Healthcare Realty Trust (HR) 24 Jul 192019 Q2 Earnings call transcript

Company Profile

Participants

Caroline Chiodo	SVP, Finance
Scott Peters	Founder, Chairman, President & CEO
Amanda Houghton	EVP, Asset Management
Robert Milligan	CFO, Secretary & Treasurer
Chad Vanacore	Stifel, Nicolaus & Company
Vikram Malhotra	Morgan Stanley
Nicholas Joseph	Citigroup
Piljung Kim	BMO Capital Markets
Richard Anderson	SMBC Nikko
Karin Ford	MUFG Securities
Jonathan Hughes	Raymond James & Associates
Daniel Bernstein	Capital One Securities
Lukas Hartwich	Green Street Advisors
Todd Stender	Wells Fargo Securities

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Healthcare Trust of America Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Caroline Chiodo. Please go ahead.

Caroline Chiodo

to of welcome XXXX Second and Call. Earnings you, Healthcare America's Trust Quarter Thank market filed closed, and the after Yesterday we supplement. our our financial release earnings These Relations the or found the documents our with of website Investor SEC. can be section on and call for for XX webcast next be available Please note, being will this days. is replay the

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

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

Our known actual our uncertainties that will affected results predict. not -- beyond and and be will are control by to trends, or ability unknown risks, factors

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

detailed on Relations the filings, risks, to please For on website. Investor potential found refer which be a our description can our section of SEC

call CEO of Scott I to Peters, turn now and Scott? the America. Chairman will Trust over Healthcare of

Scott Peters

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

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

both the in acquisition portfolio, operating remains year, of half as a one-off and accretive external an development. well-positioned and platform increasing for key leader As the including a our start medical we markets, with second buildings full-service opportunities office HTA irreplaceable unique in opportunities

to believes years. investment-grade management returns deliver balance we're fortressed the in our sheet, over X well-positioned with X extremely shareholder Combined growth next to

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

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

strategy the believe portfolio the HTA fast-growing of and Our country. key outperform we will markets has key investment trends rest which has reflected these in targeted

platform operating approach Our X create with local square XXX,XXX XX in market of forward. more also focus growth a with operating scale of where all allows targeted tenet and capabilities. million add these same-store areas can believe markets in square the and create going relationships scale for This or more market approximately to to allows with is Use size and us this strategy long-term strong We our growth value key a key strategic accretion and shareholders. markets then through we nine platform operations. value feet. is and our to markets, our and deeper to feet effectively additional generate us This over with invest

disciplined long-term recent strategy, a allocation, ebbs has growth demonstrate patient, public execution in and allowed capital to and disciplined our strategy. on decision-making, accretive pragmatic markets HTA capital focusing The the flows markets reflecting

are We relationships. an our key to allow that basis investing accretive our us also with key on acquisitions will expand in development focusing markets while on

growth of and margin operational quarter. our X.X% from achieved of the rental performance We strong driven utilization Same-store our to platform. in property Turning by growth management second results. X.X%, revenue expansion at increased

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

for renewals are from spreads X.X%, this in including re-leasing the cash year quarter. X.X% Our

shareholders. platform all over well to can which average markets Acquisitions our for in X.X%. cap add in are Our rate we retention million has year-to-date XX%. These key value our an remained high $XXX MOBs operating of located of existing drive at additional have

markets the portfolio for acquire on but accretive very deals, we which one-off in yields. fit Although can competitive our at are larger opportunities we acquisition that focusing remain

traction. gaining is Development

several have new additive drive to portfolio that to are We demonstrate our opportunities value. and our capabilities will

our square-foot and deals, look moved development delivery completed. breaking on existing North forward helping the our Carolina on campus Raleigh, XXX,XXX when ground in We forward improve WakeMed on it their is also patient to

Our sheet investment-grade capitalization of X.Xx remains balance debt-to-EBITDA. leverage total and with strong XX% of

the Our debt near maturities remain limited over term.

our a $XX. with see volatility and million forward basis price did pursue However, we markets, this on We we we take of as in raise it on it ATM that $XX the close down in opportunities to the markets. capital the so over balance given our our opportunity to took acquisitions equity the a we the at can that

in However, capital us opportunities it gives good current of to regardless our pursue continue the option to markets. markets the best

X% term; allocation long a on we over key same-store and being consistently One, accretive capital. gateway active From capital markets; acquisition opportunities our very to meet perspective, two, disciplined, remain the to real that and focused X% of located identifying criteria: cost our within that generate estate will growth of three, our quality

We patient, continue still believe of and competitiveness good to pragmatic are sector in but our diligent. opportunities some be amazed if the there with we remain

the the of we result equate to now $X.XX changes. come full to year. factoring rule $X.XX per expect accounting our a to recent share acquisition the XXXX between from and in impact FFO $X.XX per our $X.XX This share $X.XX pace, As normalized out for would

the our remains of execute plan. consistent Our strategic as we continue midpoint diligently range to

results. aspects best-positioned great to and term, long HTA We in company have is is demonstrated a also we space continue as most believe in that to all execute this over the the recent our

over to I will now call Amanda. turn the

Amanda Houghton

our XXXX, to focused value shareholders and Thanks, operating bring continues tenants that high-quality performance alike. Scott. and delivering leasing on to be In team

relationships local care operating markets and team power health XX a and capabilities also growth, enabled great strong national strong us that now, and has our local of to to out offices. opportunities for bring efficiencies, retention close development. management, XXX It across us levels allows building key a leasing a the Our to property scale This also and leasing sector-leading have high knowledge, build company and spread in generate very have acquisition of construction and helped provider professionals management, to resulted of same-store community. us

Our second quarter performance. show continued results

growth came growth X.X% expansion. X.X%, XX points driven and rental same-store base basis in by margin revenue Our of at a

slightly year was same-store Our while XX.X%. to rate quarter-ending over our XX.X% down last leased occupancy was

In the period, square included of leases. we This feet leases feet XXX,XXX new of square signed feet almost over of XXX,XXX XXX,XXX renewals. square and

XX% retention tenant total spreads strong. was Our remained re-leasing our while

have we re-leasing over full and spreads now of million square year just feet performance under retention. For and X.X% portfolio X.X the with year, maintained of strong our XX% or leased have XX%

per of for was foot X% to our to at of our in up trend leases, per leases. signed we closer and per X.X%, square new while term continuing $X TIs increasing period for of escalators year term leases for escalators around annual per around foot Our as continue year steady renewals our the square remained $X.XX roll

to and have and look expirations, to and leasing we our between As momentum of to between X.X% continue approximately feet our current X%. re-leasing achieve we escalators remainder with including to of X% month-to-month and approximately the annual spreads of XXXX tenants, X% square expect still expiring, of XX% retention lease XX%

internal scale to technical better focus roll continue to much operations to we show to our direct leads in and our performance we leading engineering our reduction a programs front, properties. the services on building platform, of expense more using utility the ability economies which of cost as to perform out On benefit and our

These a in in property primarily increase benefits our offset currently being are by taxes significant Texas.

know we appeals we won't year. likely, take are continue to appeal those believe assessments do time and While later until these certain and in the favorable outcomes results

discuss the I will now to turn financials. Robert to the call over

Robert Milligan

and growth ebbs Thanks, positions Amanda. markets, perspective, capital limited capital us $X and leverage, and sheet the From strong billion continue we financial X.Xx approximately operating continued plan to low low a leveraged of and our the for investing accretively through that of near-term and execute our a maturities. strategic debt growing balance performance, by debt-to-EBITDA, highlighted XX% of debt-to-total flows liquidity maintaining

specific to results. Turning financial the

Second in ago we operating Greenville year of last that grow X% from to costs as which the $X.XX, period. continue includes almost the in were Note year's started XXX, deploy quarter capitalized direct and $X share leasing sale. the of was first up per quarter Topic normalized raised capital impact to in FFO our portfolio this diluted million

a includes Funds our increased XX% run-rate recurring of of us deployment result distribution Board expenditures NOI. of was ratio on Directors the allowing basis. With XX% our of million, approximately per $XX.X million capital, yesterday as of dividend our almost or year, a payout by to FAD capital to normalized for XX% $XX.X picking up which our of $X.XX growth between earnings maintain

ability of was was to This the driven our reflect NOI points. quarter efficiency cash This second expansion XX revenue to term. X.X% X.X% by XXXX. and also Same-store continues to while of our long growth rental growing revenue basis grow of compared margin

leasing was quarter driven million, $XX.X primarily the of by G&A with the internal increase costs. the for expensing

expect to to million G&A our continue rate $XX $XX.XX million for rest the of We year. the and be run between

call, reminder the last well costs to balance to liabilities certain As leasing the lease largely expensing as from to the a our impact as impacted related of sheet. XXX Topic obligations right-to-use assets direct financials addition on changes. lease rule continue new and be for our from from ground relates XXXX The our of the XXXX

the most pay expense revenue no there earnings. significant the either $X.X of but expense impact this property or other between comparability related had to will and related taxes. were with impact buildings recognized to second related addition, XXXX, no two In these the quarter our tenants which accounting these for we total Under of longer payments. in revenue directly single-tenant approximately statements Topic that of XXX, recognize million changes In the periods we was of The on payments.

from bad XXXX, in In was this reduction also amount second now quarter rule expense addition, change to debt immaterial. move requires to revenue. In the

perspective, and markets capital. criteria allocation both to on see incremental one-off to accretive fit of we top our of our to that cost opportunities synergies focus XX points a in platform allows market key are capital to our of a XX rates. cap our and nature Their From of investment an continue basis add stated quality

These an property Charlotte. Charlotte medical the in $XX quarter, acquisitions of rate approximately directly in of block services acquisitions second for in $XX of highlighted the over management to of average growth feet and the In buildings bring the Chicago, Northwestern million to on by internalize These $XX two and and this across an long-term X.X%. on-campus street in square area, allow million us market there. building an purchase we scale Hospital downtown over cap at will from important MOB our were the million Memorial Streeterville XXX,XXX building acquisitions a office closed Center our our purchase

halfway under Subsequent $XX year-to-date of Washington, just in acquisitions brings the suburb for to end, million year. over $XXX target building to quarter office our our medical we the million This on an $XXX to of closed D.C. million,

do investments While target, back the expect the half backloaded towards stated more to reach we our our will year. be of

these XXXX of activities, unchanged. our keeping result while midpoint a guidance earnings the tightened As we've

to of straight-line and expect cash continue on X% growth We slightly the a X% given GAAP impact same-store year for basis that lower than the NOI to of rent.

acquisitions, of per to timing to the the range building $X.XX earnings with of in in from our However, share normalized year. we second $X.XX half momentum expect FFO the

back to it turn over now Scott. I'll

Scott Peters

Robert, Thanks, it we questions. open will up and for

Operator

Instructions]. [Operator

first The from Stifel. Chad Vanacore come will question of

Chad Vanacore

All right.

you're range us thinking second at that later thinking out first to should we quarter just get quarter, be How some about Help there. because year? end X% Both X% that, laid about of there. half? an assume the same-store upper they the in moderates Should So expense the and growth expectation growth. to NOI we second expecting were you've

Robert Milligan

Our growth. been has same-store X% expectation X% to

in that be to anticipation think I certainly our -- continue that is range. in we'll

our early high bit on a conservatism reflects towards the I running in the just the think of we've little range part year. it been of as end

Chad Vanacore

point? have range for What end actually happen low to that this hit of would the to you at

Robert Milligan

point I we're have two out the quarters, looking certainly you time. over unanticipated to actions next think at see some in would as this

Chad Vanacore

buildings. any basis in a looks Okay. and additional Do was could And off-campus you and then you from that that points XX it there? just bit thinking provide that dropped rate portfolio have XQ about like sequentially, leased the total color some

Amanda Houghton

you lower-quality just year-over-year occupancy, And that basis. the to our bit when time. were transitioning think process. factor normal couple on I and of look just it transition remains assets There little that leased at from rate of are stable is tenancy higher-quality a a a a of takes tenancy a largely

portfolio. the don't think inherent I So, it's with anything

Chad Vanacore

All right.

So, there's right kind of not occupancy any in building with major it now? any hole

Amanda Houghton

No.

Chad Vanacore

we there. -- expenses should Okay. How expect trend And higher thinking rising think seems the expenses. just Is should property that? seems what's driving about then taxes. Property mentioned we about like It taxes that's you a like the going that that keep It had board. across forward?

Scott Peters

I from talked concerns Texas, an it's have. certainly that but taxes it's MOB about think think tenants have I larger perspective, of Amanda property the raised. one --

concerns either tax fortunately, what fortunate I opportunities. we think have when component increases. look of We play it's the one pass what fortunate that that at as were we of were when But the comes acquisitions we we into or property their and to we are get they -- that the see unfortunate. through But costs ultimately, rent underwrite their majority is.

some now holder you our of know, opportunities that development talk we on about this of one having in a discussions the are one folks taxes. you right development, of So, so asset can as property you get when that see you that stability longtime is, are the

what that that looking sold, and portfolios at, -- of if to had transactions, much larger assets the would look quite the how at time been recent would going is be, that one placed high consider over through the going values. that is to to what that have on the of that values were extremely some because next bought different some, one of think is how you're through were things come has there ago I been one the some play I months XX

up an up what's it it's about up will renewals. think if talking to going passed show it show in And interesting will to be leasing. will it, will through they're not of what tenants I in everyone rents. about. So, certainly, on show Or It in aspect be talking

Operator

Morgan Next question of Malhotra will from come Stanley. Vikram

Vikram Malhotra

Maybe on just first acquisitions.

You anticipating to you weren't originally, back-end sort referenced be maybe of the acquisitions weighted.

are. they Now

talk that you sort instances? deals precluding are apparently market like how rate. recent competitive when several the staying of For any very given talking at for of heard and of went brokers from? of sort are that away from which give you of pricing we've there the being more what or Assuming markets is dispositions cap seeing, you a was a sort and the as of deal back-end sort disciplined, Can us weighted from? deal well. we're example, sort look with about And you low you Duke can sense you're what is Did about

Scott Peters

back Well, first in off, me I a and of now XXXX. think saw acquisitions XXXX lot remind right that you what perhaps

XX pass-through. as that We years, assets little question portfolios of Duke relative you've talked XX sub-Xs. to to long-term at one was property or with if understand the off-campus. rates transaction long-term and cap sub-X might valuation acquired X actually X X, X or example I went were I performance going underlying think performance the not out just a whether start of seen is a something a taxes or There around to transpired, lease for ago We've that X been an or is there. bumps be with going and about it years that

value and at a extremely this And X X- based if a quarter-to-quarter-to-quarter peers; as compared HTA our years. X-year your look I We over look business. look at think as business. you this returns a -- business period at we even you is as looked X always buy performed of about; to this it's year-to-year look we've We a upon get against we time not at well. think XX-year at when And don't I something. or

might seen buy is disciplined. that's or up like even ends ebbs like want the think looking extremely folks to when years We I to bought be not now, diligent. off, up written and development spun last some us you those It value that you're ends have that be growth. an you're to anything some give And But toward at of we us the investing that now look we've want can dollars. done that development perform to don't by we because consistent it ends right well acquisitions the it We XX opportunity it stable -- continue and important in rewarded. a little do stuff shareholder that and be more and arm platform seems it at an of XX for getting and -- the flows had performing -- just will what So, more we and up that or cycle manner and in be as get then off. being the have want to situation. enable that not our years, We be add first in in to we've want to will really seems

Vikram Malhotra

makes and important agree discipline important -- more former. the aspect. target sense, I the hit on That for and to Okay. with you Less that's the

you've something spreads, being portfolio it, of should a about or consistent -- assets? X certain call what's X%. maybe X just in in this are is? Is being balance just spreads spreads of it conscious quarters rent rents of on unique pushing talked conversation, given X.X%, spreads in we've markets sort remember there push And expect the year? we've Or markets I we our about of effort for Just or where is sustainably expiring of types terms seen in sustainably to what now forward rent going the you the difficult kind for certain -- previous now of X%. above or above,

Scott Peters

have happened. in have that on place rent leases Well, or I while. Many we've leases been or or a of things X for think -- spreads there's good X gotten of X had that some the have our

group physician and lease outpatient the for the the very to that the able health for been a and up or that's care take X-year been rent to favorable spread system and accommodate the X- outcome. location of or So, need we've move push it

talked last rent over have we that. tried our the of years. move spreads up couple two, We've consciously about Number to

tenant the we of next the the do going a over to the to And is a to need groups the landlord, companies seven come business. to forward relationships. MOB both want having are I of to continued care because business sector relationships And balance this is types of it years, as certain and going make You sector down think be to whole want health and certain move relationship valued. those -- it

think a out bump outsized have in might a a and point go force don't into time. I rent So, an you simply particular you because leverage tenant monetary point at can

I away and into give TIs. spreads TI to giving space. get to aren't mean outsized -- is another incentives move get to of lot also rent We a way to the that's people

last Ours the has consistent X been over very X or years.

third, think do see we and I continued pressure that Now as forward, that move spreads. on I going you're rent think to

I get the REITs the more spreads very don't to as going rents. there's pinnacle, as know think don't of a or rent if eighth middle. I being -- think as spreads But they in the more where be I the contain sixth, or to markets, size -- it's inning going very, health sophisticated, there's companies of know rent systems process in to it's the be if able care get push meet I opportunity seventh putting

think the is spread rent X% So, Probably. I is to going to X%? -- it

be I circumstance. strong think X%, particular get aberration I a or think we portfolio I shareholders as that a move you got if than very for forward, you've think can more would an And X.X%,

Vikram Malhotra

you're -- unique a maybe you, in few coming from been of And terms Scott. calling broader the a for unique Okay. know one sort probably of the or question then of view I just one had you've of down. rates macro for many

we next outlook? in of terms Sort months? are over bake model rates overall and the What the you you're cycle of into of the where six in kind what's do

Scott Peters

couple down. in that, said, be where guys is rates They those has we the we thought have a had the really cycles, If that correspondently were basis Well, have when a were we see much to pundits the points. think supposed as buy I estate was some to reason year was folks we've that I happened. we that, go. at buy it didn't We listening if, real didn't viewing hundred are. you went we're rates going because of past times. conversation -- pretty people and up and much tenure much I at what last were remember up we cap to wanted ago, that And come think seen well, looking with year where not

has strong -- rates really X.XX%, tenure cap the in sector as asset basis a down hasn't the of Even come very moved. XXX MOB It's from haven't class. points

that's and So, theoretically our expectation feel weakness. needs be we're right it that seeing to from there's that as the underlying some now, what we're really as good seeing that economy is weakness we're seeing can Fed an

I'm not X, drastically to certainly So, XX anything change for next looking for months. the X,

Operator

come Citi. question The will from of Nick Joseph next

Nicholas Joseph

opportunity health laid balance the settings: And adjustment off-campus, delivery You right the seeing are between do about settings? the you on-campus, best out how longer-term university currently? three think the three systems. you Where to risk

Scott Peters

backwards on work that. We'll

mentioned about was I -- a think first highly utilization. think time calls. combination the that years it's settings, of that was that And or university did six I academic call it ago on sought-after and very talking now conference conference think we really started the -- I on I first

care universities I going combinations continues. we're Obviously, to health so care the and to that issues is hospitals work a and forth. -- as on country, to between our battle continue think health

sought-after a but asset class that So, class. we now very that becoming is asset like

able Off-campus, off-campus service and continue. systems, possible. locations patients to Insurance the is health efficiently critical to quickly I critical, access going of push physicians, the to most care that also the continue to to require off-campus core and easiest be take amount will to locations approach as the as

it's a from the on-campus. evolution really natural So,

it tends and hospital. on-campus the when have ground around next that's irreplaceable because to properties TI what hospitals restrictions it costs more have still It's It But to far have tends leases the has fundamental its then located again, have from hospital. is use. to and higher they still

concentration at we that to And are little to fortunate community and bit, would to do probably the that. that the are, continue probably is mix the university be a we we'll locations size core and being going into XX-XX-XX. find. look academic say I our enough if like get up We we we would

that going to Now on-campus. our we've or opportunities all be development X X platform, got are

of Fortunately, fee and a them couple couple simple won't. of them a will be

that to the So will add mix.

X, so, like. we'll the each assets working of of re-lease our us where the think to Because are continues down are solely buildings there's get looking certainly, cities, enough have trying -- build that where but competitors when evolution, to the I MOBs. X there's I who trying locations are in to are of of for And located get relationships again, ones we There necessarily move markets each have with this square the us foothold are be other markets solely there's that relationships other health acquirer think -- continue we to a locations or enough and or to path a have. care relationship we considered to systems. good strong in are were we folks Not that to ours where markets feet, that looking where of as and or

that XX to in. continue to going like and So to markets that's -- be that in concentrate be we will XX we

Nicholas Joseph

And just you're across right returns the maybe any those screening one better dislocation on and any there three now. Is seeing today? that's

Scott Peters

to to and there. a down We nor go the transaction price mean sub-X was that not we that were think to expect. down lot one asset asset. to there. I that were good go go a which and we able liked was selected has prepared referenced the and the just -- off-campus was here, back would Duke were off-campus transaction the than we I more come the I or that just

to of you bought same-store an on and -- it. are and So an I well asset over but the put where leverage that's going look be but returns growth, you're say, going at time, to that rate at it cap to that's and example consistent do X% will, they're the be certain extremely going

more So, a your tuned a can get hopefully in rent some rent can see get to box, be multitenanted you spreads to a you little growth, higher where pretty very yield. much a push versus you can are going and opportunity returns fine

Nicholas Joseph

did And of given about equity. pipeline leverage? for year acquisition How and do then you you the ATM forward capital remainder think current the needs the your

Scott Peters

Well, good position. we are really in a

based with halfway I through We're target million we people comfortable would hope was could didn't a very that We being are passed this take or we upon that, on seen pretty have competition. our We've We've selective. call that to $XXX opportunities I that, think on like limitation we're based had that. we long of asset but frankly, away our quality selective. fee and listening opportunities. the term. and even I several don't -- acquisition say limited been the

or is positioned. pretty about And acquisition our So, confident process. we're confident our sheet we're well balance

We will have compelling a that couple dispose are assets what we prices. we think will of at

in next so, real good And a to we're months. X for the position X

Operator

Kim John BMO The come from next question Markets. will Capital of

Piljung Kim

it does characteristics? On you any the the leasing? on Streeterville Center Memorial you And ownership? the on-campus typical control your on-campus, acquisition, Is rights simple described land? own it fee as Meaning, do but does have it Northwestern have

Scott Peters

right not asset. accommodate did into now, it's fee prior This but is location. it's in is and Northwestern across a the sometimes XX great take I holy that and owner you say, see right asset that across XXX% $XX something move that assets building It's from asset look Well, a was it's Surgery. Northwestern and for a that XXX cow, walk larger to at have got, and great you directly order after to process. million look located capital them from simple, Northwestern, years, you wants right and occupied. it tenants in at it. It's in spaces

fortunate brother to able and meet was Caroline keep the to was and that very constrained. enough sister sale frankly, process,

to and people, it that that, $XX farther go and lost and didn't. other much was I fact, In going wider to said

to a that's able work were a can we your like closed if I So, get opportunity, portfolio going you to to it that, asset with buy That's assets that in very growth asset. get great timely manner. have efficient in them and pretty much you're that and an long-term continue mean inherently

Piljung Kim

that at wondering Maybe was and be difference you aware described as had CoStar might XX,XXX it footage of the square feet. I just if XX,XXX. but case? square the that a technicality, why you're

Robert Milligan

There's Yes. there. in square feet square feet of rentable XX,XXX

in I in added think some that footage there. parking component be that a extra there there's the other square of listings out might some

Piljung Kim

to property mentioned Scott, you more at it impact going higher that? base rent forward? amount the need provide TIs? Does way increase Do Can there the and you looking some you that a on that get rents. you higher taxes you that sort the Okay. color or impact could that your might on that could of tenants reimbursed? different Is you offer implied are

Scott Peters

we've buildings an that one the Because cap other acquisitions at to we four a for trades and market years. -- is rent going X, of property competitive rate the that X, looking looked there their a be been for get fact is doing in time if tax rents is first in of going states. theoretical buildings. difference, on you've one impact based X, they X the And renew value tenants passed to one the got to number at in at in the different and has and area, pass-through trades difference X the and every There's lease. I also in when on the a building we're or increase vis-à-vis impact, think looked one, thing X

or somebody or we X%," immune rent bought think underwrite I very up one now that a me. really thing things it went just not up Because and asset. you "Gee-whiz, that and the "Why all else $X of happen?" tenants, from and are that So, of when CAM The $X my did rent only $X went of my cognizant went happened was we or didn't the sudden, they're my impact up that that's an $X building to,

think look and that that an that's the that to things need underwriter, do you doing at. as are we one So, I of

Piljung Kim

rental Georgia in like Should growth lower expecting we that? in be markets or Texas or

Scott Peters

coming to think leases Well, rent taxes them I and and of through, don't tenants to remember look my spreads compare or are of I -- you around. when comment and the pay I rent this rolls obviously done. we lease. as have complicating have that's years, factors what spreads that going And market But are complicating my XX last easily competition. the be there one number the property a able because you're when being those in or if over for push their are roll, But rent think of spreads to that's middle quite I nice my to factors is mean, I that lease comes okay, now, saying, very does I rent is what my spreads how impact we rent said in rent at see earlier, again, to it value when place. a right preface the going think

rent spreads see at period think forward. think we're I range it X% X%. you if going don't X% you'll X% continue, I time, in you'll outsized, hopefully, -- a going to So, don't look see plus, that and of to see to think X% I X%

X% historically, X% can that that to think think get you and I I will continue.

Piljung Kim

then And call, on you development last Okay. Robert, the mentioned starts.

about in to million Your Are pace do year. to that a goal get XXXX? you that was $XXX on to

Robert Milligan

Yes.

we're hopefully couple few on be a to of on just waiting out get announced to we'll signatures and close I done that get think and happy those transactions there. we're pretty a

be a driver. that's big going to I So, think

are traction As we and gaining seeing opportunities. Scott mentioned,

in And on so of are that very to we that get close is to expect in to couple to we order that relative a we do But announce expect things be able do that something range. and short

Operator

come from of Rich question SMBC will next Nikko. Anderson The

Richard Anderson

up did why why question, same-store by go down pool the down. understand assets? first not couldn't four but it would've I So, gone

quarter? color first just could you little a provide If versus the there

Robert Milligan

couple we have quarter, there. that announced a first I anticipating get went We're will assets got into the out redevelopment. and of been versus projects redevelopment approved Yes, think some that

One more broke in X we'll have in or and here announced of the or those which WakeMed announce is ground project, of quarter that obviously construction, X we've to big big the our so. things next

Richard Anderson

your still in there? Would been negatively have were or same-store positively if changed they

Robert Milligan

moving It much those have properties. forward. really It's an had of on impact wouldn't something

Richard Anderson

Okay.

stay. of plus want conversations them I'm going thing more those using you Second retention for light but know is time, the the want you someone question, to rate in extra you tenants tenant to sitting the having to want maybe of your in that are spreads. retention get today? usually, mentioned to that if and you maintain to capital people re-leasing most the to your last you're how Scott, you're And environment spend that. not side, we're curious leave But CapEx obviously, sometimes leave XX% on

Scott Peters

seen mean been The CapEx on think we the I -- you've TIs. don't significantly has pretty consistent. move I us

of a couple have as had leases tried in with and we've certain leasing. capital We bigger of to practical very to consistent leases they've systems. where it relates been our health care stay utilization But

Amanda Houghton

that They're in. a matching on money we're think putting do do renewals larger period in the I want we're of funds a doing, to that, on from for started see, putting elaborate that space you've especially lock that deals. that in, to longer to longer-term time. the the tenants to push They And

year-to-date we've over average pretty years a on of done on eight you for even historically. term up long for us we're if what which renewals, at is basis, So look

But a that's basis, on dollar per foot continue we're think to I So, pretty square we'll see. trend consistent. a

Richard Anderson

you being and today, my the transaction. Duke has point What What growth about the and Duke note from you aside the completed this you you question And morning. did to changed about quarter X-year since can transaction? mention did that in growth. did materially But is earnings -- same-store the -- The since company horizon. of similar -- just the company with Okay. that and Duke, profile $X.XX bigger? that better time a perhaps before, deal power the just doing you Last saw you do FFO. But you X-, things Scott, on $X.XX,

Scott Peters

it think the markets. from core starts Well, I

We've all I think our distinctive the something uniformly is of size sides. markets got from just our peers. in that is

advantage them transaction yield to thing platform take perform able underwrite and of a the platform that assets Duke an can that and we the that one proved is assets we We have underwrote was can on. take I and a and of, that those we can operating group move think we to

always we've most acquisition. over cautious REITs a been has We so External little last of driver run very an bit of the into been the and growth XX months.

We haven't had to sell-off assets.

ourselves If the I three have place last over read to now, right the at and a had in months had assets you sell-off -- are as -- where to now, get XX being big your order looked some they to do I did have we we of note, somewhat to see differently. not

to that. had do We have not

So, has our been performance consistent.

a performance prudent perspective. Our been acquisitions have from

development then we've allows the us care development and ability And system to an equation our approach the The approach. take third, a of impact side got have side. is integrated health to to just starting

our every kept sheet balance we strong, company, So, then in market, continued size, NOI same-store it the the to that moved have relevance X% the basis. markets the that added opportunity and improved along, And extremely taken at growth XX gotten upper we've really all positioning in, perform in we're development we've cash it. size to

perspective what So, it very and or a consistent we've we expected merger that, to think perspective, from been portfolio I acquisition do. an that did

Richard Anderson

point way, be Okay. that of a visible make coming often, this closer you growth? to deal, type where today? more But range profile growth transaction I to your you using not you the kind had the component the Is mean, X of improve of of little where maybe -- Do wouldn't the the company. terms you in kind see point? you do you're other to you the point, story reference deals somehow the it supported that of in the is maybe that, see consistency to Duke growth doing done you to X Or the year to the in

Scott Peters

No.

that in cost the the certainly, position look here And upon at us are a everybody your based that in. I impacted Duke has in you cost Acquisitions, think we're market months. of XX every capital. strong it last in transaction, capital if of that puts

had that would of is platform operating the in So, of same would The we I forward. done and done produce development we don't think have side not a the or transaction. we to equation would size had the that, transaction not results be had that have -- side, hadn't development we going a boat continue the whether our to

that's going shareholder if the transaction. it years would your And from So, if had is it? us think laterally, the forward puts perspective. have hadn't we than position -- over done question a it a not next in or done five stronger I done you rather we

Operator

next question of come The from will MUFG Karin Ford Securities.

Karin Ford

the at be point systems ramping can supply opportunities? on going And signs development that seeing the you any anything health you markets? care are that there in any driving you is accelerating new think Is your might that to of

Scott Peters

buildings component want part that, to What distinctive or they the other seen have that long-term seen of component that I systems put the are we something are Well, we is get care go to and or want of health preleased, office in occupied haven't developers think is building and build. And they up to sector. seeing even that someone with up build is strong to we're health And wanting the systems. is another the this which buildings not to what medical care locate very and is spec a hoping that of that about what building.

thinking, their the in processing system very MOB is their physician becoming The want pragmatic space, space and health be. care where to they

and the sure do comes seeing and make they they've health care to the in analyze building overdevelopment. feel with. outpatient around inherent They of of take that process go in it's the pretty cautiousness right system. time a don't But mix they of and I see the so, because see opportunities. whom at regulated got they that to out through the And want prudent it, turn I rate long conservativeness an and comfortable the putting then RFP they a

So, we that. seeing are

allows that And that get to opportunity here either the We it system are one which X care participating But have of table that can something or to a the that that -- to health them, them. see with or them. of X of opportunity. in the bring for isn't HTA there's do the folks XX relationship is something all not there's

Karin Ford

any lease is the is, the from Park at there rent we level Great. talked? And other Forest commencement and update on my of time last question timing

Robert Milligan

Yes.

XX% I the Forest think kind with leased, of kind perspective, and commencing north quarter. is of quarter and from Park starting now the really of and an second accelerating in third fourth into overall rents

simple fee feet back. we seen It's back ownership about expand really now come the bounce perspective, that XXX,XXX think with So, to and and right from certainly an there's investment opportunity square that. we've

Operator

will come Jonathan question from with The next James. Raymond Hughes

Jonathan Hughes

years I could you're with part opportunities. you mentioned of for in ago rationale was development. Duke in of systems that development the couple just with the earlier lead under kind RFPs relationships active a was the choose to Sticking of I impression, to cautious incredibly or changed has judicious develop and when integrated few get with? the to been picking systems it and has mandates. comes who are to that years they the Duke mean health past development these as evolved over But

Robert Milligan

No.

think Scott I health of on been going developments just mentioned, don't systems I as think myriad have there. think out a there's certainly selective. there's I --

we've think platform bought I was the certainly the certainly period we think there things there out come a gone transition from where couple out a once But transition, period. that. I of a Duke as was through portfolio have and testing

yields and really, think the from I completing our team. we're those When acquired the we part Duke all; portfolio first of developments on quarter, Duke at on time. X% we to ability talking grow that that projects that X.X% finished was cap rates fourth the when the of bought we the about of end to

big are us near in that we that was Raleigh, health look of that, late we've think very are seen going new any the to term get first a a more in systems opportunity that for at North wins. now in big the WakeMed from to was that's going acceleration We've think And feet. Carolina kind test XXX,XXX and of for. win, I show and of square announced couple very us. stages of got

Jonathan Hughes

programmatic Are agreements in any discussion? development there

Robert Milligan

they health fit. go call are replicate that can you I with discussions -- to best most think after them as possible care of if you a the like program you them you open that the to in most that systems, see terms, our of and give

think as going to our with I come them we've have our there's looked start that's us our see to and care to where But for be see invest going I how the I we to us, as discussions think capital, you're systems, well. we approach out. think development strategic space you're I selective As health discussions think

Jonathan Hughes

on with Okay. you, maybe just Robert, sticking and just All the right, raise. forward equity

lot those challenging, were You a it's the of outlook. growth still pretty external and do It sounds at proceeds liquidity like raised. have

I NAV. just consensus equity guess the raise below modestly do first place? I'm in the why curious, forward You're

Robert Milligan

we of opportunities. that There certainly were in from think the not our Scott are lack it's perspective, pragmatic and cautious as year. of opportunity I half first for the mentioned,

are us now, We continue markets it on see to and seen them. I us them seeing our execute in and think you'll on you've execute

at price As capital we markets volatile the in has equity ability been at look balance sheet, that and we've small looked to we the to amount a raise it really a of again. of the that. When at at platform management ability investments Xs accretive to with add property X.X% one-off we're make could looking to them these our buying acquisitions, on top we're

So, accretive forward. more to little allows to a it going aggressive we're to the that and there, bit It's investments a shape. be in good of making equity continue us our sheet balance keeps

Jonathan Hughes

Okay.

XX to So, next to I'm gap gap? NAV know me. for we try one what sales but that the last consensus take about you're really year you what to point expect trading did at I as this close NAV? close can valuation I some relative months more can you steps over now the curious X% just mean, to below steps

Scott Peters

cash extremely Well, producing growth. to that we? what X% same-store is what I capable We on What focused of are think our from are a focus we've always is on. platform X% perspective

that, this one want by we that And close I think go bottom you things FFO about giving very talked Does has mentioned. of at. disproportionately drop consistent the to you I We I think any things folks the one we're things to And continue of this grow to continue so to to keep that's consistent very a away will dollars. be we've through investment, of and to our looked relative it quarter-over-quarter help that Earnings, basis. is on not gap capital line? that that, to I think over the important do year that's one think that itself, the quarter-to-quarter-to-quarter. as us

more very user adding capital. dividend, accretive, cost what just that little strong opportunities is safe very a think being have we are sheet, disciplined do consistent, balance a continuing I done, of conscious, development growth that to strong same-store

the have Again, six years, time. the performed, we're of five negative XX%. had of us last never look at We've over you how up if a period

The have of other periods time. negative had folks

XX MOBs, think asset they that shareholders have at next and I to of like is I of particular something classes. they to you So, at period the our doing flows be really, and like over continue I benefit they -- model. at the a consistent. them of at years. by X, job, the look longer gap today, might the to X, shareholders to look of I We And that time perform closes look ebbs And we think get quarter-to-quarter, know that, and type look ability might see for think year-to-year,

Operator

will Bernstein The One. Daniel of from next question Capital come

Daniel Bernstein

I wanted the other have you there, ask metro And of portfolio going that's how the about to Charlotte to opportunities and think currently to major internalization areas your in improve in assets NOI internalized? growth you are the what Charlotte? growth not improve

Robert Milligan

from Dan, the seen time bring we that. with third-party XX think typically points any on them, what basis XX, yield we've over time assets is get acquisition, we can to incremental I internalizing that

of that a assets market to really was entered that Duke it we build It of us as out. the part in around was we've new So and a handful for opportunity bought transaction that the Charlotte. since

really to down more XX team should the growth health better incremental that basis there, to a XX systems investment local lead that then have seize opportunities the opportunities, with has relationships same-store see ability with from road. of we more where a to So, yield, that the that's points

Daniel Bernstein

that to Are like you'd you're there that internalize? other major in markets

Amanda Houghton

of lease as in to a them guaranteed them the agreements and/or up, that purchased from to developer property, will where in-housing. assets that period in look don't got As make market time of Florida I and those couple in-house or where have there's either are to the that properties markets evaluate at only they've for the do we the manage sense it; certainly we've Connecticut, or a we scale, the the able of remaining we be and portfolio, it doesn't case don't have we come

are there. there opportunities additional yes, So

Daniel Bernstein

a that's bit. the the earlier year, you look if scheduled Okay. at up data mean, just down the December, volumes space that caused you dislocation come transactions? little this were rates space? exclude little a anticipate some as any aberration there, out is market reason come an in or and then of Or of side, volumes acquisition maybe little that that a And some larger volume acquisition there cap Is that if of MOB for of especially result a I the less the competition bit on was think any acquisitions to will some not in that really fall-off or of kind acquisition by a there's has of been

Scott Peters

are to being this look is mean MOB sense are X be what always boy, fascinating grow growth happened. see it blended very to rates same-store that was being a to attracted driven are X, it's then that things my that what happens? I supposed that's I therefore, and by are earnings, years. higher couple buying and was other Well, are rates cap and and X X, the people the folks and things X%, to space X%, theoretically X, who back remember being RIDEA able ago over engine cap i.e., like not great and next years say with

lower still that they're So, of then And the blending quality, the it. the things seeing it. cap because rate blend we're folks a I the location, we consistency, all about are like acquisitions. at think MOBs that

are where MOBs to stay much think pretty I So, going are. they

to or we get to constrained But in rate I those X% can are and we is to it, a X% from those always said, find something. we They're continue where declining interesting can be They're interesting which as someone cap the long how this it'll yield, not assets, one-offs. bring opportunities a yield will X% continues. see range we think when our I opportunities. But reiterated, longer-term transactions. they as buys the continue to and escalators can Robert platform to large X.X% to get yield not

Operator

from come Advisors. will question Lukas of Street Green next Hartwich The

Lukas Hartwich

questions happened sheet? to interest me, the Just my been What answered. couple the redeemable a most on for have GAAP balance of noncontrolling

Robert Milligan

you This a or -- building, Yes, Lukas. the great had that convert in in perspective I'm question. some What building to were back cash. had joint interest we that, into Houston. on ability from we on acquired great venture had specific caught a on-campus XXXX, the glad so property. sellers was There was we units -- of a

I think X.X%. we bought it for like an

that unit OP the of did, joint ventures first One we first deal.

to was So, at a on to was little there right It it's the that end mostly so units be went million transaction, of bit of redeemable and the from put dollars a couple in period, OP going a it. with of of being a cash.

Lukas Hartwich

And development track? of then there spending lines the there Are still wasn't a I during the on Perfect. ton noticed quarter. time

Robert Milligan

Yes. end of from The when Cary look beginning those, May. WakeMed groundbreaking, that just was lines, projects time the the we April, in right big have we kicked now, off of at that

So, you'll that accelerate. start see to

we We half in we there other is the active so there back ground process The year. through should permitting the down of have just got at that one the Florida. break

right those now. yes, So on certainly are track

Operator

from come will Fargo. question next Todd of The Stender Wells

Todd Stender

the right. All back And usage. to going ATM just

it of for redevelopment I maybe bit on Is would tucked of then in fractionally. actually just is will rest down you You've maybe got which suggest that accretive your year. If came color use maybe acquisitions highly would've the before some time you of but ticked train maybe it's thinking earnings could it, to little be whole provide the for know, of a there? line tap your quite don't drag, right up there bit the anything my have guidance credit context. a which maybe

Robert Milligan

most matching to with it equity, on comes like time and acquisitions up think, at I of equity taking down that do this mentioned, we've that. acquisition the we timing Todd, really the

to going a to like necessarily opportunity to games around equity price it that. an play issue try anything we So, I that was at can or don't we're any think But that certainly going that gives see, value. on the we markets that those transactions to move and confidence capital with are forward accretive that make think the us it we to add and transactions

Scott Peters

And I later. general -- be than as a would of we users sooner consensus would think that

Todd Stender

the From Okay, equity? got it.

Scott Peters

we that away put we'd thought months. wasn't XX and for raised something It

Todd Stender

it. Got

look kind back top want little speak to when the bit came expenses. flesh recoveries, and passing you to when pretty else discount some spreads property it's at point not in it's of just that's investors, comes Can in degree when something lot so usual, because than your tucked really to that a the there wider So core tenant to top Rent When they potentially you power line. line are pricing But business. that high. a tucked to just the comes there's it through in about it I of taxes there? anything the a

Robert Milligan

rent of think, Todd, I view Well, the our most driver base truly is of is growth. the that

you So said component as and of to our look same-store a that's out highlight is that. consistently we've right. think that But why broken I what

that take. might to Given tenants structures potential NOI the we the increases, cost the ability lease we which it minimizes additional as hit that certainly got have, see the you we've to on pass

forward tenant base things we certainly has revenue control how how from And our focus expenses think focus and our decrease think growth I through perspective, then is going and we them. occupancy. on do drive growing been So, all a recovery along I rate

over X-year been trend, And back so, X-, a when to essentially for you we've look flat down expenses.

So, now, kind as expense see enjoyed peers. low-level have of most these of any especially of increases certain you these to our of growth tenants relative

catch-up And perspective But seeing to most perspective. that expense now the so, tenants. through from a an again, is pass tax you're of property from what a

Todd Stender

get I That context to XXX there. like just but Okay. going to back seems think you that... some acquisition, in for the And maybe a lot tenants Streeterville there's then highlighted

Robert Milligan

lot. a is It

Scott Peters

A lot. a That's lot.

Todd Stender

systems landlord what as and Maybe just that we footprints to building take just change versus hospital up Are time they like? of to medical office over other and bigger every maybe to look kind looks taking it property footprints? talk speak small that now you does want the like what guys the will

Scott Peters

a performance. going our all, at has thoughts vision. a you're should were, a how first and we that When buy to bring of improved Everybody something, a where a of back, of When vision which top X from you value have first looked location, go, one you it's location. the building, care Northwestern, location. in go great perspective. the is health it's you And And to located, location, or of universities country well, you located vision obviously X

the was Then order us to they a keep capital it we that folks owners that, trying which the because clear two and inherited to and occupied had do were did were were our tenant to is budget. little as interviews they the and they building on -- just and understandable specifically living property possible the as were in using

we'd and be slowly, talked to got with kick like folks our can't So, is -- we've go and tenants good X% out. and that you we and to them to top paying in real pay view and it who just so dollar around is looked has -- escalators because slowly

over we've where approached would will But take university capital. approached require the time, been already like we've It and been to larger spaces.

will that come internal now, spaces, that can a larger if be or property upon completely rents it back think to be And do we higher footprint will from have Fortunately, different focused value. I larger years will property you greater it seven motivated and and tenants, that.

Operator

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

Scott Peters

for questions to any. and joining you, anyone reaching our out any further talking for everybody, if and Thank conference call thank with you. Well, we us has forward look

Operator

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

your disconnect a lines. day. now Have great may You

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