of looking hospitals of the at supplement of I've reason so health HTA, system have play credit can the entity asked does what us a of at So usually at percent level -- core leases improving. are side fit that assets that Or local likely those does corporate you et where rating? all space provide cetera, how your at these have how business? are actually sense actual relationships give like

Scott Peters

assets those ago I question be with or talked seven, interesting going going it's last I think traditional work MOB was. what I’m going they do your to were The Robert I one. thought we’re I the Amanda they talk and because, rates cap down think move about five with were become I quality And to first and when or let years varied. that. the But of that first quality fives, would seeing were office replicated into to think about,

I seen see we’re I it, I we’re to think going continue it. think think seeing we've to it,

group. and two cap by attached office couple the And groups that is same about building. you located medical not the and patient hospital and I because calls for the quality three demographic or arbitrarily systems qualities wrote not the a do hospital I at think again it central just large the and think or credit those one that the talking high high all to it's ability a corner of It's with that years MOB that the then they that in location one-off a coming off-campus use physician are But looked carrier system rates that or is talked a something of physician that’s we've at it's down I there. a other move stability been the off-campus, is about. again, the for off-campus, gathers building four mix look a event what building, and that that's agree. I a you and a we’re rents read

are rates investors. to campuses of do I I Robert they're apparent is are the coming but think of think down think on they're assets cap the down. recognition think I the in coming in that. valuation, those secondary value becoming, I down in coming don't markets, going to about

Robert Milligan

the in think, with parent you are we these When or that tenants I the basis, and listed health in. stakes lot the that that see from their across the well as of really it's area, we've space, think, relationships typically leases on I as system these the to up they directly ownership specific with physician Yes, there. leases times you subsidiaries as hospital a the roll important note out, the campus system have in direct see group the leases health that affectively look

Vikram Malhotra

guarantee or the is -- a clarify they HCA, that are to like HCA, in? local with entity corporate there HCA, just is whatever leases by MOB But your located

Amanda Houghton

with health a typically that have parent often the system So hospital our a will as as system entity and you times the leases tenant guarantor.

released the entity as actual of on where leases have the be the system we health evaluate looking that basis and guarantee, health role, a seen we’re we the hospital working we Now that’s of depending case-by-case from to with. on

Operator

The next SunTrust. from question Eric of is Fleming

Eric Fleming

like or benefit as buildings the with but close you systems saw look two where the whether is MOBs? that health they together question one dark XX% with JV to larger there. not, kind facilities? and guys larger of be for and the Adventist it’d actually close it That going reading they're into more merge get to outpatient The and announcement benefiting facilities bigger treatments sound JV of, them got like of earlier as your would facilities, about Is down headline you more the the of hey, you Ascension and I getting together reads their people a be

Scott Peters

When high Yes, roads head. nail every really outpatient the location, a quality lot well really folks with Eric, by talk, are looking driving for on I located especially the are of in core hit campuses very the community in and think, we major day that we there you communities.

look where systems those. looking space, assets, especially who on just the are beneficiary the When tenant be take off-campus, So we is the ones spacing underwriting for or health to we’re we the competing parent the at of should not there.

market, you our these you systems joint assets lot So or of see a in ventures health as the see new take well think are pretty positioned. come place we

Operator

is question Green with Advisors. Lukas next from Street Hartwich The

Lukas Hartwich

senior factor that? As assets how you into evaluate housing your hospital dispositions, and do

Scott Peters

our probably I portfolio, at our over focused medical we’re couple MOB the of with buildings. in think still of When assets we’ve gone XX% look office process through most you a the last owner, years. XX%,

As years we've couple the living type through assets. gone think, transition certainly of see you’ll out we I move to the through sold selling that process. of senior And continuing our majority assets, of over last us

Lukas Hartwich

Great. quick And then a just question. clarification

in that's Park, Forest same-store right?

Scott Peters

just for reason. It moved That’s to in the remain continues correct. pool. any Yes, haven’t we same-store

Operator

from Capital. Kim is BMO Please next with ahead. John go question The

John Kim

this a Looking numbers rent those expiration to square your year renewal apples am at And implies apples, at $XX Page schedule wondering growth? rents rent your XXXX XX, per expirations find foot. and comfortable to X% still if at base I you on feel X% $XX. are

Amanda Houghton

The do necessarily of feel with is. strong the rate escalator. X% not still we lease comfortable a rent to Yes, really the factor X% is rental and base market, how

it deals at. expiring it's depending we is, and that that X% what to renewing, market what that rate dictate on the but ultimately, average we’re So where above expect just will we’re rate be renewing X% to

John Kim

you’re between your are between leasing off-campus either or rates the line? the any spreads difference and And getting renewal there on-campus

Scott Peters

other there there's is on I'm last months. We’ve campuses healthcare that do that not And is spread. to and because unusually some and I landlord. tenant influence over and a how says that, our a that ground is the that behavior integrates abilities seen the think spreads the I years, and you're But have in certain to that ability works that if that to saw systems leasing last there X both to rent in do because far rent changes high philosophy hospital two on-campus. or a X the more on that the But can into lease, hand, they months, relationship the we’ve on-campus, prior now. campus, process last I I three we system the would I'm distinctive a there move pressure greater a necessarily were with healthcare rents exclude know

for eight of some leases, we TI's with as that were extending the I they the of mentioned mentioned our the that been quarters I seeing quarters here, improvements think, seeing of two now recently, do us our three both tenants why looking Now, want those there you're additional systems, one something. lease, best larger getting forward recently, healthcare in consistent move of some the number, And or as off-campus, the to but which we recapture able ability where produce produced the we part here, to about us earlier, on also we're to extension. rents, some probably is have some next

Amanda Houghton

that And in had comment, say Clear in in that add Lake hospital I Dallas, that before, Houston, transitions just mentioned Park the Houston. to of Cyprus also Scott to Forest some will North

where smaller are re-leasing hospital of transitions hospital more larger we leases leased away, that’s kind As the and directly pressure, with we groups, these really of position and start go see happened, some and to larger a have greater because the that positive leverage. you pressure when ability to leases spreads. downward you have on has that spreads get the the tenant leasing could that It's

John Kim

on-campus between the may rate and What’s this. seeing right I off-campus? cap missed now you’re have differential

Scott Peters

months. six haven't the been we Well, active in last

But would on-campus what that can’t I is off-campus. between specifically you’re think whether basis still So XX tell that I you or be. a XX, difference point there

market. the would it I depends that say also Now, on

demand, a about then strong got think, be If component critical change because, market. But or different the need, high systems, patient a seeing basis I is the in country. it's healthcare. Boston to the mix again of and XX than a -- off-campus think system groups that that's But the high or Tampa, we're location markets healthcare very XX future I Boston is in talk so it's physician big for other that healthcare generating some the demographic of is what points. you

next to of off-campus. the one the changes in the we will years from think on-campus biggest I movement is XX

to desire think efficient. access to be increase, to for the I but the is access healthcare going the that

be physicians. to physicians efficiency that to for four visits, so than four visit by better different four much different one utilized And is visits

to deliver where our that think going in do cities. more off-campus a move more major continued see country are downtown to is I So and to able cost-effective healthcare healthcare systems campuses efficiently

compress rate So will certain probably that cap in that think continue to I areas.

Operator

will Mike Mueller ahead. Morgan. with J.P. Our go next be question Please from

Mike Mueller

of the comments and look talk on coming out there. focused it Robert, get you are to bit trying a angle, seems people you’re dilution sold going lot, about a or little an lot, we more that much but to ultimately it 'XX, on the little are your impact like how Can going implications bit from XXXX in elevated to we and going We've is a have bit sold forward? that's could a more? sell 'XX, little clip it's still estimates

Robert Milligan

what think from we’ve see we from look a capital where at With as taken I perspective, we’re certainly, positioned measured done you’ll of sheet and allocation balance distinct reinvestment, perspective. a a and pace certainly. And very time how to estimates as what’s really the in we at rate dilution we fourth do and do some look be around can the XXXX, quarter redeploy most our capital that. right the of

as that I very and markets is, better presents good opportunities good have time move, run. in the because to shareholders low think a Scott it some view liquidity is, are it’s long our leverage mentioned as for the

better think of opportunities when I can view into quarter, our the present quarter fourth as we XXXX, a look certainly in will remain that at we I or that we see fourth dilution and as themselves opportunities we the think have continue get earnings at some we to we into patient look could So call.

Scott Peters

Yes. we’ll of one And that I think the that’s do. things

fourth this at thought give as to quarter. and I know two we’d XX-year it weeks where in X.XX think we ago. look X.XX, guidance investors that will was through today, for be some we XXXX don’t I the move I

at still an If think unknown you just economy. -- in look I there’s the

of big I as have would we a election XXXX. very is big will the we’ve haven’t them rates move cap estate have not to may it but they expected November and on -- be in and maybe the theoretically move impact where have unknown going to somewhat will I you side and moved very the move things thought as is they’re that where about a stay XX-year clarity equation because some have through the or a and talked real moved there’s think at maybe least in

Mike Mueller

XXXX? your less is where mean think today sit than selling you’d -- ultimately that sell does you you I in do your you’re gut instinct

Scott Peters

wanted that we’ve sold I think to -- in do is we what thought that XXXX. my

a $XXX was us I a see million one getting and advantage opportunity that. would in another Greenville we great like Now that us opportunity market don’t sale for take of

you’ve not think would us what out year, do this year. we I probably next that So seen from

Operator

The next with Bernstein One. from question will be Capital Daniel

Daniel Bernstein

portfolio low and of about you Hi. the a is? might have some your some but cost the missed are the I increase your what call. to of in about portfolio opportunities you’re what talk it And in the your performance are doing cap development But bit capital existing of rates -- I earlier in just redevelopment out redev? there that light to can talk with opportunities I want the know where little

Scott Peters

mentioned next some great -- got receptive to new Mission really recently about be and and proactive development something had we’ve redevelop but state-of-the-art in has of be opportunity where a what to moved rates, will Viejo question on great that's assets, an XX for Well, will us where locations. going two them, years. around into have real earlier the real campus, estate healthcare a Robert settled also a opportunity fee-simple, estate, is that or three our older that

need So and space think the years, healthcare that I XX over systems to time getting physicians the we’re stage. and next that

cost-effectiveness do how to those provide do do economies efficiencies, better systems, right get groups scale, stage of the physician you think is how now healthcare I how better tenants.

we it to because get So better making that something, assets, redevelop there a control want when to are growth, just that, demand going introspective on one, can you But them we’re into dollars are put rates, here is better look at you you reciprocal I these expenses. we don’t being sure do redevelop very and we get to do if a dollars growing if value them perspective better wasted. them, the we we and for have and think from put management

us or get think as talk of year. two four about of I to opportunities the you'll three quarter so And first we and or fourth see these next quarter

Daniel Bernstein

the back brokers bit I you’ve if I I actually that and than don't out less little by any they’re a it there mean know have point. that may cap of more XX -- basis rates we maybe is you a be it’s in issue bit alluded quality you earlier I think few coming up if little think heard that And seen call? or that had, of Okay. a from question maybe to is the other a

Scott Peters

Well, seem we’ve I we’ve that, markets assets certain a would we’ve markets that would has that say bit said for that that have been acquisition say have, the in said, markets. actively little looked expectation and specific we that we one-off to But was as the at opportunities. struggling. seller are looked that from XX markets and not looking at, I those seen the assets changed we’ve Having

they of Robert owners a or I own. went trip, of a looking them I on, fact, went locations met In the four but to of what the and half and and to it with had unrealistic expectations that call are three I’d know trip, directly assets sell don’t

of add two would to we’re conversation certainly couple three, Now engaged be other them, the and we portfolio. our that something that or in to actually with hope

side. from do So to in for calls else talk the the somebody what hear be I were. about happens coming morning I cap But a and acquisitions; acquired rates some larger will if cap And rate reported anyone MOB perspective. get then not two to heard assets know that I other folks haven’t MOB any on the said one-off I see they’ve haven't but here this bought portfolios what seen did I interesting up that. think talk those it what of the about they’ve assets, these

little they think have I moved moved they little have would would a a I may think that markets, Secondary bit. bit.

Daniel Bernstein

one those were morning mid-X, contractual The a already. Okay. is but this from

So …

Scott Peters

Alright.

Daniel Bernstein

private is buyers. and Anything with that seeming front to we just at don't new anything ventures on on are don’t about or could that before question changes, not One and about calls those from that heard Nobody materialize this think this them joint point? last private -- before mind. this markets. quick So on -- if you I expect you talked talk priorities equity

Scott Peters

of and back generate necessarily earnings look not in lead to grow asset. for that the into fact help year, use with in wanted on of somewhat the tell a the six, had our convinced certain would turn one, other Robert -- platform type our we our Duke would've transaction, is, five, around equity to this the The we over and platform, that assets that weren't use to it They with will about perspective that the had seven look so we into was nine three, any discussion in we our to attractive. we’ve a MOB or we it Well, markets. that a couple and it They invest that prior they necessarily a not buy we the something arrangement. even or did partner that been I and We platform could the a JV, though assets the feel space, we would weren’t has now or even short-term. equity me, be years have of we will by entertained transaction. far did we months, it that get were knew an last felt were for about attention We would that in, didn’t now, that from Recently, us longer-term that been on spend it accretive were -- problem certainly in that quality frankly second year, the of that think from times growth nor question that the portfolio. yield earlier moving we JV would I -- folks gets think continue utilize approached to however, for

of didn't no kind we We we’re something. flattered interested. not do So said but

had been of we’re that so the and viability So shareholder yet. think or pricing internal was that to always quality But employees and long-term it investors our meetings We’ve forth we and dedicating just right good seen opportunity as And that's for we generates platform forth, maximize beneficial to discussions efficiencies, get came if for to going through have approached. high transaction our at value. about along, a indication us value. shareholder our an was Board and assets I maximizing something so it entertain come not and

Operator

Jefferies. next follow-up Okusanya a question is with The from Tayo question

Tayo Okusanya

Hi.

about quick community new maturities. line on a just up the front? Vikram’s Anything some So on of one of the following questioning lease

Robert Milligan

did through on MOBs a Health down see Yes. the transition. I hospital a campuses look as We didn’t From long-term continue or think System, go Community the that actually them, quarter, campus. one to Health our we to that. of the sell exposure We We in perform at campus Spartanburg. continue Community as within we did see to exit growth the

assets However, that’s not-for-profit hospital in in just dominant the own we've a We transition. the former also on just That Oklahoma in area. campus City. through to two got gone a sold community larger

the As transition went out team in and to how talked Amanda frankly invest campus. and prospects to we’re they’re and the going the about to more them, excited continue

HCA seen community the that’s grow. positive, just not-for-profit it's is place, dominant and owner So buying of to I invest think campuses. in within transitions as we a been positive capital the they’ve excited putting We’ve see to the looking selling take certain new as a in other experiences lot of they’re almost they’re by our to these hospital or whether hospital campus it, trend all

Scott Peters

I I and of was major would prospect about local all else, back a closing a and just determines basis are or is while how with that the the now the again a really and to asset the comes hospital created synergies something hospitals associated ability not investment put class the add, you’ve think think location. continues. equal is ago It there I hospitals. MOB key out think something But hospitals closing I on

the happen into it’s expanding. want that have MOB. answer they’re MOB that's hospital, that And that a dollars you location expiring next necessarily was that very we would’ve the with Indiana would to have up in We back the -- and that’s show to have put very have busy a continue year to because -- a of in stepped and whiz, sort said you gee something they you But is interesting the well, that Indiana “Well, if lease MOB like that on.” they just busy a not gotten very, this was

more it’s on particular getting when it’s into when so it and I that so -- credit, location that And we’re location. it’s more hospitals, think is great. when depends But tenants, closings, it's really when

Tayo Okusanya

-- these leases most when of expiring? And are leases expiring tenant community

Robert Milligan

I I major think across don’t the significant board, think have any we role.

I think it's relatively level-loaded on the community front.

Amanda Houghton

Yes. weighted eight remaining. years got average We've

Operator

question Malhotra a with Morgan Stanley. Next is Vikram follow-up from

Vikram Malhotra

Thanks for follow-ups. quick the taking

kind Robert expect you FAD payout. you Just and down to expect the say XX CapEx level? towards Do normalize to to trend that clarify want you would FAD of high

Robert Milligan

for we think in expenditures I more third completed. capital month to see be more capital allows quarter, Yes, one seasonality typically just a projects for the

the see We facilities. to the two run of lower Amanda year. trending you if back larger and of of we’re combine first first that think were that last some the now construction, quarter mentioned, end acuity I the higher signed definitely in year, to that in convergence of that frankly fourth as kind quarters leases rate and the the quarter saw at some completing with we

Vikram Malhotra

MOB Okay. then had next did the close you just there and Webster clarify to asset, an to it. hospital the And

leases to there never groups leased -- and that all? you was no hospital saying no they instead or -- they MOB the to at was You’re change the was with impact, physician converted -- there were were the fine,

Amanda Houghton

of occupied hospital. operating and the lease The the by an continues physician lease group it’s to be

the the physician operate the despite continued So hospital patients. group to closing,

change and in evaluating So our as to an now expect the is physician to process that’s tenant much coming of see lease we and going on, the impact groups through may ultimately don’t our we’re bringing those but the hospital building. on

Vikram Malhotra

been So impact to there there? occupancy has no

Scott Peters

under the couple actually indication they where be. we are -- rents not us a agree an for We think may dollars positive of should they example that impact. expect where but think with We

out, that on her, will lease something value I -- less. work Amanda be get better So get her think transition for a will has will got work but cut not we out does we if to through go that that

Vikram Malhotra

hospital closed then to quarter that or And year it. Got just clarify the in this first of right? second

Amanda Houghton

first quarter. the In

Scott Peters

facility. the on I UTMB And morning, of new hospital that the taking announced the they're operations in, with announcing over coming this announcement the saw think you

one-off as So they to dynamic from the credit that for overall a where this improvement upgrade it's wanted hospital be to going an and location volumes. saw certainly it’s operator and be

Robert Milligan

lease -- is I that. again, ground credit what given of MOB, deserves emphasize as at been would not that the fee-simple lease. we it And now. big talking Amanda a If ground to compared is Recently the had about as not it positive has the outcome can’t be particular over been

our We over. the there that to have hospital that’s hospitals in fee-simple, is it compete looking with taking to be competing MOB want

our use they So their have of that MOB. in to the that solely pressure sort keep

and at at Park was in fee-simple fee-simple imperative, Clear was Cyprus Forest Lake So Cypress, fee-simple North imperative, imperative. was

type So assets. like we fee-simple

you Now campus, the on are again aware becoming early that more fee-simple of because healthcare fact advantage process between leverage you bought develop like the We the fee-simple a acquisition non. and don't predominantly get of and assets. our when systems more that in lot necessarily we

Operator

Doug from with DA be will question next Christopher The Davidson.

Doug Christopher

of cash that? -- above NOI funds kind am the have sorry. cash XX% to look we trending level, relationship And funds rents, cash reason the available, at FAD, its again for rent, that new is cash -- did level you I kind how see for NOI a available that up I The kind on over it’d of think this about just new this historically above a a million XX% for this $XX on the kind follow-up well level and ask wondering, the of area area is of sorry is distribution. NOI Is do $XX been I should the you? the I and million of or back a

Robert Milligan

relative for periods expenditures we FAD here. elevated over period, how look thanks -- our capital certainly we’ve the certainly I question. I to the have we for first think Doug two as your some at run

I deployed leverage. mean, we’ve I that that seeing disposed leverage certainly that of sitting two debt to over years and second we million pay-off and our had of now is lower the $XXX into earnings assets. lowest that been with last some really the that with thing assets fact think the right we're hasn’t cash have you’re used

you’ll But go significant think the quarter. back certainly the our that redeploy fourth see liquidity normalize we overall capital I in should until have. this So around and down we rate and expenditure also first run remain our level

Doug Christopher

just of that average been remain or Then are sense. -- lower have side, others. buildings, does on it -- so percentage buildings, newer the you mentioned of lower lower you you as And your bought of kind that than a kind makes Yes, of the assets? CapEx that expected than CapEx had versus when CapEx coming to some down, back does

Robert Milligan

Yes. case. being the We absolutely that see

overall converted I built space capital certainly and out our But an capital. think as there’s a are to some more assets less of space. some we’ve require that shelve things perspective, required couple had we from that continue

we’re getting how more disciplined we as the both overall capital we’re our into we putting it. the tenant think that have as where on building our I dollars that well utilize in value we’re capital improvement

So we rate. NOI XX% certainly be do to of run to term a expect that in longer it XX%

Operator

to the question-and-answer this gentlemen, for over like I to Peters Scott conference remarks. any turn our would closing Ladies back concludes session. and

Scott Peters

you thanks much questions. for everybody the Thank Well. for listening and very

they the up in San Francisco. coming NAREIT you. think were I Thank analysts to certainly and investors and forward very seeing look at we insightful

Operator

for you presentation. The concluded. conference not attending Thank today's is

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