HTA - Earnings call transcript Q4 2018 | Healthcare Realty Trust Incorporated

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Operator

Good morning, and welcome to the Healthcare Trust of America Fourth 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, Senior Vice President of Finance. ahead. go Please

Caroline Chiodo

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

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

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

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

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

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

Scott Peters

good for earnings fourth morning, you Thank you of call. us quarter today thank and joining Healthcare and for conference full and XXXX America's Trust year

deliver shareholder over to management management and balance with three development a property and as our on dedicated Joining five platform buildings largest that Houghton, of today Vice Executive returns to is well-positioned Chief of sheet, begins the Amanda are believes operator the platform, and President XXXX next years. portfolio, call and Management. Financial me Robert leasing Milligan, the owner Officer; our medical extremely Asset office growth and HTA

conservative, in has annual delivering Our in located office focused, best-in-class FFO its disciplined, high since XXXX of while the last while U.S. disciplined, owner strategic the also time growth X% investment-grade medical at years the largest XX irreplaceable over the HTA balance buildings a portfolio strategy key, accumulated markets same sheet. resulted in has becoming investment maintaining HTA growth and

leasing and of since focusing XXXX, same-store has NOI. delivered capital approximately XX% NOI approximately full-service also Our platform on growth property efficient X% utilization, of cash management annual annually while cash

have for where and of trends overwhelming about in of We outpatient care take move health are where locations three integrated view are reflects settings; our the This academic a one, MOBs academic locations we an years where system talked the delivery critical. to combinations all the country; on-campus care place that providers in health experience. health in are owner largest care and health three, two, focusing; in care off-campus community in leading university will

rental these of assets reflects best and opportunities. and this levels in the estate, of where growth high tenant composition trends portfolio retention each real the critical demonstrate location Our nature

these two As system and importantly, three focus such, with of healthcare all on in the and a opportunities external growth or removes locations without the also one of for U.S. healthcare future the requirements alignment accretive

both by is to on-campus five private cap the last and public and where started we As for recently, assets have markets over view rates shared see compressed off-campus have this both years.

more. over one investment million have eight and we in feet presently in where gained portfolio fast-growing key and Our markets markets XX has with approximately key HTA’s markets reflected these targeted strategy with scale square trends square XXX,XXX or feet

beginning $XXX an the of feel our add ebbs integrated has shareholders. that flows HTA the our capital our strategy patient, scale demonstrate a in a disciplined allowing with year aggressively focusing XXXX future To same; accretive team to markets we resulting assets of XX% acquired and a and market now annual with under reflecting to over XXXX, investment value Carolina management to certainly our development $XXX has maximized our execute long-term present billion us long-term as in that accretive for our South generates development additional platform add capital selected an just future. We and our to to markets earnings. has recent capacity ended in find that utilize allowed square XXX,XXX to in in This continue feet our Greenville, square our it today. to and to the and which XX% opportunities completed and execution positions since the a long-term the with in we on and million The in for recycling these opportunities strategy. leverage pursue public and In IRR sheet balance Our shareholders. HTA the million fortuitous growth disposition disciplined are platform We enterprise XXX,XXX ability liquidity. and is over themselves investment unlevered feet development HTA allocation this asset strategy, will XXXX investment growth XXXX $X.X decision-making, return pragmatic to is of focused the strategy, includes that on we value

and X.X% and performance X.X% the fourth for our strong the we results. quarter, driven for our achieved rental same-store Same-store strong growth. year in XXXX portfolio, to revenue by Turning operational X.X% growth is

feet X.X square leasing new and square XXX,XXX year leasing for quarter square Solid XXX,XXX leasing. including a feet million with over performance in total of four, feet of the

for X.X% spreads focused internal we including year for of and X.X% re-leasing specific on tenant increased four. system, healthcare relationships. the assets, in year quarter to the in from XXXX, growth, integration cash to objectives Our accelerated Strategically expanding and renewals over

outperform long expected portfolios the growth located recently opportunities to remain when our we generate allocation performing many future XX underwrote capital of most as investment within yield. This criteria of annual the disciplined years estate we over of: on same-store From $X has Looking identifying our acquisition real meet and above located term; X% acquisition we at in has and grown deals synergies. markets; to in the our X% acquisition two, Duke we acquisition capital. basis one, over gateway market saw consistently high-quality, strategically investment billion a focused the large In -- platform shareholders, perspective, XXXX, points have that to we the portfolio of in very the X.X%, assets of over key yield our of assets XXXX, to And to the is $X being and accretive and market. importantly that we will underwrote that continue traded. believe for cost achieved million to come In a three, active number will opportunities. the quality total, compared

very criteria, occurred that get is our by outbid diversify asset so from away the medical shares. into were office capital non-core, XXX and trying in these or at rates. the liquidity, lower-growth However, interest Of space acquisition other than assets criteria. sold repay million short very took used and that aggressive the proceeds transactions of advantage rise increase and attractive chase down, deals to classes. long-term situation pricing of few XX% Rather despite underwriting and the met of fit repurchase these healthcare over and our our accretive This we did this or riskier debt, we to

earnings first we will at guidance. look provide corporate time the XXXX, we for As

especially MOB and model, to Although, dispositions new our a believe have analysts changes see how the providing space, we of occurred. guidance the had rule company and and we straightforward given and enable business have a that have model look earnings, we them accounting formal investors translates will recent business at our very recently to number

share the expect XXXX, $X.XX the to FFO we give accounting range we per at before to the and some Robert to $X.XX a share, movement expected XXXX from rule comments. additional changes, X% anticipated normalized normalized reported For expect share, compared with of our and Including midpoint. dispositions to acquisitions to $X.XX per accounting changes the color timing in impact will $X.XX FFO $X.XX, per the our per resulting share range primary from activity. between increase from his amounts rule

our Finally, momentum capital XXXX, intently growth and ensuring the bottom line half in into XXXX. back we early investors focused are years, XXXX that future in translate to gaining and on growth decisions and for of allocation into same-store

will that the turn Amanda. start our call development opportunities being consistent months addition, months in will I platform look over to to delivered In to yields. we now XX XX at accretive supplement with the earnings

Amanda Houghton

team key capturing Having now acquisitions. of million high-quality significance market acquisition results, value our of onto our XXXX $X and Thanks, Duke acquisitions platform ability operating while and our concentration to our of leasing our shareholders. the bring the synergies, platform, remained to delivering bring the efficiencies line and and to the Scott. the representation these jointly bottom focused part on they is and of XXXX, demonstrated synergies, platform our integrating In both as anticipated great in the a

of XX across training. XXX managers, leasing the platform XX States construction byproduct of effort, XX which managers United offices nine consists property Our professionals, planning, asset deliberate in and management of years building is and engineers, the XX

started and of square This the of Our would team difficult over today's be is largest with buildings platform When office with focused XXX,XXX us solely replace on leasing services to extremely management, the we to leasing, maintenance our owned in with markets initiative retention and portfolio environment. the market direct XXXX, our past immediately, in an to in-house led tenants, landlord. improved third-party management years This and we and to to of and as serve enable management. relationships them a versus better establishing leasing intention feet. concentration XX in country key medical did the so

create demonstrate operating for that noting trained shareholders group alike. concentrations over expense of of the able quarters, tenants quarterly opportunities allocate discounted that this markets and staffing, bundle is operating maximize us services specially As our the size are services, advantage. while to we in-house management to increase efficiently of X.X%, impact as The of in combination quantitative value that an and we key the is asset in X.X%. we and with that it's It gained concentration savings market peer along recognized market XX competitive uniquely our the five average pricing. provided savings generated to where markets To continued concentration reporting upon platform capitalize to our in quickly it further able years puts key expense better nearly value scale, for and expand average allows long-term expense to a more these platform, have our we team our position HTA those larger generated same-store worth in-house past have has we're focused our or

Our us ability or without efficiently sets service sacrificing apart quality what we markets. is in to our operate believe

XX a good occupancy the year to which the same-store We QX and our results. same-store at leased. Turning increased very at our XX ending our lease increased year-end XX.X% basis points had rate ending occupied. XX.X% year And basis year-over-year, points in year

renewals. of million XXXXXX GLA. This leasing feet of total XX% our we X.X square year, million square over over For feet of new the included of feet signed X.X over or leases square and

across During tenant Average included total of XXXX, our back signed of large XX% X.X%. growth. positive re-leasing effort our X% XXXX saw that the smaller our our leases and were escalators mix consistently to renewals. increasing rent We to spreads in-place a the a XX% and X.X% year. annual while in retention the averaged QX this for of our accelerate X.X% is continued was in of strong key our leased continued blending escalators on the portfolio is This re-leasing and period and half in

renewal Our per remained year per $X.XX at year of overall. of and TIs term under on term $X steady

with We assets during our extreme campus. were space hospital ability our at sales XX% came example buildings XXXXXX changes. was into approximately addition, XXXX that successfully that of to Park most In or Forest occupied. The and XXXX undergone square Dallas feet vacant transition we approximately have demonstrated

we leased. the XX% at leases XXXXX ended the square of and new over During signed year year feet

of XX% are fill XXXX expect with this average. rates portfolio We first above that campus half in to our the

we we expiring leases, As Across to to our current and have expect achieve with continue. of leasing square XXXX annual tenants look leased XX.X% between and momentum and our XX% to we X% approximately including month-to-month X%. XX% expiration, retention to of over expect X% feet spreads re-leasing these escalators

platform. our front, using and economies to to of the services of internal perform expense show additional engineering scale our On ability continue benefit we the

now driven expenses of we Outside call same-store financials. in in turn expenses were primarily to flat the these discuss our mostly inflationary pressures. by Texas. taxes property despite relatively over an able to increased, entirely will Although increase Robert the I hold were to this

Robert Milligan

portfolio X% our our and last five to strategic growth per have maintained In that annum. we on execute than we result base to yield years, our embedded X.X% sheet balance effective yield a in second, especially NOI primarily improvement XXXX positioning. a importantly year same-store have our financial fourth by From is plan XXXX and improvements cash our growth Despite the execute revenue a driving our Amanda. we given to growing grew earnings by Thanks, capital performance in full portfolio, acquisitions as growing X.X% of balance XX and today's investment sheet our the terrific quarter our allocate and existing a our operated acquisition continued in has more perspective, first, continued effectively: growing maintaining X.X%. our growth: these quality strong basis strong acquisitions. points environment significant over That in and to in portfolio by of manner financial

investments. be of over and the cash leverage to net debt which mortgage with liquidity of we balance We times redeployed on steps of in lower completing million raised late in when the allows first majority did X.X this non-core the deploy this selling repay We We to increase of over $XXX the also $XXX over of debt, $XXX half other expect allowing to XXXX. equity EBITDA leverage assets a took to pricing to at them into in XXXX million to year basis. forward and that million us sheet of accretive the our utilized and $XX million capital on end maintain we

Given from throughout stayed the the disciplined capital markets acquisition year, we an perspective.

equity net where did market trading. opportunity our us asset above around at own the implied of value our shares repurchase assets to give $XX However an million an inferior X% cap volatility are well and

we buyers non-core so do make stock, won't we be where on While and repurchases of smaller intend sales. own basis don't from large an asset to proceeds can to hesitate leverage-neutral accretive our wholesale utilizing we

but FFO strategic years year, was from over was where our increase the quarter for five year an for we XX% normalized plan flat Our $X.XX of share the per $X.XX started and the levels the to ago. prior

again the XXXX. been capital our pivot we to we to deploying public again in staple bottom towards performance since which came line we XXXX, of performance As expect fall has a in our

Our recurring NOI. were of capital or million XX% expenditures $XX approximately during the year

have We increase slightly. has space capital which started shelf to up leasing formerly some nonrecurring caused

However income. investments these which are positive to income-producing recurring long-term lead

Looking to slightly given same-store year for X% X% basis that are for our rent. grow a NOI straight-line than to expectations cash impact the the by lower to us and our on XXXX of GAAP

change impact We expect between before G&A at lease the accounting remain related ASC our flat to million to million of $XX accounting the relatively and XXX. rule $XX

majority in-house of these previously, of leasing majority and discussed capitalize we have we As the currently do costs. the our

XXXX, a $X approximately paid million For gross by have rate our our a Nonetheless completed income that or hit on we the capital while team compares million year average leases at million This expenses X.X% by $XX XXXX were to will our earnings From would disposing in commissions at we $X in million our $X overall. cash capitalized those on we to $X will than $X between the $X.XX and statement and acquisitions also the conservative a deployment million per complete a year-end at value. yield. X% have for X% the third-party impact approximately $XX lease of quarter. these more the million million million primarily $XXX allocation of to approximately or expect perspective, yield,

these for of XXXX $X.XX year. our the $X.XX in building expectations, second the with Given in guidance momentum half to per formal is earnings share

This of model driven X% have dependable X% of five to now to which have three the what next turn operating The the five X% we growth it should allow over produced years. we same-store Scott. acquisitions both potential I consistent earnings growth between given growth we the through to over leverage steady leverage. for remaining growth and all holding and a our by X% for would X%, to constant. back to translates years external with last believe is earnings Over X% accretive development to

Scott Peters

the you, operator Robert. we'll get And Thank turn to over it questions. to

Operator

Instructions] of [Operator ahead. our One. from Bernstein you. Daniel comes go Thank question And first Capital Please

Daniel Bernstein

of -- expirations I excluding from leasing looked bit Good like When the the the morning. expirations you it a Actually was XXXX. sorry. looking to supplement, actually ask down about little guys XX.X% I the month-to-month, rents wanted to XX.X% at GLA went the -- for

into some maybe were to And rents you that hear leases -- affecting of XXXX? I CapEx the should So Can pushed XXXX? renewals how about in XXXX spending me? early up think versus the

Scott Peters

better? Is hear you Can us now? that

Daniel Bernstein

can I hear but question. you guys hear my did you

Scott Peters

did. we did, we Yes,

Daniel Bernstein

You did hear.

Okay.

Scott Peters

with coming start us to and overall. larger putting we'll talking some coming XX about space. next seeing the So We've months numerous or extensions, been tenants, about renovating are to lease tenants, groups us the physician with also TI dollars that in talking in expirations

as see in think we months somewhat year. I of the expiration will six So change it first actually right now schedule, our this

expirations see And in anticipated to some we've completed are that or six go that probably now. are you'll get question think discussions having the your can -- next to months. we'll those going capital. about we Robert, right I to we years gets think two renew I answer because the are over scheduled next down place those

Robert Milligan

Yes.

of of we a at lease think is broad XX% anticipation But that quarterly basis and holding brings out from TI. our certainly additional the renewals on a cash of bit earlier averaging percentage XX% as to in overall. a capital the that as space a in to XX% think perspective, XX% a as it, some I of still kind I NOI little look range we extend to

Scott Peters

of any our putting be We've our -- put of that to not I in. We've CapEx. to in. XX more years, seen their far TIs tenants XX also three on want application with We've we've rents in. -- very over but say just additional dollars also consistent seen last to always certainly seen boost last, the dollars TI to touch putting the tenants we we've tried felt would trying to We're that, over by months, own

Robert try guidance XX% leases TI as things seen I closer are larger we're to that keep to where ourselves. XX% we've tenants said above to additional that dollars going forth for think sort or is that with So probably that much come we internal be. the some larger middle to some XX%, But wanted but with when of they to put we

Daniel Bernstein

trying depends And for to is renewals. anything of tenants, trend of are some looking it I there X.X larger up -- lease hospital trend unique like there Just imagine also kind your XQ, the there. upon or looks like years that renewals lengths In on again tenants specifically that went the leases? Was understand the lease. to length a longer range maybe the to

Scott Peters

Yes, and more I more that or than we've that. the they are seen XX-year. leases X, but from up seeing think larger XX, more not -- out now we're are we're leases X discussing It's there, probably

to And might that little so, gives seeing. of move quarter we're that get fourth see bit. continuing those also good We you you're that rent up a activity and these ability move some the to ability the rent the see But spreads. spreads to in out us in picked

Daniel Bernstein

question queue. question Okay. actually, I'll then, me, It’s in for And a just get for just the one more and Amanda. back

management a lot brought You’ve in-house. of

You controlled the expenses.

what's trying the I'm iteration like platforms, operational investments more something understand your of maybe automation, next to So energy, that. technology, in

Just of operational phase next what trying be. might understand that to improvement

Amanda Houghton

Sure.

into lot we’ve particular So we XXXX as in we're of in of efficiencies XXXX, opportunity I and started with energy a really see buildings increased think, spend. lot our this a in looking and

bundling on and opportunity, there solely we Facility, we're savings within systems believe is up a brought evaluating is building our more the So on that of efficient we services. control last actually this them at significant call, focused as who building. And making and on the Head but we brought looking

continue that, to of So going there's savings to significant we through kind be as additional we portfolio, go think there. our

Scott Peters

answer that of but and and upon assets are them also certain idea program means out -- should calls embarked tenants -- some that efficiency sustainability certain them for part so so to we We've cases improve, our of spaces on energy allocated put your can a getting It from means means to on. of building. to embarking reaching that we're to our and tenants But handle the giving in passed be savings. prioritized some better We to tenants. and the energy question about components actually program. also all It other that what reimbursed we actually the means. an on free almost fact that's together what within It not speak internal an tenants, there's we

to we we analyze how our who six be our five folks tenant in of out those And the go managers. internal to to service and putting about a system cost able our push services calls, the efficiency, have a So handle we of services to push where engineers, have the connect are. them out folks, utilizing we're timing, what property all them

perspective technology are we I a is be passing continuing of along we so, together shareholders, but revenue generating to, think put for also from cost generating hope tenants. And that for what and efficiency, to platform state-of-the-art savings a

Daniel Bernstein

Yeah.

hop Okay. and Appreciate I'll off get back in all the color, and the queue.

Operator

And ahead. Karin our from MUFG Please Ford next Securities. go comes question of

Karin Ford

that cetera? morning. spreads expenses, the is terms expecting Good the of Can give et details forecast Thanks occupancy other us on for same-store any you it, in you growth the for of NOI terms assumption what provided just this year. what X% you're underlying in baked retention X% Hi. into detail and and to about the

Robert Milligan

be fluctuations up slightly from quarterly our there will throughout is I same-store anticipation But as the to expect. for you'd year. a growth, pick think occupancy

looking a a think points our targets, XX point at as move growth. basis overall to as of expectation get or basis would multi-year by be we're progression I year-end points, through occupancy so XX our we

some as it's some re-leasing So certain basis really that additional savings, work of probably by bundling we're expansion, some of XX on the of another on increases taxes that in property in tactics points but seeing escalators annual then we working the having offset mostly by driven and with energy jurisdictions. margin spreads

Karin Ford

development starts year? you this any Do helpful. anticipate That's new

Scott Peters

the in several to to think forward the we front of really engaging do. this now having about those earnings conversations get be that to get platform We larger feel of and equation. needed first bring commencing development ability systems, are quarter capital the of announce front good the some health very development. systems care expertise We've now really that's end right able very been the We'll to in interested certainly with in the I and fortunate call. we've We're as get with health care and groups that and integrated physician

that very platform we're the about have. of excited that we part yes, So

Karin Ford

Great. And then all? seeing asset talk think that last leasing you're acceleration do just demand? any Is in one, what specific the spreads saw rent compensated you how year? you you tenant at it people in your in is about this classes? Can changes Did are change driving sub-sector markets, specific you

Scott Peters

with up four Well, capital or spreads. our we've spreads, we pushed years. it's over important note picked I think the leasing very we've think that where last kept consistent I to the years it's been and three But to leasing

not some cross-market We're we're to XX now feet utilization or So market. markets. capital in to We've a We've capital square We've with spreads XXX,XXX space of at is to rent already got able important. pushing allocation, us. able that some get in cost synergies. which the have gotten space size been the folks

frankly. a we better so see And marketplace

Amanda Houghton

that And that, rate. expected place I to see manifest with the to actual impact re-leasing within the in you're the spreads, think, savings some take of starting the addition of rental

and past. we've the they in they'll effectively very cost their paying And several paying is past structure. a rent, looking amount be tenant to they're if to at a were the when at able all-in that over save rent expenses So what years, similar looking I can been increase the

see continue two I get that we And to on the really go do that benefit side. in to rollover. and the why So hand-in-hand, that's the starting we think as you're rent expense focus of

Karin Ford

Thank you much. very

Operator

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

Tayo Okusanya

morning, Good everyone. Yes.

I on but potentially up starting Karin's you Just put worth $XX on side. little about of formal out million haven't that? you know the this, you of guidance presentation, any bit just about development. about development a kind Can talked your talk following about question from

Robert Milligan

Yes.

primarily most projects that talked our putting WakeMed announced of new about MOB our as project So in what Cary, where we're start projects in feet we've Reef Carolina, of is XXX,XXX already from MSA. up well project we down two North our perspective Miami, square Coral the as there a of

to the we'll throughout think two excited those is we to are that's where So new And that anticipation pipeline that announce projects our this the I I break see think year. built. But where ground on I year. I certainly those think development expect think wins we're

Tayo Okusanya

you. Got

And then thank That's for much providing you very Okay. helpful. guidance.

quickly everyone. point an I perspective talked timing-wise helpful deals one-off hit the point at you sense may year bunch of you million that to there's of whole that's you're whether hit, at how From this the think just throughout a a give acquisition's a that us it's time? expect again about, kind thinking particular $XXX whole that what you transaction good or one in can around

Scott Peters

that recently we a type underwrote yields it We've management but probably of aware the it's or our We continue specifically us Duke at to really high-quality Well, and market necessarily out either any the gain make up larger move I'm of really the would would integration the asset not better I be as might to think couple those that we and be from at have portfolios there, for consider I a seen assets. key platform. it's here there transaction, our get of trade performing to want more and be valuation of one-offs continue attractive. group attention to would or portfolios to smaller continue some what the more of

in-house. consistent see bring that? platform that that being to assets we Robert, on able to markets, our acquisition I we anything get us our adding I think when showed that's and So in those we efficiency where, can get

Robert Milligan

have bulk our of midpoint to we we a force to that's think with driving been down on turn going deploy significantly with I the to sheet. going the the $XXX on there. full a obviously as year. timing Duke kind certainly the debt the of from think million since coming of transaction. to EBITDA a I spread drive times estimate cash sheet XXX throughout a has range from balance The evenly year, But capital also completed within look We're perspective what's that's over And X.X place there. into of we good be our the balance

to redeploy earnings as really when start we you'll up. that the So, see is look to accretion pick

Tayo Okusanya

because at Got the of you been you again, guys And markets. guys idea building of scale again you mind. I don't you MSAs a kind of me, there. Any look on prospects market? focused top one decide another you some But out of in the or this I that if kind just growth like key break of sense kind you. the very then into know – have for XX take may MSA that to like demographic, more

Scott Peters

is. There

be size cash to going need I for that years, and acquisitions XXX,XXX very of I three we have these think think assets to our mean value we the very going to two value the I us markets a have we make And get done XX that overall basis folks. one that size. think do, highly think done continuity perform. mean, and focused a committed need seen don't our we to proud done differentiator. to perspective reached you that, haven't to I square sure really dropping of do get on to earnings we homework because the because well, are substantially and of have think years very scale have want continuing and rates seen if there of is enterprise out bought we're in have a on or value to the haven't are we the of biggest overtime. to divest the add I delivery a investments on ourselves but It's and line that we we are years; We bottom Number that, market to three assets X, that with for health can some location I then that that right critical bought is things be haven't think changed we perspective thing the and over I And that in right and XX, you really philosophy in the the next from we the consistent that want number of feet. ebbs NOI and over to cap disciplined care. able and we're two, assets in the being and we've we that that enter flows, key the consistency of bottom us performance XX that to going that's five doesn't. differentiation meaning the next they're last location have they're platform being what line

Tayo Okusanya

helpful. That’s

Operator

Hughes Our Raymond go next of Jonathan comes question Please ahead. James. from

Jonathan Hughes

time guidance. morning. good thank Appreciate Hey, the that. for for Thanks and you providing

big deals just that You little more elaborate on you've give talk the seen those Maybe large looking and guidance other marketed about trend a market? to traded the But was did you then transaction past you're or acquisition one can formal on the deals six that the over nine helpful. color any months? recent large one-off so And pricing the there? Where recent currently at? that's deal out

Scott Peters

haven't down. gone think one-offs that I Well, or prices certainly moved have in markets at looking we're

them with for I these we've than have care now years. number we medical comfortable going based and where good really We've have this not -- five have seven where of folks. affected impacted? difficult be been They've we environment. was have us. We Amanda they're it folks buyers mentioned, see in opportunity seen us our of more break rates year being being being who after relationships but interest got were health being markets cautious us tenants. the company They've of didn't judgment indicator great, went to have acquire more it on have It that We being based of to is -- into more got into -- us. assets it cap to We've position who for them platform, longer been really point get do move accretively to been aggressively, we have with good got there very where certain to make diligently deploy going think you who got break to a do with leasing really where a the rates about What got we've stable when a where say, a to a things that's classes on bring XXXX see us versus of platform XXXX XXXX and as But they positioned feel be so out assets be, decisions. did helped and get development take of you than have a also because the to positive rates a other pretty capital I good number going really couple type what going the were things. some in And think be a hear I bring was the systems, have felt that and now chance is a very We've need allows at be and XXXX to upon been forth. year with pricing and a side that little liked or really of that should to that. think able relationships our other really and you it not acquisition going leasing years. about think in healthcare been office cap able to a seen I in side. on in we an significantly asset to and productive to helps able introduction it capital a HTA. where, for was about a And was

Jonathan Hughes

a past three six Has between -- maybe on-campus, cap say over compressed you or little have the the you years. mentioned spreads to in even remained past off-campus expanded Have that stable months? rate

Robert Milligan

qualities think seeing real now. MOBs I you're driven recognition of by more estate being

on-campus still. seen of good assets certainly pricing you've a type you So lot trophy know the

window I with tight trade aggressively seeing think good within you're the assets a on-campus. really more and off-campus

relatively think that stable. we So I see being

I at but really thing get and you're quality. see what Everybody is really on to cap do going think the it's rates as of the cap the to is what out reports hardest to looking always quality the there, hard rates you're seeing. read-through a

really we're produce the it's think I seeing same-store X% the stability, looking with I will the as where assets at us And growth. stability. think for we're making continuing sure to those X% that's assets

Scott Peters

Just sticking further. continue Robert to to step with

important. growth buy sustain very that The is I get the It without you all I take is you put but tenant think asset to -- X% capital can important, the mix when one an that the has think connected. all you be rent in quality the the to you same-store to X% that's asset other. isn't one

shareholders same-store that ensuring well amount of That's -- down of the capital that I have in seriously, put to the assets order growth that that to back bottom-line. to that is comes take we is revenue renewals what for drop returns think the into to greater goes buying those the is dropped drops all capital that and are but our the to into appropriate you get looking then really amount amount increases very cash it that something or bottom-line.

Jonathan Hughes

Okay. there? meet you've portfolio. portfolio I out that And curious in big on more. a Obviously, terms sheet. sitting your quality? then a looking great a Would just on in -- great spot mean transaction you there. one your cash have that of Just amount got Are balance of the you're underwriting thoughts you at good

Scott Peters

perspective six, course We've looking at not eight We've that one that. fit are portfolio Probably for of does that. from and would we're those for known years. looked at so acquisition look we what of it seven, an that not

Jonathan Hughes

Thanks right. color. That's for me. it All the for Okay.

Operator

JPMorgan. Our next ahead. question comes from Michael Mueller Please go of

Michael Mueller

in don't I quick want there's confirm equity to think here. forecast Two questions your for first. just hi. XXXX. that I Yes, any

Robert Milligan

That's correct. Yes, correct. that's

capital at $XXX dispositions, we've look got $XXX of million of we acquisitions, million of on there, $XX the the balance million As use sheet.

the it's think I use pretty leverage-neutral without of So, equity.

Michael Mueller

rents average. remainder though? the I those the do rates was Forest prior to were same the compare higher looking think mentioned it. where XX% portfolio Got for space to How you're fill then the And rates Park buildings it the of than the

Amanda Houghton

Yes, pretty they're similar.

Michael Mueller

Okay.

kind flattish? So, of

Amanda Houghton

Yes. I adjust expired, bit little so months they they're if you difference. similar. a of past pretty we're then But a that there's XX mean when for

Michael Mueller

Okay.

that Okay, you. was it. Thank

Operator

question Please BMO John next Capital comes ahead. Our of go Markets. Kim from

John Kim

research that universities with Scott, you. beyond Thank and that you and space? have extend into lab is something you're you that could given MOBs academic relationships your targeting

Scott Peters

university saying is Well, concentration everybody we with think I healthcare much the the now academic and really same like pretty relationship in thing. future the the

type For us has it be need of the really uses within asset that asset. would a multiple to

we've tour. space that think ability very that nice-sized I move building blend We seen have in direction different and hospital, like we're space have a clinical a something would of don't way that it of to ago, have as illustrated all university, lot our think to that Boston gone because up types this us investment the really think We uses between about a between space. the we and team XXX%. also lab management a I don't on takes years from us the office. We from building a the medical folks four -- really into and is But had up away blend like into a needed. I committee, in and

Boston, we way, have that have something blood that that It function it's tubes that we it's is that that for asset the That's interested And unique. assets blend to built be hospital eliminated. the So very and can and has just a in for and in to ever that are drive would imagine example, delivery hard uniqueness. it testing. was actually critical,

And so did that that's to us we and a for good do opportunity that.

And would we at look so like that. things

John Kim

because the But your reluctance of the or different with that space of is with CapEx universities? relationships because

Robert Milligan

perspective. think I we're they combined those. think lab and space also some many of academic of -- the have them I have on with capital extent the university of teaching typically center and able service them and comfortable it's like it's buildings, And necessarily relationship. a the more to to don't a tenants medical clinical We being the relationships.

do and I think anything directed more you like biotechnology that. what is go towards see out companies won't pharmaceutical us be companies or or

John Kim

and thoughts or wanted your your on this I and values you asset then to impacting what get views think have Section rent as for as may volume on XXX values transaction off-campus And potentially Okay. MOBs. updated far

Robert Milligan

Yes.

is, we how care with that as we the really relationships and health more maybe more manner? they with the you across pushing is broader at look health think I themselves amongst sector, our less do other of off-campus compete discussions a cost. hospitals predominance things are The how competition follow compete and more lower in care and the amongst players the them cost-effective

that. bringing really we it and more closer how do customer? get to How to rather perspective, our seeing they're real these more paid So when get than with from impact to we But you to health large this we're them not convenient make they'd So patients from conversations estate a obviously get care them any system? have systems, into the saying do closer less.

might of you the emphasis remain off, different groups same. versus think see but I continues overall health systems to go the on-campus the

-- traditional you selection. significant think really portfolio our great good in assets do great our you compete And there. We And they've that real kind metrics. in activity, that highest got we but systems where of really have also on-campus like reflected you're locations, seeing communities, see they're so of in I see demand core estate those health got off-campus some

as a of rent everything growth, estate And that so that retention, would to levels high leads company. high expect you real

John Kim

than costs And final or XX you to hear the your some a have you amount CapEx prior lower is second all, of fair have I two-part the I'm like the rate of about just the run quarter during of question, completed want during only sort It still of of looks quarters. development And recently on spent your and thoughts I then on that. why that's wondering it's Okay. a which in your $X cap case. page supplement. million MOBs CapEx your on quarter, of

Robert Milligan

Yes.

I projects of bulk have many and to the completed, left that's that in the out to think there have complete. build substantially still the of TIs cost been them

more we goes continue to the a a lag as move-in the from to be still perspective. in, there's project we going system complete building, as health tenant the So complete

got fixed of we've and a think matter there. rent just in It's schedules the in building operating. them I getting

John Kim

projects? And what's occupancy those the of

Robert Milligan

projects has -- kind that's on hospital those. The XXX%. entire you're that of just going I complete actually one to the of is instance top of Memorial And looking drive the of Hermann a to TI most think space taken the expenditures occupancy And the space. The space. at there. that's cost takedown that It's has for the the

XXX% actually It's not XXX% that's So at this leased. occupied just point.

John Kim

during million quarter? $X the on was question spend second my And the

Robert Milligan

Yeah.

on from perspective, expensed that. the development in think break I we've up see project, you Memorial projects see will to of get also announced spend recently a think million things you'll Hermann think One, the two see I down on will TIs $X that but pick us start the ground I the development you some in Cary.

Miami see to most start and quarter. third really likely the in quarter the You'll with costs second up ground the in one pick breaking third in

of in see you'll the pick start to half back expenditures up So year. the that development

John Kim

Got it.

Okay, thank you.

Operator

question next Please go Our ahead. from comes Chad Vanacore of Stifel.

Tao Qiu

for good This Chad. Tao is morning. Hi,

Robert Milligan

morning. Good

Tao Qiu

you could if me the break wondering I'm Hi. guidance. FFO help down

change looks like it So impact the midpoint accounting $X.XX excluding we $X.XX are for getting FFO XXXX. in the at growth

acquisition you guidance timing. generate $X.XX some repurchase math on also And using $X.XX disposition would so provided you if So that correct, in XXXX. to depending did the is my maybe and stock

$X.XXX I that. think contribute $X.XX to also like or that would

seem at organic growth the guidance. doesn't of that leave to much midpoint So

Or how it reconcile with NOI conservative timing? X%, deal Is X% growth? of should the guidance? So that same-store result more we a a is relatively that

Robert Milligan

historically timing. think line, is in be timing. as at so deal same-store really the seen growth around We've it, we translate bottom of deal it's of to our look going more most difference guidance to I our the

Tao Qiu

Okay.

into goes comes that. So, that follow-up in just What about out? to what same-store the on Could pool you talk XXXX? and

Robert Milligan

be typically to the our of assets is. going it as There's in there majority

that it's pulled is five around for the held assets sale. owned being unless out same-store it goes been pool policy for same-store periods the any full for in for we've pool Our

redevelopment, what bulk is pulled quarter. our you the assets the we're end out pool at fourth in of the which see of So for the

weren't buyers you'll the of fact given see XXXX, that pool. So the in the assets our we bulk big in

Tao Qiu

me. for additional for Thanks details. the great. Okay, one Last

the for their So you high in reported so REITs capital the also mentioned but guidance acquisition that of MOB interest space, have far increased XXXX. many remain that the company private

in year? competition more you from seeing this public well as side are So,

Scott Peters

was I six was in first almost been space. to when we've I Well, competitive going compete now a that being as you're we've become very and to your build how grow going our very would public think question very, we've now able And see I always asked portfolio? think public to think the And largest acquisitions And at we confident you ever been you been going of years we've how the continuing you portfolio. were are and good to owner MOBs. and find

better years in ago. were even five So we are today position than we an

plan? or to HTA, have personnel, say, we be from leasing, six able to people category in execute a we you balance infrastructure at management have to to And employees, what years to look sit to their they back five fundamentals I think every that have are had we component should from ago. to our that the in development, better-quality order than business cities, today that when in have sheet, every today key we and leasing

So they've the going opportunities the really in that's I next excited better And for XXXX. us forward been. are think are years even over five what gets us three to than ever

said I I cautious. everybody that a think As was year XXXX was

results XXXX. rebalance the about our it released. think needed XXXX. that I in I We're of a XXXX, sheet excited we think ourselves start we're And balance fourth where position to We thing you've and get quarter to now was seen there specifically and in right that wanted it the we to be.

Tao Qiu

taking very for Thank you my helpful. That’s questions.

Operator

go Please a Securities. follow-up question ahead. MUFG is of next Ford Karin Our from

Karin Ford

one just Hi, quick one. additional

get there to sheet able in of effects back reason you're guess term. up that the XXXX? to to talked This wanting growth in get be to work. you it's the medium back up last there X%. shouldn't Is lingering any doing You said about due year's about FFO you range I year, to X% like to balance X% why

Robert Milligan

We made run as of next XXXX half you the the into rate, looking don't in certainly the we year of of dispositions XXXX. but see XXXX flows in kind pointed any a year. part we comp. we're as XXXX the at That issues first Really, as look back also to as out, the both

to modest and to we So X% X% expect acquisitions consistent and experience with running same-store range steady our to that business that get growth continue. to long-term has been the in MOB

Karin Ford

Great, thank you.

Operator

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

Scott Peters

right. to joining questions Thank calls All to you appreciate out anyone don't XXXX Thank everybody hesitate we you. call. us. and We has. for any the just to reach Please any look forward

Operator

you concluded. Thank conference today's The for has now presentation. attending

disconnect. You may now

Healthcare Realty Trust (HR) 15 Feb 192018 Q4 Earnings call transcript