Healthcare Realty Trust (HR) 5 Nov 202020 Q3 Earnings call transcript

Company Profile

Participants

Todd Meredith	executive
Carla Baca	executive
Bethany Mancini	executive
J. Douglas	executive
Robert Hull	executive
Juan Sanabria	analyst
Jordan Sadler	analyst
Vikram Malhotra	analyst
Nicholas Joseph	analyst
Richard Anderson	analyst
Jonathan Petersen	analyst
Daniel Bernstein	analyst
Omotayo Okusanya	analyst
Mei Wen Tan	analyst

Call transcript

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Healthcare Realty Trust third quarter financial results conference call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Todd Meredith, CEO. Please go ahead.

Todd Meredith

Thank you, Debbie.

Joining me on the call today are Carla Baca, Bethany Mancini, Kris Douglas and Rob Hull. first disclaimer. could you if read the Carla,

Carla Baca

most are Except discussed forward-looking in historical filed information with These statements Form for in the matters contained within, risks certain and measures, company's may uncertainties. share; this and comparable year operations, involve the assumptions, the XX, for normalized specifically contain available XX-K website. Todd? press estimates, discussed EBITDA. a the that release these found of adjusted ended press risks more the XX-Q the update call operating the company's for company's SEC XX-K may of statements company's earnings the as judgment per FFO; to XXXX. share; per as ended funds forms net December subsequently forward-looking in any the release, funds available and earnings this in The A reconciliation filed September Form disclaims the also GAAP from third matters represent this date this non-GAAP information, The XX, to XXXX, XX-Q. financial and call. company FFO These discussed distribution, quarter measures forward-looking may measures call material. of for The obligation FFO in contain on EBITDA be normalized NOI; financial FFO; FAD; such are supplemental income,

Todd Meredith

Thank you, Carla.

business accelerating opening We finally, properties are that pleased tenants quickly; morning we of how the our this comments My focus performing pace acquisitions. the positive will X are results quarter. to and second, first, for report has third well; on themes: are for our rebounded

while expect or and of much better surgical cases the professionals is patient XX% than the to visits see and understanding health our availability needed demands horizon. routine but COVID steadily to improving. The traffic, which therapies, managing all is health frontline are and foot parking, our capacity of experience in better cases. including encouraged activity in spring. evident This care facilities to more have are and country certain the Public and levels buildings, patients in We open and systems, to is care we adapting rebounded have equipped to elective procedures have markets, addressing effective and at are COVID on in remain of They providers the vaccines gained valuable continue. rise a back inpatient seeing and officials health

Our collections normal. deferrals for for productive are need Requests and credit levels. to resilience services. specialty months at now operating have sustainable tapered returned We rent their the to outpatient rent and off tenants ago, critical

seen have periods. for pick which notably, tours well up We property bodes absorption future in

While and there may quarters offense. perform our have way, encouraged well ahead. be positive steadily to improve shift the along portfolio These trends expect we us to in the to bumps

we a pipeline, and come organically. acquisition for substantially time We and have our guidance a this growing are second on sizable pace year. Ramping about has up capitalizing increased investment

experienced Our in our markets proactively properties. more target to source team has worked

intelligence scale to in terms. costs, are these primary benefit amassing leasing market our better leveraging but on our in Concentrated is the help capture deeper reach clusters. tight spread We extending MOBs local can more volume markets,

maintain complement on has some our a benefiting have of have COVID-XX, from course the medical our Denver largest office not from to high-growth is and the multi-tenant us the and migration yet relentless elevate possibly also providers. a on-campus enabling or create strategies with of investing in consistent proven by aligning such to are of We continue could acquisition of common strong to The business and focus link basis Atlanta, many properties pandemic, discipline the cities. Through strongest target more trend essential. on see markets, but preference MOBs, Raleigh, ability We but anticipated quality. as off-campus we dense, the markets value the the that Nashville, are our These hospital-centric pace for adjacent portfolio. our

optimized above-average portfolio while and sustain Looking translating FFO of And complementary more to the dividend a exhibiting produce sector. better is efforts internal higher ahead, acquisitions of hallmark growth level our are to our the per to low-risk MOB share coverage. attributes

Over long steady shareholders. outpatient in risk-adjusted rise demand our ensure the for a ability solid returns attractive growth for services to generate term, will and

over care health Now information trends. to I'll on turn additional Bethany? and recent it Bethany policy for

Bethany Mancini

economic their resilient are to backdrop have come. If able inpatient and shutting lower for while up potentially health and staffing, outpatient scheduled be whether acuity to fifth remaining on providers of with political under bill COVID ramped for meeting macroeconomic focused normalize also could them capacity patients strong are a previously down have and federal to to inpatient assistance, adequate in in and additional an hospitals, to from coordination expect health lines of bed to Health Hospitals the spike, quite care. continues treat services benefit acuity CARES Act. well through better service have other without much-needed PPE stimulus uncertain Providers allotted surgeries as providers factors, or care more care. With of expected now Higher proven facilities. quickly demand volume funds XXXX. months care the use the delayed as we providers

Supreme deemphasize for expect in option, next agenda choice ultimately likely providers. administration and wins at A a quo and the least as insurance providers scenario, risk which for seen a physician need consumer enrollment will strong subsector, outlook staffing Medicaid care steady XX,XXX direction revenue XX% for In competition the tenants of without such at legislation President midterm September expected mandate care, we election, They now in even hiring positive in-person have every physician California to a Court to other a After health of stable have once hear rates election. offices, until patient the sign office demand, health months public visit. a monthly implement are health offices physician and growth political place care remain v. in Congress, Xx health in case penalty. incremental health in normal determine to for than President marketplaces. Presidency ACA higher Congress progressive more market presidential can hiring shift average of to the months. Tuesday's difficult levels, November Several Physician scope. If care This policy HR's over pre-COVID. balance reimbursement reimbursement remain to former continue support swing arguments have of the adding the the to prevails in stable in insurance years. for XX% Medicare Trump election, the a executive If oral to individual returned on We more status but result ACA is and for for more offices contention, are Biden likely should levels. On coming be telemedicine majority health care either back would intact if Texas of jobs. will split keep hiring, the the outpaced present to pre-COVID volume for or the hold generally less implications bipartisanship increase under orders in for expect policy, states should Senate. remains Republicans on heavy pass, is next in change as XX, and average. For X physician with payment and Medicare the the his of the Vice several decided,

become will expect from on for the consider will strategically and demand. the to services We original providers nation's greater ability outpatient mandate care political aging medical critical. positioned to patient to the keeping facilities rise. Realty's markets of intent population, our continue more the health care office increasingly Congress the growing coverage. With insurance with to court spending the enable and specialty Healthcare loss in any expand favorable services their of meet deliver And with to the expanded agenda, are

an Kris overview turn Kris? it financial operational I of results. to Now over and will for Douglas

J. Douglas

the Performance pace third than per we a looking us is positions year of almost Thank sustain even disposition impacts FFO quarter with the more internal dilution combined to was rent by rebounding to the And FFO collections strong, with accretive the redeploy well assets these acquisitions, that which proceeds we and noteworthy the normalized $X.XX quarter. growth, on share is from July. COVID forward, in It of well $XXX per $X.XX. share in of Mercy in million you, Healthy this meaningful contributed second above saw year-end, ago, XXXX. are to $X.XX from in growth Bethany.

is Our testament ability FFO amidst portfolio's to strength. pandemic-related grow our to challenges a

utility from impacts over parking offset As XX% typical expected, Mercy seasonal second as the sequential the were partially quarterly dispositions. well quarter income increase in These nearly by as expenses a experienced quarter. third we

in that COVID most of the quarter. rent rent over In $X scheduled and and given collected million deferrals no was there were XX% XX% addition, deferred $XXX,XXX importantly, be Further, Remaining a payments rent to repaid sequential third pre-pandemic we including are reserve granted. new a by levels. to from release deferral reserves, reduced quarter The collections from back year-end. deferral swing the in benefited scheduled material were deferrals third we reserve

X% performance. was year-over-year revenue multi-tenant XXXX X.X% by a properties. to NOI growth was to over our growth NOI levels. growth quarterly operating created utilization second X.X%. Same-store enhanced below below expense Turning Same-store to from X.X%. but growth pre-pandemic of is long-term operating growth from and of still Building leverage multi-tenant the expense operating lows by for quarter X.X% the rebounded driven has of contributed average running quarter just third This of the

to a see typical expense to forward. moving return expect gradual We levels

performance. square growth foot cash few by of key per multi-tenant revenue revenue drivers of a spreads Our and COVID-related Overall X.X% In-place drove to X.X% escalators occupied was bolstered impacted X.X%. contractual items. leasing revenue

income parking $XXX,XXX. year-over-year was First, down

third income to quarter. nearly portfolio However, from traffic continuing back improve. the same-store by reflective $XXX,XXX is sequentially, in parking bounced This of patient the

meaningfully a property in saw the quarter, in demand. indicating decrease pent-up we basis in have in considerable a X point occupancy due quarter. Tours to the third slowdown second Secondly, quarters, XX in rebounded mainly last tours

of $XXX our XXXX due Xs. equity forward balance million. X into XXXX are We in maturity our to X.Xx spend Also, at available the expiring balance contracts spend. and moving to flexible quarter, be for quarter, leasing X.Xx, senior maturities the After XX. debt-to-EBITDA and welcome over end maintain XX% XXXX. Shifting year This capital the lower is refinancing less over reinvest a we of will guidance average was in September noting reflected basis benefits extended fourth total senior We foreign debt-to-EBITDA be coupon ratio, about $XXX of $XXX slower we and X of our the number interest TI worth expect optimistic we issued due unintended an to second-generation sheet. cash XXXX. under the XX material was XXXX. took XXXX. until at payout the The steps no cash notes benefit by Net notes bringing the blended X.XX% entered which million of we have October, notes a the lower at mainly equity range is and TI conservative low to fully the from in In years to to of with lowered FAD points. We almost activity on rate below target our the due of million called X.XX% absorption no until now below debt debt to senior hand It ATM, our this or year. sheet. full that third dividend This into for

are of we look XXXX, we resiliency tenants on the portfolio. first with X back As pleased of our the and quarters

and generated revenue organic steady drivers market times. through indicate asset will internal have growth challenging Strong this selection growth continue. internal Our quality

In and well acquisitions growth, our positioned internal addition, numerous to well pipeline growth. capital with strong for acquisition low FFO are available. fund sources per summary, leverage share us positions accretive In growing we accelerating

for investment it Now activity. I'll to turn overview over an Rob Rob? of

Robert Hull

confidence forward Realty This with and supported cash resilient the flows by is Kris. quality office strong moving rent Thanks, medical Healthcare confidently is from investments. buildings. collections additional

buildings at year been we hit pause robust unfolded, assembling this X pandemic has pulled, the X/X sourcing remained the button. relationships a directly In owners over many and a and sourced a number contrast, pipeline our we've or time. of building As of Over cultivated many investors pipeline, active years. were marketed from X deals

centered last we to market. to years helps provide where in our primarily buildings additional of needs. building multi-tenant in Local example been markets hospitals, leading diverse in dense the the also of been investments to acquisition in prospects Our with located concentrations us sight growing invested, and with growing, populations. balance we leasing already This The XX% XXX-bed to has MOB around hospital creating couple serving Over knowledge located this adjacent a agreement third X were space hospitals. purchases see Healthcare focus us line leased have the Los is leverage on year additional we and recent signed adjacent on a to local where XXX% to a have varying in expertise illustrate These invest markets Realty and around and July, leading path in $XXX hospital. position well gained clusters million. our with target property acquired the in on campus, Cedars-Sinai. affiliate purchased of of a options Hospital. the buildings. Since identify has mix Huntington Angeles. MOBs X a forming These underwrite around definitive clear of for our more tenants clusters properties This is A is focus last

year. aligns campuses. And that building acquired investment next XXX-bed Hospital X-property to Houston, X for a square and MOBs tenants X MOB services to they expands we our X rate core range the group that this leading competing has average we complex to X% MOB on attractive other growing -- this for the is hospital with Colorado require Woodlands. in buildings adjacent diverse in distance portfolio for us to steady Hermann's the hospital a located we from of is a X in broader This hospital on-campus gives in broader on corridor. X.X%, convenient own the The a of This supported These an residential the to medical properties The and alternative control buyers. an MOBs where cap area in XXX,XXX short Another recent destination properties. along with is buildings on-campus around of acquisitions off-campus and is acquisition we also provides feet. plus X total end adjacent purchased to located serve The our expect immediate in corner other commercial and an own don't Memorial from a Springs core adjacent building at a year as and the where market pricing X.X%. March an presence. market are around And we that well-capitalized a X% near remained by our for

portfolios well recently of a a with of greater up uptick do have early on We the pandemic. align seen preferences: enough taking deals A robust measure couple mix, with for don't that approach marketed as market sellers portfolios growth return the larger our an period us. These and wait-and-see in the rent on-campus particular are after not potential markets. overlap our target during

Looking ahead, have another under $XXX under totaling and intent. acquisitions letter of we million prospective million contract $XXX

to invested these more While by may the we fully year-end. mercy have early some in expect XXXX, proceeds and close of

is are last raising to We above well from top guidance guidance million end XXXX million. quarter. now $XXX our $XXX

start confident open that a that XXXX strong ready to end As robust are of growth for deliver questions. we we the can a contribute remain to share. Operator, we building meaningful continue in investing, now pipeline per the year approach to our call FFO a will solid of team and

Operator

question [Operator Instructions] John comes Sanabria with The first BMO. from

Juan Sanabria

Juan It's here.

a on if And you're to portfolio. comment from maybe on adjacent versus just Just versus differential more the on mix bit between rate I take a the wanted wanting different cap like or prospects clarification of looking little relative assets. sounded pricing for so, off? off or more the that on pipeline. current investment are could you perspective to you're after if on- how it a Maybe and your off-campus get

Robert Hull

Yes.

most few year, properties at off-campus adjacent think have been this our have in properties, adjacent. that there have a There we've them of I been been there. more look acquisitions you if made

it if -- and the on pipeline a there. think I sprinkled on few the for to similar the a be at look it'd and comes I when of you year, adjacent, think remainder adjacent, in and and the largely off-campus of mix

that. generally, on typically between be from basis -- see XX point the pricing XX those. I cases, seeing XX think difference, basis there's pricing that at higher to point it's when range. could you depending to you than can some In But market, the XX slightly a in it look difference anywhere

Todd Meredith

on I that's really closer adjacent on then cap say and -- sort off, Juan, I to is the versus And that's skew the going guess would to of rates.

the of you there as said. a I as of of to mean kind distance So by not vary much are difference hospital. market, closer can to but Rob it's the hospital, almost linear line a it

Juan Sanabria

'XX capital Great. it -- of kind your And in to for acquisitions, then said you you alluded of kind you of a sources. had in multitude

rates to of capital assuming about today? quo relative you to we think forward you would recycling cap fund today fund? be in cost move feel capital about status you willingness Or equity how likely in of a and So cost how as to should capital your 'XX, your more either your via

J. Douglas

Yes.

First, cash right now, proceeds we the do have to redeploy.

our guess we start I this will we we're redeploy we we where cash. there. will or once to So working leverage be the low where blended, are Xs, in keep

are kind us that certainly And in right assets the to that of based is purchase off accretive mid-Xs so we it looking WACC And basis. of of range. where at market we're now, kind that for from blended in able

continue fund of equity. will And a and so with debt mix we to

well on year. with we that the lined proceeds forward front the this positioned ATM up have equity We so are far

have available now. forward $XXX We million that equity through right

we we So that through will sheet have go the be on pipeline. fund current our to cash balance used that once the

forms certainly of as but positioned, of to well capital that other we have outside So also access well.

Operator

The KeyBanc. Sadler next question Jordan from with comes

Jordan Sadler

heavily skewed question follow-up the the the of under as LOI. the the and well acquisitions, last there of sort contract on off-campus? pipeline Just toward potential a mix regarding Is under

Robert Hull

No.

is towards on adjacent, and in mix and much skewed under skewed is the contract the off. not think heavily I mix

Jordan Sadler

okay. On and adjacent,

Robert Hull

Yes.

a the mile. adjacent, it's definition our within about you If quarter of think

Jordan Sadler

I I'm looks I it the of of think, to Or is just your of lot that. preference I guys in transactions lot mix that's prepared just done. mean more MOBs. I'm kind for caught able I nuance, a adjacent? what really -- of of specifically? of follow on-campus, you kind I are multi-tenant those where it source on-campus still said mean -- like going strong this have I noticed No, I a you kind a you that piece you Bob, curious, -- is it of down. just a have remarks,

Robert Hull

Yes.

are yes, still I we think, to on-campus. able source

think -- -- XX% years, over markets the acquisitions I target our been of we've been already we've acquisitions -- we you've past a have where seen, X presence. what have in have

look have closer, about have XX% you If to on we either those been already a adjacent campuses of even or presence. campuses around where where

So around or presence. what we campuses out building to clusters clusters success want is us seeing I a you're in build tight think having these out where

you've of of a those And seen as so we are around acquisitions out that strategy where want to be. building smaller of part here made number adjacent, our campuses where portfolios we've recently

So building we at buying I knowledge, out and with that it's property on-campus then X comes we where the to buying way local and our enter think upon going source get that. these time. work properties. and properties we're at a -- it It's and submarket relationships direct the can through just still Oftentimes, X and one

portfolio and opportunity significant square really we've where to be, we're that's build comes strength footage. of building so constantly to buying And identified properties an around we pipeline want and out where campuses the in, our

Jordan Sadler

and tenancy. surrounding available how you're a of office Okay. obviously, be there's at more sort of your or from there'll home around hurting? in locations Has of result stuff Do users, this office obviously, this infill you work traditional traditional sale about because, narrative, quite versus these -- potentially That's -- these and bit are think looking landlords hospitals even do for of kind helpful. space obviously, locations? primary a product of these this traditional for a adjacent more Rob, some you other I as know think when underwriting,

Robert Hull

Yes.

to our as statistics We've be located well significant buildings for during around think you foot of at show surgeries these falloff on that when around this mean even really still seen -- and tenants restrictions as and and the largely in I on, the had where the think underwriting demand there's that some our underwriting was shows I I that caused elective our when pandemic campus. rebounded. look or that the And the by we're that's statistics. adjacent a we on-campus up in inpatient services, traffic traffic

we think but there's continued acuity campus to so the that And space the hospital. located these around adjacent higher serve services need for on to in tenants and around still to that and as be they demand going only be not

J. Douglas

ahead, And I might Todd. add -- go

Todd Meredith

ahead, -- Go well, Kris same probably the comment.

there's struggling you're to demand MOB, sector on on retail of move in of on where then you're a think that cited, investor right, and been really the -- other in area other hand amount the some a one probably capital hang liquidity to there's I going institutional work-from-home I to that They're one well. or you portfolio somebody it's because value an a or trend, has a from doing regional on at if economic other doing want MOB. saying, local reasons are I from I the that and hand, to in well. for right. something people generally And similar some or like can to into the if a looking lot they're has preserved has struggling you're they're be even think But

itself case to to from seen a little And will continue think more So be you're And it's think I the you've it at us it the benefit a balance, for while. right, that. lends probably availability I think a margin. but do I certainly

J. Douglas

on the adjacent. Jordan, one back question Kris. this add is your thing, previous actually, versus about to I'll

we at across of could that, X/X more pretty if tight a it's walking is our mentioned, frankly, a of at X/X a campus than campuses, mile. And Rob the as definition be lot look As at look you mile.

adjacent versus to interchangeably. very properties, similar. our at those And And close if so properties across look our they're look we on our at performance pretty very, we

adjacency shift on. wouldn't into read slight or year quarter versus very similar. too much one of one in very, a even They're I So

Jordan Sadler

And I clarification. a That's helpful. just, while Kris, have you, then

helpful. looked out that guys I from reposition, feet? that assets Can the little on the light you XXX,XXX just square a it's the you shed at Just were provided, bit moving same-store of portfolio page X

J. Douglas

around. Yes. had were We moving assets, that couple are some had sold. We a of things that

moved a couple that have got into reposition. We

One we of center center. talked to that Currently, we the are the dollars to to fitness those the spending of -- into are over reconfiguring XXX,XXX It be fitness is be half we the the space. in process and that one that, new before, fitness about have that was about upgrade going square Dallas center feet. building that down is is of remainder we're going and that convert in clinical space

one, some had that in out, we we taking with had XX,XXX office tenant had is that square We tenant we a new backfilling a in there. tenant that multi-tenant building Another as space foot Dallas already moved floors. are that had general well multi-floor a actually

process. goes that going as there's in are just some assets. repositioning already that we're we be So on transition But to those

square the in of But one over So in center overall main kind that's it's footage. the terms that feet. culprits shift in XXX,XXX the square building of is, fitness -- the where

predominance the change of square it in so you makes the And footage noted. up the that

Operator

comes question next Morgan from with The Vikram Malhotra Stanley.

Vikram Malhotra

adjacent first the looking to you times you've of also of by of too one or much guess I the we outlined versus I it's pie, at But shouldn't say, into and kind of more maybe actually read mentioned adjacent. know the so the mentioned. growing one so like off, kind you on few

when level, just to of I'm versus you on just the or off-campus traditionally you've at you So how metric if maybe is of sense looking be this in different can what if the at then us may bumps or a that, for other at? margin. -- tenants your what's it's And give terms slightly change looked underwriting for related maybe impetus even higher look any you

Todd Meredith

not much it's -- a we good a it's think adjacent. so it doing agree, think it's would doing And question. new. more little certainly, We've I really while. actually are Vikram, for And Yes. I a we obvious been

developing scenario tenants have -- we and that we of among And the I would we the the is the our we all that that's have competing the the And I flow, ability, Rob ourselves over in sense have is XX% year ideal you're assets Again, accelerate adjacent of see and year, our what think that where a being well, it's what from sudden, mile knowledge what is cluster these adjacent, add to we of or you're where buildings to the that ring, this whether off. But build the a tight campus, of seeing we're on-campus those around cluster. on. have lot adjacency we competitive ability effect are and then up to of, stacking a trend. on, as either described, nicely are call leasing what seeing and continuing our X/X adding we're or that as buildings. sort of right this network really most,

-- and street a and whether building is the by strong that get or and of realize the we which down suddenly dialogue directly And that well. definition, like We information, that. providers, off-campus really so hospital and competing what you often it's one ourselves through we is the brokers the flow in building our mile, with a the

Let's look go that. at

Let's go see if we ahold can of get building. that

develop a rather is longer obviously, than view mass just get then limit it's a play just revenue-enhancing you're the so side flip build. a some you But a benefit is market critical cost our because And that a that standpoint. cost benefits. you And from more really there's the in cost knowledge more and you the of to the

out some it down anchoring submarket, always the and of effect. cluster effect, and strategy local of the sort to is road that cluster with getting it's on-campus yourself view that the our of of tethering that building So really just and strength sight network line

Vikram Malhotra

that was trying the you rent from going kind market. specific terms was get to perspective, of even, spreads then cluster, in -- sense where hope or a a in you actually or I of with what cost overall so your I Yes, bumps maybe that's mentioned margin to of enhance

where metrics of you So goals any or I'm to some kind may don't. of or do have pan if experiences share wondering if anecdotes are how clusters, to have what the have started those you you out

Todd Meredith

Yes.

builds, I you what the it's this absorption those we now given really to but, for then a what Potentially all the sort really Nashville, Memphis, any place, these insight. trends. absorption than way from own to we is if early long and while, we're move period think again, in several and generate just some where these or to it's a Denver, way it direction. I of translating X% said. is might spreads. And that of where more over are trying and But doing we run, those, we places been compelling own to it a But all over very going demand aggressively X mean, concept, it not concrete that X% different that more a spreads. positive we've that tenants see -- places example we give we I to on adjacent -- think that the or these seeing, core us think of it Y cases, building where and don't getting that does and be gives leasing in sustaining exactly. cash that the It's you That's that stronger absorption, to to see in new so

a we seeing we year. in the sustainable. mean, very And not it quarter. close, you're first pipeline of the ones group next even accelerate of frankly, pace sort may under strong and of properties Rob the and elevate close our it's so have that they'll mentioned of going under contract LOI acquisitions. And think into I some help the us

at be a year to strong kind start we'd this to as keep up So least as pace, great of year. a off next

Robert Hull

add might last the We properties at adjacent. cluster characteristic talking kind said there's that to of on the this over us I to what might that say this years, didn't thing Vikram, have selling is, good we those Todd's and time, or One add though, fit seen XXX% I off-campus to of going always that, with that, some X-plus I ones you we said weren't fit buildings. we are that same would kind idea. about. But some owned

now, XX% is XX%, So we're, call right off-campus. that it,

somewhere currently And probably if range terms overall range, will of so to it see similar you the what stay a in in in mix. us have that we buying

-- say But And all would do it what seen of a overall an it's it's out it's you've not in certainly portfolio. terms can be additive our of for major think I not marginal. shift we So us.

Vikram Malhotra

Okay. Fair one last just then enough. And one.

see done You've as updated a in be can wondering you think just you when of now, dividend the share hoping great you of mentioned, increase. if about XX% or have thoughts I'm kind a to job sort that or investors might lower. payout getting

Todd Meredith

Sure.

outlined, you made So be clearly, And we year think, as I as out, we've should progress. or calendar for XXXX. of some Kris pointed better the XX%

little is down slowing slowdown saw quarter. second tours the the bit that attributable leasing the in of of to a we clearly Some of back off

little So that's helped a this us year.

getting occupancy the So right reasons. we we on don't ahead get more want of that, absorption. a ourselves up it's But spend year next to to It's and too for that. if obviously for little make even

our the mid-XXs. good news forecast But it's that. And be line optimistic is, together will about really next we drive direct So internally, and -- are our is 'XX, see -- drive of focused sight into ability think put to when. still as goal really XXs of our I year. very and to the but comfortably into And we I think it's on if, line assessment the we not

I got wouldn't take but payout it's 'XX. think we and to the we've So look there looks sooner imminent, but I suggest thoughts, hope to planning the in for it at is certainly leasing a rather later, and how -- hard it's be our than

Operator

question Citi. with Nick The Joseph from comes next

Nicholas Joseph

some gave activity. details around You tour

indicator ultimately of the So kind activity curious leading what between is how typical a as that ultimately that you and for I'm relationship and sign leasing about just think it.

J. Douglas

the as our as That's hearing what us the are are providers those Yes. X This ratios. people talked this And quarter, discussions it's pretty we together, as drop with that second similar kind leasing as well take with about, third track we off, we just various is we that. what's average Kris. move on to first optimism saw with of nicely I'll Rebounded of over see We clinical to hospital looking forward systems ground certainly when some of of conversion a and did in quarter. then the very you what quarter. in leasing as the had plans. kind giving well our from

the So of that's we into has that in and it a providing us a is next in quarter. we'll terms converting how track you're a third tour into that for lag continue the lot There activity as rebounded of into quarter, initial hearing of with pleased tour move to there fourth bit optimism tour going -- But well occupancy. year. we're

Nicholas Joseph

at are much your generally of of from of is Or these demand you positions? normal just previous pent-up course from then how back business kind unsatisfied tenants, lockdowns? a still most of have And do sense we to

Todd Meredith

quite I normal. would to it's not say back

through appointment, I a you in experienced your good working it's right lives still mean it trying still delay probably usually -- own a pretty it. you're we doctor's they're now. to think if I get

And still biggest the going overwhelm do is kind of such in safe work -- and But think there's being waiting demand. rooms making practices I you that think crowd I think of I don't take of still So it's sure everybody's and to through that. high don't to pent-up seeing kind it's I system. the it. are very bottleneck think just you terribly some there forever

is best volume doing keep it the to safe do So I think everybody and now. of their appropriate sort right

here. will So be It grind will continue to think benefit. I it a

XXX% XX% plus, As we to across XX% market. varies from we're said, the about

the all really obviously, looking So the we're vaccines the I just we into of of I and improve spring. you'll or I where of sort for sort that trends we to probably grinding be, think, worked would pre-COVID. back rate that some a higher think when have run moment through better were real to -- get of And as I until that's see XXX% think the will of see most

Operator

from with Anderson comes SMBC. question next Rick The

Richard Anderson

the quickly, trade money or curious was making any if disposition, rate realm on thesis of kind those redeploying just of that longer-term on normal, cap deployment a the And just that of mercy about you're like kind growth X.X%? proceeds. in So if more that's

J. Douglas

higher cap was had in that rate. No, single-tenant the It really rate. about we Yes. X.X% rates the was there risk. markets It some smaller that was higher cap and a

good dilution some from have did long-term trade was associated value, that with that. think we for it's us. a But So still a we

Richard Anderson

now. I remember apologize. Yes. I I'm sorry. that

a also about the sort you anything naturally can of that and -- is that, all of maybe off-campus. to hospital connected the is On a understand even that sign from about in a -- playing an times, of would acquisition standpoint? sort go the be market center own talking the circle, But people the adjacent environment? there marketplace in theme is a close clusters, the here, that of away a don't behaving and want is we're how because not or role that you the at of so hub, move to of you're about anything Or -- I from

Todd Meredith

at not absolutely we to on-campus . want all. No, do the I mean,

the those and And I think been down said us over We've XX% of be well, strategically that's adjacency. say, what go that tight hospitals then very by from is building we what we're the want And one, you that that Rob of drill now seen again, heard, and -- mentioned, out which around? said, do well. kind to what go and ones already want have a And you we've as down markets, is as doing to then you've that done number as we we we're in. circle. pick we we're into,

certainly -- adjacent the situation foot it's no activity off. is levels. that It's the be quarter. not it there's do. as traffic like levels portfolio, second heavily versus didn't in see which to versus play absolutely We different out you concerns and we're on-campus, I seeing in deferral seen Differently And on know, want our any frankly, we on-campus. have change not we there. So

a So then talked next that's get trying it's with we these Who the the want concerted find XX% of develop competing leasing our sort that then effort a a to is on-campus is that's buildings team clusters about saying, we submarket same in building are what get or cluster. therefore, of XX% in same maybe people. what somewhere clusters. Rob adjacent an in doing doing our in Maybe very are the to single immediately, who we're And one. And much talk to we we Well, -- new And us the we cluster. with? not is submarket. own would what

campus, buyer like get often some going not institutional the already they're it's to just the adjacent if you're owned us. -- So frankly, first it's likely because to on more the hospitals other own by

that buyer of get usually can be get sort if in to priming best getting more. and a is it. of the you oftentimes adjacent that on-campus, so the then on you build And foothold, But to yourself you don't initially, own can position already on-campus

Richard Anderson

being last. idea Okay. pretty environment differently includes If off-campus And then consistency me of reasons let to people a some bit drawn perhaps a distance list able there's for in And to there's by think -- quickly. this probably that about the being be the that? office Or movement you'd more maybe this where little all to bit medical the people attention then. more all close you there can do off-campus? environment's an actually that own and where of how you will sort a I of this home, no is that, know accommodating safer really But don't of more of? there either whatnot and to feel might long sell environment Is is speak what

Todd Meredith

say, through was and versus out Well, a as of we we which off-campus, pointed I ones own probably earlier, sold historically to not. fair bit going and would long identifying Kris have term our really wanted it

to we've we to a percentage. small of clusters off-campus again, where of And lot Those invest and a fairly is, the want we down kind to in have, develop the markets. continue which are so whittled those it places

looking advantage of say that would not I So trade. taking we're at

that say almost Now us off-campus I we're very up that tick little or on the on say, for have. Sure. Kris see said, off there? do you would we I I generally, But mean versus a would And margin, off. we that may as because, we're an adjacent with the XX-XX will comfortable here

so And we're to XX% there. XX%, could see But I drifting that an on comfortable adjacent.

clusters. strategically, demographics, of the plays our kind into it as long it As fits right it's

mix. that with comfortable very we're So

Robert Hull

Todd, is would I to I add just that. about And add would clusters. to Rob. point just that This Yes.

to see you or on significant have you're a in us, is are If we adjacent going investing generally already presence.

we're So cluster It's effect. complementary clustering with in going be a off-campus and going where truly to really -- starting that building. it's to not an

Richard Anderson

for Last Yes. perhaps Kris. Got you. one,

low the XXXX the target assuming lower type levering XXXX, and growth? funded of up words, debt. and X.Xx a accretion than said, does and your incremental you're bit I you interest next think, from In in all of got other that acquisition X.X-ish by a with go you much rates feed How lot it's you If little rest, debt-to-EBITDA if into range. entirely

much growth that how you're the move So I'm when about next FFO year? material talking curious, needle does

J. Douglas

you think Yes, that really have Rich, on way think to to for about is I the cash the that balance forma of have pro the you kind it sheet.

to was was that trying prepared kind I in of remarks. highlight So what my

low the a debt-to-EBITDA So But and up today. on are low redeploy yes, our million a of cash that we debt-to-EBITDA ends in if X.X going basis. you take Xx the mid-Xs, back $XXX that into Xs,

so And X in of to X.X. our we're really target already range

did over And will by at to X.X-year from did points. the we see X%, so wouldn't just down back blended XX some out which earnings issuance. and A I that refinancing bond a with leverage rate forward. new point year October new the shift interest our plus benefit that brought in anticipate XX bond issuance moving meaningful we basis I --

where So on up. is try leverage redeployed. that. to which kind low But say once cash we're is Xs, forward not benefit to some the it there keep plan would looking levering we that that in to I are frankly, of We moving is seeing earnings accelerate today by

Operator

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

Unknown Analyst

here ] quarter. the It's on Lukas. on Congrats for [ John

supply wanted I there the on. to guess, coming What's from markets to your desire lack fulfill of a outlook, understanding of me. better just in kind supply, of side get around and X-parter to where step need? I cluster see particularly the Just, your you have development on a the that

Robert Hull

Yes.

locate buildings campus and local And I then, we and markets, identifying said, us own. that around, form want certainly and as source identifying side, in engaging our there on figuring supply markets think can with certainly, target way going when want factor. those with either driving help begin a to really, brokers a to in supply owns a the then we we're out that owners starting or think evaluate dialogue And that the with and the Todd we out we buildings, I going those who that building relationships. buildings becomes to

so a next of want -- as these that their hospital. substantial drives buildings, we certainly, -- a certainly a the our don't And if opportunity, are that with certainly identified. And We certainly we've -- move inside oftentimes, clustered been And the if there get -- market but then those when what's there's largely in see development the formed that's properties on and their growth. have the late. efforts to develop market sure, we nice driven relationship our going by and markets. feel be needs we'll of those the relates really when -- opportunity some development, clusters, And like we to identification to of driving the to clusters of hospital the we've we're enough it there's if enough to next tight it's market,

And so where we have certain situations we've that. done

there an develop our a Our was we the Valley. additional were that situation under year, we current that an development had where finished That to building through with and have we on-campus hospital. this already relationship building opportunity

that we and opportunities evaluate that that that clusters working have criteria. we're we've building on a will continue these out fit certainly actually to -- while So couple been have something of

a we'll of couple coming So new months probably couple out -- of developments. be with begin next the

Operator

with question Petersen from Jon next The Jefferies. comes

Jonathan Petersen

would few they leases A about go reconfiguration renewals were if that higher just needs, lower they you social a tenants, can your On of TIs I bit but anything with of. to forward? new or this kind COVID-related going telehealth distancing TIs, little whether there's or wondering like of talk questions have if was sort actually that, some necessitate quarter, or --

Todd Meredith

volume talked that spend is because bit, down, we well the of Yes. little down our earlier the that, spend as this based saw as because at On of is in of we kind is off TIs, it And about, we year. but a frankly, look tours as slowdown commitments.

look commitments, We expect. at they're we new of you historically right If our for kind that $X kind to $X, renewal of what to of $X.XX leases. is in range the $X in say more frankly

that not now, making So We're for of terms the what space may we're changes monitoring seeing occur as in pretty they're close people a shift of not material way in shift. any to yet, space. meaningful so needs. that right We're using with seeing a we're COVID

a done have of a on People probably many room think being are that things getting online, you turn rooms also of as using I location. around such. and there of to that depends be much lot are and and there's and exam the better discussion people could in have able don't waiting specific to cleaning so check-in, the and

be of we'll expectations on the typical us TI make would be. but we would leasing -- our so that, what And that for lookout of anything commitments have seen not change as yet our

Jonathan Petersen

overcapacity kind XXX,XXX Okay. if new helpful. neighboring That's milestone creating then been for And additional with having there's hospitals. I'm or neighboring plans if on them of cases. spike your discussions systems the yesterday, in just curious in of whatnot All place capacity unfortunate for you're right. at health or another your we hit

Todd Meredith

good which as we The material places spiking. has markets currently are news. though returned is to is to degree. bad really there saw It specific like it's happening doesn't the not in we that what seem It in news know are a our spring, anything

to to dramatic way. issues return hasn't it more that in some more about or fashion really helpful of So discussion these sort a led addressing just

a haven't lot had even We that. of

it. July now, spring not even The markets. a of the couple in news good second sort went is surge So a say in seeing right of and I all would we in through this we're

ability our really think And about whatever react and ability, hospitals do. say us sort little better, handle breathing it a a can I our easier to So everybody the feels with little we I hand of lending is well. a that means and

couple a they lead did who than members Board spikes. a they health good way feel of the it. having And feel our systems we even different spring were back in better with inability in We about handle discussion markets. So to about these

So to it's Obviously, very winter, we're the going hard hearing. into far, what so so but know good. encouraging

Jonathan Petersen

be get I would of people If of be kind to question. very get If assume to I a guys? COVID-related for guess, that more to short opportunities seeking, just a there's vaccine Any it term, one or vaccine, any the guess, administered. high-volume I Does I to anything are the going for administering demand you be going could, create and for vaccine? we that

Todd Meredith

activity. lend to will get people office to We'll family vaccines. hopefully insight they're confident is normal medicine, us going of good, none more being to more If itself how obviously, it's or it be visits I practice will all this mean, into work. the pediatrician's to of great it these more has going think acuity to see. offices. exactly to But and will kind I think fairly kids, to low internal return likely a lead it for certainly people I demand type

benefit, nothing it point. will So be clearly this but specific at a

Operator

with The Bernstein next Daniel question is from Capital One.

Daniel Bernstein

increase I space lot had expansions? I seen the as size space more kind this demand just next from your the XX wondering if last have for any in set to looking for occupancy the over I But think confidence ability a answered mean your of or any leads, are but the I'm months I you you for questions. are your of difference tenants guess, asking of actually you additional in, in of mean well. of tenants tenants?

Todd Meredith

mean seeing a I yes. expansion It's generally, say, are talk. would definitely we amount proportionate. of I fair

new absorption. it's the I positive think and signs similar for more to leasing

And through that a orthopedic that, really big really up. outpatient and there just is a by redevelopment one part, that. hospital out practices And but I But type expansion. building grown So that ramping It on we of see we've has center this is one very place surgery are kind it's say driver a we that. of consideration. in definitely wouldn't seen Memphis. XXx going a also it's lot encouraged that their of of

we in just signs, expansions very of to more translate some higher proportion, that acuity some generally think on So I would will more that And but demand. say, encouraging demand.

Daniel Bernstein

I Not it's like Okay. -- COVID. to not guess related

not space looking more need... because You're for they

Todd Meredith

-- just to -- it's just it's back more Yes, it's Right, Kris' volume. not comment...

Daniel Bernstein

care of needed, okay. health Volume

Todd Meredith

rooms need Yes, volume care, that. we or of waiting like health not anything bigger saying just

Daniel Bernstein

I little -- And guess to of name we here, some then a bit flavor trying buy could it know -- their assets monetizing within whether more get there capital I mean Or it are just the I the just hospitals someplace this assets? you that cap looking again, portfolios? is reallocate Right. on private are characteristic, is by you're landlords? sellers rates talk about hospital if to might Right. to the through is a somehow. capitalize that whether -- and out just but see looking sellers Or are for else monetizations don't from. sellers reallocating private people by just not the

J. Douglas

I mean, that's I Yes. think right.

to the We I that We've sold, for sell. purchased and that. wave think hospital not are to the Mercy the last kind assets looking but owners just about come, hospital quarter. private those of had years it's that waited monetizations that over the primarily we building talked we're seeing

another hospital been think where I purchased a there's saw some buildings. recently instance that I

view the don't as them now or large I source of in near term. So a product

Daniel Bernstein

going property? -- between of understand that at your increases in shift be rate and incremental And an or you back might difference just versus see adjacent any shift, question, occupancy an if growth know to all but all? I do on adjacent, it do change if you the rate adjacent I'm it to to you the an on-campus Okay. just trying discernible fundamentals

Todd Meredith

to a say, oftentimes but would on-campus, alluded we is between really you leases a some with terms see occupancy, One right this but think those take or a I pattern to lease very we it's strong see as adjacent. Yes, hospital. thing, good of leases and tend No. I and renewal. Kris common meet oftentimes new a not of have are whether differences. thing there up, this, a have to And one a lot anchor a come third-party lease they a or on

times, backfill provider And just or but hospitals that it And great at us, as to same for these space third-party becomes campus. around a time, a so lot wants take that will losing available. be you're the that's provider, of a

they you buildings, to of, building if be we can to hey, we And we adjacent can that so that's that have tenant continue campus. multiple a own is get synergy the see with capture that benefit look the as around that we street. across And

benefit a certainly that's see. So we

And look operating very of but so kind metrics in slightly spreads, those all see we just similar. again, behaviors very trends different retention, similar occupancy, leasing

Daniel Bernstein

anything? There's feasible, these ground or right? And no are lease

Todd Meredith

Yes. feasible. Almost that you always, would see be

Operator

from Omotayo with Okusanya The question next comes Mizuho.

Omotayo Okusanya

growth. looks pertains internal growth, Congrats to the near-term 'XX your external as like of solid and as well on growth it and, solid potential kind outlook pretty It is dividend of quarter. course,

at for I your point kind there's or given positive So team the the of have at earnings for question a you lot of still outlook? indicators this is kind point, keeps worried of what night, this up at just

Todd Meredith

on. that, thing think, Sure. I Bethany touched One

of can external these us -- things but factors. these of Some it's none we right, control,

volatile markets. I that just have is And right of down -- seems these I were not of some particularly was clearly, that any Those more world longer. were bad articulated, now. be And it to the hanging if also that health probably that's years, the I much it positive have be should been that there but think Bethany a markets, hanging the capital looks mixed political as going think, some well. that like insight of just uncertainty, of on for in not as on this And I sort that the we think settling the of think But it's environment. less tame, least things outcomes to outcomes, horizon a visibility. lack it And now be over X at capital the it's outcome, care environment that

relief on see So maybe to nice here a everybody's get pretty recovering can with sigh continue think focusing from and of on on and their COVID. a and, growing we'll I frankly, there's part little business less that change people

great uncertainty, than we ago. And think several of building ability of amount as really combined some said, all months feels traction doing, really pipeline I we're seeing a the things plus more portfolio up. keep that I top I today but just on and that did to you on confident everybody organically give think still the what confidence COVID it presents think for acquisitions those us

So optimistic we 'XX. about very are

Omotayo Okusanya

up again Okay. ], about do That's could helpful. And we if it let's down it's stewards, whole [ little the ends are says bit, then to kind thing for hospital client guys just rabbit if potential kind base? you the your think could hole which indulge assume the hospitals and scrapped, of kind go systems, impact and gets of me, unconstitutional ACA of how major what a you be as

Todd Meredith

Sure.

obviously, It's It a you know think, this hole. is it. suggested I speculation. rabbit and

wrong. Bethany remarks, we kind described we really determined be confident as very her of Obviously, lot that. in there's just that on severable, will do feel could be it a As precedent of

it benefit Senate between administration the You and split House. the and could the where go. the Congress outcome and know Maybe of to back never

stimulus a that to show happen, down. if what that sort think get of That the a of in something in leads show struck says ACA step up more some up hopefully, that may to of things the It bill. form the would were we form if could in were that I have environment to productive done. is

Senate it's effort from up. if obviously, do the would to we've something but the that got to you House, say, to think the I quick see and shore Biden, a from cover administration, lives even these

I think it's So probably on of so a unlikely a whole just I that outcome. think time lot don't not draconian that's worth that even but it's it,

Operator

is with final Tan JPMorgan. questioner Sarah The

Mei Wen Tan

we negative leasing noticed one was be Should that? increase reading Just your I this proportion a renewal quarter. that into rate end. on of my leases question

Todd Meredith

tail it's tails Yes. the -- It's a -- would of I say a it's really story this quarter.

we a a more had the have on but did were that on we were So negative, positive. bit the that more also bit

seen out from so and other each back performance they to that balanced kind the you've of And us.

On some of the the one that we proportion favorable left which they're more renewal negative a the bit on that negative, had spread. -- tenant, option tail, was drove renewal for property an higher unusual did that unusual have language the

one property, XX% that also which pretty with spreads, as the you mentioned, But that on expectation would described and that quarter. the have end. reasonable what range would long-term I that we we consistent our X had a greater news were historical is is have had of Excluding good been than this XX% have negative, as

cancel did each So they bit out. other a

not would still So we term very I performance. that overall with expect anomaly something would say the and an and long pleased

Operator

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

Todd Meredith

We appreciate available forward your NAREIT. great morning Take virtually follow-up or interest for And you Everybody, Debbie. meeting questions. will any look and tuning to showing time, we and lot your a of in this everybody day. and have we care. you, Thank be today at a

Operator

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

now disconnect. may You

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.