Healthcare Realty Trust (HR) 6 May 212021 Q1 Earnings call transcript

Company Profile

Participants

Carla Baca	executive
Todd Meredith	executive
Bethany Mancini	executive
Robert Hull	executive
J. Douglas	executive
Juan Sanabria	analyst
Nicholas Joseph	analyst
Joshua Burr	analyst
Jordan Sadler	analyst
Vikram Malhotra	analyst
Connor Siversky	analyst
Omotayo Okusanya	analyst
Richard Anderson	analyst
Todd Stender	analyst
Michael Mueller	analyst
Daniel Bernstein	analyst

Call transcript

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Operator

Good day, and welcome to the Healthcare Realty Trust First Quarter Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Carla Baca, Associate Vice President Investor Relations and Corporate Responsibility. Please go ahead.

Carla Baca

Thank you for joining us today for Healthcare Realty's First Quarter 2021 Earnings Conference Call.

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

Todd I'll now call our over to turn Executive the Meredith. Todd? Officer Chief

Todd Meredith

Carla. you, for And today. us Thank everyone thank you joining

We getting FFO are share. This flow back external growth traffic accelerated we are of patterns. When growth momentum internal positive Healthcare we in to outpatient per facilities our profile. toward pace volumes see drive approaching our Realty's levels. add normal will growth, pre-pandemic and our patient encouraged FAD fast building in to very Foot long-term and is

pre-pandemic XX% of about levels. Now at

still disparity markets. between exists Some

vaccination providers are a the of levels. The capita. in least received and to with at be doctor's one folks have of the For example, folks noticeable the XX-plus back increasingly where just which traffic the We've vaccinated most cohort, Bay consumes have comfortable in vaccinated in going is group, the months, health vulnerable these last office. matter to These is been fully care will weeks. dose per Nashville, a several well XX% Area for behind and uptick a is most normal X months correlating while. seen

volumes patient plans reengaging rise normalize, in optimistic providers steadily for levels and growth. vaccination As are

see expect rate indicators X% We will momentum same leasing We improve of several positive to growth coming quarters. our from X%. translate to that long-term NOI this more today toward in the store

rents strong we for term our patient for success aging best demographics. Three volumes We do and the the are short to denominator demand and to poised leveraging tenants are relationships with local returned space keys levels. markets, our seeing properties. to are Longer raising steadily normal. the choosing well at aligning retaining common in And underlying All term, outperform best ability high at very as are MOBs our to the our providers. is

core in are consistently hospital Our new business What's where is close our opportunities. campuses Typically, to proximity these also is is some hospital on clusters. around that finding and we're performance off-campus attractive strong. buildings

pricing. us demand thus that rich local plenty capital off-campus high of especially in providers. plugged have help identify is are buildings chasing Our The relationships Highly history steady, to at supply. from teams properties to source, campuses long are difficult around competitive MOB of desirable limited hospital with sector scale, a in and the highly

credibility we share edge properties. hospital-centric of competition helps of the in properties, long-standing an have invest networks to our these than our For us over more This and due relationships.

around see investment going of we allocations to campus. properties bulk ahead, Looking the our these hospital the

venture a on and to momentum. initiate and we We in plans, per allocation higher acquisition a Healthcare accelerating actively to expect XXXX, risk starts and internal Realty FAD year. strong pace in growth in reengaged translating attractive to performance in off return to yielding This development this order with share properties providers external will growth multiple invest selectively with our with FFO robust to also capital. off-campus balance higher is going joint our together is

over to it turn I'll Now Bethany.

Bethany Mancini

direction. services continue be the strategies acuity These current Volume which of even Thanks, year-over-year, health fewer an patient Todd. expand down, up lower hospital is our I'd the financial We've health for-profit encouraged but up costs, right to relationships. the preserve outpatient state capacity inpatient low outpatient like by continue to care Still, from recent make store ER settings. hospitals, And revenue systems higher as based of solid mix. company and to inpatient policy. and and surgeries on growth not-for-profit remained is average, volume system similar XX% up results. decreasing health been by majority government are services for margins positive. strong, of percentage in overview in heading have been Health and provide focus in COVID results on a to impacted visits. EBITDA has of cases revenue are same on insured Hospitals acuity increase and growth.

looking of On the side, positive than under physician an average, visits a seeing are vaccinations, growth. for among COVID tenants or are and past select old. patient demand more few reopen, office older, our slower those population office number physician year services. XX With practices other than particularly markets On each years physician toward XX-plus times those most to strong X.X XX increasing flow the a recovery

policy a the subsidies a the and There low As X.X ACA over to regulatory are population, bill to place relatively of benign also positive providers XXXX. years. away to President Truer the increase make expires of and to expected providers. in focused health were demographic that remains for long-term recent in continues landscape once in coverage COVID-XX. Other and permanent for increased the clearly to ongoing buy care. on of by in a is providers very health this a administration's benefit wake to COVID Incentives signal two as lowered balance public income through be eligible insurance to for insurance people still option a of agenda a care insurance number strong more legislative the care health to that allow providers' offset most million scope will premiums into of in next congress potentially the The providers. hallmarks and benefits supporting people health measured support least on in The for keep close now, direction holds should is legislative the growth value percentage health COVID is and X items to MOBs. The funding through of age health is positive relief. the the adjustments age Medicare $X.X passable XX. compensated at eligibility coverage would gap increase to nearly care The insurance government-funded it cohort under ACA the while the campaign term. Biden Expansion incremental, XX% health up limited the care provided. trillion to to political reduction support for take agenda, in relief that down shore from near expanding Conventional large-scale XX% wisdom legislation is ACA proposals care total Biden's road. congress of expected difficult political Underlying Medicare today by these

the in leading outpatient private care an We facilities. as demographics, insured to been rate care support value move costs they ahead. to and in health rising benefit more mix, promote demand As aging will hospitals a services increases any lower and to health months. rise as settings. and hospitals positive Healthcare and physician total COVID, opportunities commercial in delivery steady for years of in regulatory payers, from meet The be providers and effort Medicare physicians population, offices XX outpatient look both long-standing of nation's they with advantage more many XXXX. Insurance outpatient development care will the continue view the growth. payer the public, underscored bolster in last relationships legislative Realty's has for the to beyond of With will their or critical

I Rob. Now call turn the over will to

Robert Hull

activity Thank first you, summarize morning of our for good Realty's remainder and the investment the will I year. and outlook Healthcare everyone. Bethany, quarter

are We year. solid investing this a to off start

advantages moved Our These into the market we acquisition and before noteworthy and And preferred us build relationships become for especially give often competitive. buyer a owners, remains pricing we enabled maintain widely cap attractive markets, to This systems, they back and buildings. brokers is as health as target the access have have buyers rate marketed. are levels. pace with robust often more deals scale property deliberately viewed as to us and

purchase So year, what to this existing far our joint million. in of for X like our with San $XXX really the I majority through clusters. have Denver. venture our All teachers add And we for $XX including core including million, DC, is Diego, purchased are and XX buildings located these Dallas, Atlanta, that markets, buildings XX

hospital into this to levels. us Memorial Recently, example, on, in multiple a practice portfolio were them center which of with interior decision the around the our exclusively now is of which have sizeable around points, a from expand places and product process. acquired an able Orange property properties, to finish County campus this throughout price and engaged range Hospital, adjacent, Saddleback us need show was them their another of types flow. of locations, making we a in fourth Having keeping deal area. submarket We Care. had instrumental a We part As off-campus at of

was in buildings. where X Douglasville, X Atlanta. in example already hospital WellStar's we Another acquired We own around properties

X.X% just X%. these average Both low Our Cap were within with in of The expanding and and X.X% over a hospital plans existing acquisitions buildings. buildings into these low potential X joint future our cluster demand highs off-campus venture an high with a us insight its the property. of through opportunity value-add and the a is teachers. gives these purchased relationship with for for rates XX

over footprint acquisitions For ranges billion for the investor What higher will we some rates, you last lays presentation rate by is additional we beyond completed generate the campus of that have a and couple out color in incrementally see $X that we've the around been to region our expand years. returns. page cap able our of included cap

properties, of at been on depending points XX on-campus location. have acquisitions off-campus XX basis geographic above and spreads Our

Our million second sign totaling pipeline. near to quarter. the no slowing acquisition close contract, pace our we that expect $XXX we LOI, properties continue of under or we as to have of Currently, the end grow shows over

XXX the XX acquisitions, raising of an our by million our of with midpoint guidance are end With million. range strength upper the year-to-date at we

were strategy advantage not to reinvested buildings long-term cap We properties with growth of properties environment X.X%. $XX hospitals. clusters pricing strong around These of prospects. of out a with X accretively million leading proceeds a at to in the also MOBs combined our into for build line rate superior sell We took

first center This X.X%. on The accommodate to expanded Looking is to stabilized over $XX one in by volume. in currently yield XX,XXX-square-foot building. our the to center well is year the more and early at projected has a group way occupancy of will April, surgery at March, took existing lease a our This stabilization next Memphis. our and we surgery This Seattle that orthopedic XXX% yield million renovated started feet. an of redevelopment, in project in new estimated drive being square budget expanding tenant X%. In volume includes of its property a at redevelopment project buildings XX,XXX

move to next tenants by expect the of middle start We paying in year. and rent

have year. we start ahead, developments couple this to a Looking of more expected

create comparable financial above points yields with developments value Our targeted XXX stabilized basis XXX assets. to

deeper Additionally, outpatient with relationships growth. to work them as they hospitals we plan and their closely providers foster for with

summary, look forward into momentum paying strategies this I quarters development the In and carrying ahead. our off. acquisition are to

turn it we'll to over Kris. Now

J. Douglas

into saw The Rob. momentum you, continued last late year Thank 'XX. positive we

as increased pandemic-impacted is we as that the underlying First $XXX FFO by driven due as last $X.X increase well quarter year-over-year noteworthy was $X.X in contribution In per drivers our was million. each accelerating in the increase share growth. possible This million FFO quarter million investments. This by sequential of quarter What's from positive a of share was year, a acquisitions. the of revenue of offset the of the turning store full per current in lower the the and above, fourth to will loss FFO last G&A, X.X%. by parking first by growth external had contribution for income quarters portfolio $X.X or pandemic the offset average saw This grew $XXX,XXX these million X% the quarter, the of impact expenses. during of fluctuate of quarters. timing really of operating long-term we year back X% rebound even was The effects which same second is the and the COVID We see items. quarter and from was NOI related pre-pandemic of third vary market. levels occupancy to our to, only to first dissipates. Where approximately items This partially

our in the in increase widespread potential growth is However, in place X.XX%. our of vaccinations the leasing quarters with leases a embedded to accelerated we path more becoming The tours and average existing number portfolio growth for ahead. The contractual solid. increasing, see remained

and in X.XX%. spread renewed the future was the the leasing average cash For be X.X% average first contractual quarter, will increase leases

is markets future Our our growth. and ability performance achieve runs of averages to national growth targeting to this above tied internal level where expectation well drives population for

will in middle was XX our million expect worth of This we prior below months. the Solid funded X% the equity. we operating quarter. $XX seasonal down of EBITDA $XX.X dividend months. maintenance our fourth to payout grew were right to a the of of was a million, even will the payout FAD noting at of of Maintenance FFO accretive in the XX-month high drove $XX settlement proceeds fundamentals the ensure of target the last Net in XX%. first XXXX. pipeline quarter-to-quarter, range payout and X.Xx. $X.X the XX.X% Net first ratio CapEx our maintain through ongoing trailing however, spending investments of March. the to quarter in of X.Xx from acquisitions the improvement as the increased forward end It decreased is is In ratio debt net to the FAD from a quarter, strong first This million over over XX CapEx primarily ratio, strength fluctuate share per of quarter in X million which

we fund million capital our multiple $XXX have near-term over Looking of ahead, sources pipeline. to acquisition in

dispositions proceeds venture joint forward along capital, to $XXX Our capacity under planned settled nearly with more of equity, full from funding options be and include revolver. our to yet up million

Improving at on most with We and significant reflect and cash healthy quarters hurdles a open future. the on fading per a with growth accelerate to including portfolio the X% drivers, robust to vaccinations of we solid will revenue line and pleased and more. escalators our we the year, our we're are see same ready the growth spreads in store of of Underlying are earnings now for widespread increasing. poised pandemic impacts As stable traffic pipeline properties of performance or Sarah, investments for of last and portfolio lease to our COVID-XX drive foot the growth internal the share the questions. growth our accretive ahead. encouraged

Operator

from Capital Our Instructions] Juan comes question [Operator first one Sanabria BMO with Markets.

Juan Sanabria

much regards parking a way levels give could bit store. little context kind to from how Is what the the pre-COVID same quantify you're you hoping versus benefit just more a with to generating was I to normalized today there of were?

J. Douglas

XX% was. Yes. income Right what now, quarter of parking we first XXXX are running about of

benefit being store us So XX back we points. see results to that rebound it, same that a levels. more periods, do call was And see ended as that XX, normal in coming basis impacted start we that up about to the by, to as

Juan Sanabria

local benefit that to and margins local know-how just driver as was a to generate. really able asset, local guys of I is maybe but cluster question, know-how. then What not And lower personnel from and margins more or a it's does have just you of by been have to having that Great. hoping, more the conceptual impact you maybe

same-store Just margins you're means on curious growth? seeing that what for NOI what and and

J. Douglas

there there the we a show spread what lot of Puget find, example, big region across I would can in also our benefit. different a rather where very presentation there, that see investor leasing at an clusters, it Yes. benefit, but premier revenue Seattle, of headed up, across than savings we're scale of our pretty benefit, savings more were a in Clearly, with you we benefit and expense expense a which you as Sound. in some a look agree and just is you that as momentum this driver really if be probably we out

buildings centralize And so out. with and send service, lot the of one that folks you a don't everybody we a office level of own. just It's high in

don't high we to in due the to so service So and want customer forth. buildings cut traffic our

of flow or with or being of directly with on, a physician really brokers are us in is that it's discussions So whether benefit leasing tenants. to the going hospitals the

than more expense and and So a and revenue accelerating savings. driver of it's occupancy much piece revenue

Juan Sanabria

you quick last that one just kind what up of one, as the forward? maybe going deliveries development And ramps averages do expect to

Robert Hull

delivery... When development you say

J. Douglas

Just the volume.

Robert Hull

we the Oh, it's on the year, be a to projects starting a we're at looking to and starts forward, in that's move volume? anywhere Yes, going X million I from million volume think we're generally that $XX $XXX as X generally year in targeting. side, to that

J. Douglas

would projects X upper could I think, the be easily that or by but And probably X right at Rob's or we on $XX end time. underway active each year. end the not we're that started getting year, towards of right now average, over million, if the exceeded, are push

Operator

Our with comes next Citi. from question Nick Joseph

Nicholas Joseph

the seeing volumes or returning about or wondering I'm but differences any practices flows? you're that differences geographic patient talked You specialties if seeing, different of across you're

Todd Meredith

back Certainly you clearly the getting see are Not tremendous. to specialists much very normal.

geographic I more psychiatry, out that that's to not most back by Certainly handled of virtual there think normal those more it to certainly psychology, some some normal. health, somewhat seeing we things a can pretty back dermatologists, But examples and out, specialists. significantly all the like as are of more in are point buildings, and much what normal, than of There some some that much or cognitive telehealth that most things, to we our manner. is might it we're dentists getting very might is saw even be in necessarily the is lend impacted ones you to extreme can those point specialty. behavioral much themselves of counseling, back

Nicholas Joseph

happening what's leasing market a through what leasing geographic perspective? of at think you do leaking all? basis? kind that in Are I given a just on differences Is That's guess, then, And volume there the about, helpful. seeing you from

Todd Meredith

signs in would normal concentrated on, of touched your as the more growth, all much been that have us markets more Nashville places say a somewhat that's of correlate be of say emerging little different where little to does Rob's much I'd -- in over open some more team or bit, is certainly longer, back that active, more very in with North Texas in are Carolina, would whether been here have I that, that like sooner. places

going Area front. a like on little Bay a to definitely place so sleepier that is And the look

there story tremendous a gave that we've Rob example, California Orange though. momentum. Southern and very an I'd different engagement and say was in is County as seen

specific is to So very it markets. particular

Operator

My next with Scotiabank. question comes Nick from Yulico

Joshua Burr

This with Burr is Nick. Joshua

you in terms what were So just of about Leasing this at you're guys activity? spreads end quarter, re-leasing leasing strong are talk high retention seeing maybe both the bonds of guidance. pretty could rates and

So provide on year the could of rest any the would color that expectations be helpful. lease you for

Todd Meredith

Yes, you're right.

was our of out. terms quarter the year, with spreads. to leases what First strong bit the to of of leasing the X think, with, X% just cash but specifically ended guidance We about our really in spreads. a has metrics, comes had ultimate above that that up were our do range to X little leasing They mix I it where was negative for

in have portfolio to of also that back year. some just terms year positive into talking look expect additional the the renewals quarter-to-quarter. you us going the and absorption, can of things next Overall, as for benefit to ahead. absorption the for That the about we're as higher-end what we very the whole X% not fluctuate your were can and And drive about, ahead, But in sector talk of demographics heard But think be the aging average. still play behind X% years still, we've a majority the of across it country the help we there's same half to renewals think through the signs the small from and having overall, space the look that So is to vast the need year lets backdrop in in that's with in been in then leasing, improving the we just a range basis. but bucket on certainly store number we to if a positive we pretty flat at absorption, you year. did

Joshua Burr

on it. activity terms you pricing? better of helpful. then what then Maybe just And disposition update just and the the you guidance, Got in current about acquisition, in could talk pricing pipeline give increase on acquisition the dispositions? That's could an and drove

J. Douglas

we're rate the much say I process very to year $XXX million do blended -- on of pipeline. certainly And stems building building Yes. our targeted into from a We're pipeline. off continually We buildings, we X.X%. strong at the have our our going I'd XX think investment it pipeline, markets. that started how activity, really a cap of

see building around opportunity team are is getting on. to grow there XX owners. intently that we know We focused markets these an in, relationships, We our have to building

some And visibility see terms what us the for we so in of future. in creates that out

of range I quarter, volume And $XXX under and around are to LOI the mentioned we we're going is contract investors. new and so going giving confidence this think we've that that that we of strength that given million -- the have to close next end that into upper that given for pipeline level that us get the to the activity that

fit disposition cluster mean, were the strategy, the us pricing properties On that market. in rate this think quarter strength saw our there cap long-term Those selling low the properties was didn't cap But I the with of a you X.X%, into rates. strategy. our yeah, sell cluster I at few side,

those we to us put we'll realize the assets and you'll MOB opportunity that year. some opportunities some them into transactions. We've so value properties of dollars and this see to accretive our to those into got continue some took and accretive MOB transactions. And from And nice recycle that rotate do

Operator

KeyBanc Our next Capital Sadler with Jordan question Markets. comes from

Jordan Sadler

closed cetera. in But the in on Atlanta, that sales? follow was more couple of couple sort up know like quarter ones the queue, a up the Valley a I'd L.A., Virginia, Rob, through I you on saw or in Presbyterian couple around the dispos. us walk what got bigger the teed on rationale Piedmont of these et rationale you I this and can Maybe to two just

Robert Hull

campus. we tenant there. the Valley the that that was very an lot look in didn't of X owner hospital, see buyer that properties aggressive opportunity properties a of the sales, we they made a And that in of was around at And the and offer or When Yes, at building part build cap ownership campus we group. additional to had out rate. that an property, a say I'd a

of wanted where we rotate take to so group some clusters build for advantage and that sell road. to potential that that area and And to and an down we saw assets the and growth into out

was asset a an other properties over that of theme. off-campus similar asset to long in The a We out build cluster the didn't area, term. see opportunity in an immediate

took the So sell to market the elsewhere. dollars and of deploy strength we on opportunity this pricing those

Jordan Sadler

asset Okay. seems the larger up, see stuff [ that's did sale? I And teed XX it's held million one for of in like ]? terms that

J. Douglas

in about, that one inpatient. it to building is actually on-campus has you're that convert Yes, building, it's the interesting to talking Virginia some portion one capacity of an but a that

that buying And interest to help the expansion in looking us their some with inpatient on them opportunities so hospital approached of had asset at side. the they're

And were cap able on at one. so I it's cap we rate, X sub to rate that on a a think favorable price a agree

accretively So a reinvest that dispose good and capital. opportunity to

Jordan Sadler

$XXX,XXX I of was makes from in FFO higher was elevated quarter, but -- sort had of of in out provided... acquisitions to of metrics just you and on you would've headwind from G&A? headwinds sequentially, you going G&A all the aside one the pressured contribution that some on sort closed the been a anything else commented a the quarter Was headwinds continue. was little of sort not curious thought that then of I side, full is the kind pointed was Because have of sense. And there Kris, -- underwriting would the the guys based bit on Okay, quarter's FFO the that the a that I

J. Douglas

G&A. No, that seasonal that in the first the main each item kind we that's quarter, of is about a really only. I year, have that We've talked mean, with

growth up, that penny that basis if pushing so. would you rounded FFO your have So call on back have another had would it a started or that,

of growing experienced same year. is the that we about it So item. historically store than last that our Obviously, a we've slower because certainly main is talked been what frankly issues COVID little has that the

So as lining that lift it, as we some strong moving back we will per see the share FAD. year well FFO of look we year towards a on on very the think of next us look that up especially at into additional very growth. But overall half I growth things and provide for rebounding, as are and

Jordan Sadler

curiosity, of GAAP growth metric, for year? and of to it, Out NOI but important, sake less year just store the you over same the pointed

J. Douglas

see top you know our the don't exact of the off out the my number we rent. but I head, straight-line of can inside supplemental, lay do

wouldn't difficult that to So the math be calculate.

Jordan Sadler

the guys with provide Yes. line to actually you you you. expense I'll -- follow get items redevelopment, disposition because up hard for there items. provide acquisitions, It's don't the line for and revenue

-- bit but you up that little it's on one. follow with I'll So a

the can of On or terms the us Was that in timing you late in equity, shares early? settled the in give that? quarter the on quarter,

J. Douglas

been... have would It

Jordan Sadler

[indiscernible]...

J. Douglas

I Trying to remember March. early or it February was... was but Yes, think timing, the late exact it

Operator

with from comes Stanley. question Morgan Malhotra next Our Vikram

Vikram Malhotra

some the a their goes portfolio, it get and business more -- where that of given, think operations asked over obviously, that. big of incrementally hospitals maybe your pieces how for to is? on I this campus for latest the opportunity into move wanted set time, of settings, their -- opportunity community looking in percent aside to terms leaving more you the reimbursed take to talk off-campus the the broader big is pure of you set about off-campus is how Healthcare a the of being procedures for on And for nomenclature, or thoughts maybe adjacent, Just Realty the other just

opportunity this an to helpful. somewhat care you're building bit accretive, just your different not that would it's updated So wanted is and delivery versus sort much of model both. toward this different is completely, a set a slightly be find of of maybe health you get but how thoughts any of But

Todd Meredith

Sure, Vikram.

view services binary view be a it levels that. hospitals really the inpatient probably a it's of we to just fixed The both, of don't sort bit don't prevailing bucket acuity amount in the think are is smaller maybe growing. think see that narrative growing. that and We that that, slightly campus. is counters bucket I you a growing, sort I campus, always expansion have are than this see anything can't subscribe it. that on know, there's different on of we a We somehow shrinking, of the we mean bucket volumes the are of

more his what and working lot on on-campus we're the stuff, we're and MOBs Rob's built. a more demand seeing campuses. right of hospital seeing And so around being And

we growing So all think a it's sector.

we've the we'll more aggressively time, continue there's and also that there's pointed said, invest as can have doubt. no campus setting in those And it's real too, over been acuity things trend improve, off-campus you as just moving to to off-campus settings. a is, very in And and always well. both but So more out, be that and be going it in can off done

balance risk returns So you. with have less our all and mitigate strat things us odds express and that you learning the dark variability go strategic by have, of the today and things help can though, what just looking that, think navigate denser, off-campus return get that we it. of way alignment risk you've finding more that we in is have I do on of that own clusters. really like being we're that that's of small, with Also, extension those it's the a think that a the important, better We rural, what's sort of markets, at risk and buildings larger to how an that our relationships heard all

So number. and it's no -- hard there is fast

we're in Rob mentioned JV, got more our that off-campus doing maybe we've there. think I

think campus. roughly is the to JV XX% date I off

campus is, very than campus. which that's So balance high picture sheet, around the different the a XXs on and

So increase view does not for bulk hard our But campus it number. the still, I opening market the encouraging. allocating I things and to which us, are we're are a very as the of we there's mentioned, up think is fast model. We is and addressable

Vikram Malhotra

changed thoughts field has traditional give way can that and just from talk makes about new as sense, recovery any given latest in pricing the playing away players Have months of then up? in sort last this come the That you is just from the your and X maybe what picked is? on us you X, seen over peers competition a maybe

Robert Hull

we back Oftentimes, maybe Yes, really mean seen the the cases. names, the the say standpoint a sidelines of from sitting that it's we but last it many marketed year, Vikram. behind really side. the were buyers would of the they've, of they've think capital right. mode moved same I deal product, same for on certainly we that's say about on that's competing names, I the have in into lot

seeing are like into And so bit they're space. quite a we chasing we are. chasing, of just opportunities, move the capital And

cap saying get a trying make and to bit you're we're you're little big guys the the compression, in on side well. rate mostly a are ultra-core side, big, little these a so it on And what portfolio as where seeing calling move of the

we getting process, out previously. price. us repeat fair that our through the borne sellers, they're accretive make able by doing that that lot they we've for And we've levels. certainly a a find been established rates, cap know a -- bit, we're underwrite those the know with, but them. of folks are to of and moving sense cap being able Repeat it they we'll close And can, we've rate to transaction, on been we'll and deals right repeat business that a can, relationships we -- properly, So

we're as really environment. And finding competitive that's this there off in out we're, that so we're paying

Vikram Malhotra

Got obviously, over pipeline. just on, last developments increasing it. the you're And referenced the That makes time one one then sense. and you

feel cost about on, here, underwriting there a you're focused power or you Given think certain where pricing may to markets materials, you focused on, of areas just underwriting costs just trying standpoint, sort the you're you pressures, have the I'm are various as all wondering, an you know, across where little more out constructions going? light bit underwriting of in figure from of

Todd Meredith

labor, right the mean observation. cases. that's you're mean, look as an development our I And in various Yes, that some and our we're prices escalation we I with we seeing really, that's we at And our, think embedded materials I over certainly we've built from it's internally see feeding the where of And you we things, development, in the always pipeline, on shared everything from that construction some this focused efforts. years. and kind pipeline have observation. that said

are are like rent so the has feel where systems we're levels hospital construction able -- growing of And in been are right, escalating with we prices, they aggressively. you're growth to focused been they've yes, strong, markets some rent strong, where keep up

rents price here we the been working plans. Nashville, where need have that space. like construct they on and strong. just to a opportunity so redevelopment And to in very we in they've cost in into have for year Places off built development a this we're kick escalations here started business Seattle their this the additional have And

our XXX time. where hospital And really that's seeing spending driven assets. basis our targeted It's focusing points by stabilized so above, in what on we're relationships a that to and XXX need. And we're yield,

Operator

Our from Connor Berenberg. next comes with Siversky question

Connor Siversky

follow mentioned a the Just multiple up you starts. on pipeline, development

are to can these provide plan any facilities all something oncology, what built-to-suit that? specializations dermatology, color are, if then as the wondering I'm you like So whether projects? And it's

Todd Meredith

I I are by but developments initiatives -- being think, the mean, our hospital. the of Yes. driven certainly, growth

and the buildings their part be are and cardiology so building. campus they service to they They they And to on to on with to and working grow we're development women's it's are big the is so other need be a hospital lines, of the example, need going campus, and and services Nashville campus, growing that in enhancing and a health that going grow system, the growing, for on service are tall this the their here around just that's in line. also

with into them So putting cardiac building. there's about services the more dialogue

are lines certainly bulk efforts. need be our what's of service So the campus what that campus, and development specialty around service on that's growing and lines really higher in it's that or acuity mostly that's to physicians, we're seeing driving

Connor Siversky

that just Okay. of bit Vikram some cost on mentioned. And a pressures had these more then

have be would rates Or these those related in development to projects? decisions been project the cost? has So leases anything any signed or reflective of end the

Todd Meredith

I just No. we started. the mean development

doing set. We the put these to of building that have into before in go XXX% we And we and for when we're commit rate ground. the a shovel lease the what that's the where is projects, signed is

not usually working lines, multiple hand-in-hand whatever But with that hospital-driven service XXX%. you're go service or your may out, contractor. It you're line working

get at saying constantly a just go what lease, costs. not out let's it and we'll working process same You're that the figure then It's you're a parallel time.

construction for your you're your working estimates leases? keeping like you're just your live with your with contract, lease towards So doing -- costs a contractor

Connor Siversky

this. one Okay. Or is for or starts there last And schedules? of maybe just foresee? That's color. you project Do helpful piece then in delays expectation any ongoing

Todd Meredith

this like have in be it and we've contractors going I going can certainly right and team pacing day through hire and you you're started. mean planning we're to feel to as and permit building in we more the and and the you're we've on Certainly, mean right pushed start challenging. to those target permitting I development. age, get if right get you certainly you're out But the as schedules. flows. out place, now, in our its as has It we're getting complete certainly ebbs laid a laid

Operator

with Our comes Tayo next Okusanya Mizuho. question from

Omotayo Okusanya

Question.

versus kind of affiliated behind the have trade putting that's they're you seen of wider about not cap just join and assets there kind if but that off-campus real well, So actually have you than at the tracked I'm out talking data guys and assets, report better rates. off-campus recent this on-campus, sure actually conclusion Revista on-campus

data do does historical of curious more it you I'm assets should of the And off-campus all, in better to regards what about second influence off all, argument of you that given First sheet? than this campus? kind think on-campus balance on having

J. Douglas

that it. interesting. certainly read seen report. It's Yes. We've We've

it's cover think them effort information. for a type to good I to of try that

thesis with stamp data out you'll as good. put is just off-campus little in we One growth. says, for early thing a it's is think a that's it, NOI I that on not them to a that notice come

think You'll they have notice at only I years. benefit also we some X And peers. in looked of that's the our

I in doing bit, this factor that cycles, buildings doing look same through cycles believe off-campus, dive deeper if I yesterday for a heard, that anchored, go they're go over We're Healthpeak over We've you sometimes into been expirations you thing. the even think and long time lease you a fact have longer lease doing that time little they're occur. If the when time. -- passed. got The a dark. you frame. You can a And are one they're

there's they're types really that a data different that lease and lot rates up So from between tell third-party there's experience basis. trying, I'd I to is Again, There's fully a the applaud mashing think our do of on-and-off them don't some real challenges and But different. also difference picture. performance. there to trying a glean I little on that to think for it. issues something a of varieties is think integrity all We

properties that difference report into on. a they we Another like adjacent in that is all behaves key saw the throw Well, adjacent category. more off the lot

issue. there. adjacent And so performance the your you're by bearing lifting That's in off another

lot nuance there's a it than suggests. that more to report So

better, have And would think that to experienced I what are that variability, to issues on-campus growth, is generate ultra-core put perform over get performance. I do start they or that's to off, and job our we around just and more you to and When it tend figure we better learn to higher tend right and the we from on have think so key they opening that less say work the out the that you with thing changing variability. performance properties campus, is years, see up what you these and risk. the

we on getting off, to XX so of put rationale Rob you'll our And cap And we as and that's there's think see, versus in we've been rates said, together presentation. XX for points why some on investor versus spread basis of some it. off our

topic. very look about how risk. talk as to that NAREIT And that certainly we'll mentioned Healthpeak as in to so like we And on careful well, we're more at well bring

Operator

Rich SMBC. from comes question Anderson with Next

Richard Anderson

of don't get think you and out more that maybe market? things? that off-market the where flexibility get situation special about made exclusively? there fair better a it's Or little that a like how trade-off whatnot. cap almost you you a way customize off is Is about bit, just easier, the a commentaries on more So can price a to bargain, have Is bit some and a And but flexibility to things you you can that. -- on you and get approach is the sort of rate relationships little

Todd Meredith

that number Rich, on getting I repeat me, that saying we're think is we're that told that owner your value, you've deals And that sitting is them. with discounts they we've fair getting that business. mean, them because that buying they with that's And had done that reputation. mean we're know us. appropriately can think a so property relationship of to you don't in the off straight you recently something To seller. certainly I -- area. built the are acquisitions building they easy know They They like to becomes They right, a about Yes, I market. an relationship a close. I it. building know and different feel it same We've more had a us came here I know process. think it's Isn't how they're underwrite

and look like so out looks of just to than further doing what where waiting real in it can build And know that that properties off-market is the see hit we marketed the that's then and rather we market kind to value for reacting pipeline and us comes in for those.

Richard Anderson

hard as the not to save and sort by And -- it's savings comes just maybe money around chasing of from maybe doesn't -- it you process speculating...

Todd Meredith

into as other the you the where thing, you big earlier, premium to pushed properties a allow get if these mentioned and that's Rob well. think I But portfolio, avoid

liked idea for we knock through see size, steal. been have by way again, knock my you wanted joke a it on their -- -- door, the that buy by we've on the the and lot seller. is and going premium they, you avoid family want and is sell go here, It's getting you you So just But these in portfolio saves that fair so to house But early chances and it not there always they're that to to a when building to doing. you are you price. really relationships, them it is always go your and of that these a they headache,

Richard Anderson

too push you down? rents of and by Well, with you not that's comfort in see the retention you Do but have When any -- Or me, a take off percent? about issue. talk door, another pushback, they wouldn't down that pushing able the level to much let about rents have something couple you're if gas? you do front a trickle even it open impacted retention your seeing going like, of indication okay, you'll being mind foot getting

J. Douglas

Yes.

kind is X% we're by for we ebb minus that have and it, and to looking on plus Rich, that to what's or kind the minimal, of pretty this and have X%, recognize expectation some competition, the you some look XX XX retention X%. markets yes, that quarter. frankly say of -- think, us, at And running grow down. more was I quarter, XX. flow as This to For but roll we it you on that, than our Then to market better time. been We've that. And have in have some you we say year that's going we in to going that doing we're some markets

to are the gives X% that And reasonable at us a look had you're a so we've portfolio a inflation. grow you -- you that just hopefully, that over And asked opportunity consistent we X% some can to as people trying more and time, have rate. build stronger rate to who compared

this have term. value, X% questions we north this that that there's And still concern moving speed So we we've been think X% well that sustainable really we're able some are have that level cost plenty growing and investing of growth of we we be had frankly, showing up of And of that long well to to of is the now, for need as of making tenants terms as CapEx forward? that maintained, our there's construction call, a with sure on at that to things could think maintain that the right are we so some still to the has TIs that some value in we they capital time. room, which certainly building sure we make properties space think replacement from and look

Operator

Our Todd from Fargo. Wells Stender next question comes with

Todd Stender

Rob, a cap candidate, think rate. the I there. If what thanks X% here will creation look the cap you, plus basis? at off-campus Colorado for if you kind think property down the And around. Springs acquired, you Just that opportunity stabilized that's sticking was like highlighted I for it QX, you don't do a know one in of rate narrowing a redevelopment on value

Robert Hull

bit you hearing I but think said a having time was X% I heard a of we say rate. little I Todd, property hard you, heard I'm that think say, I Yes, a cap you

Todd Stender

Yes...

Robert Hull

that really kind property situation were and That And the that we getting fast. wanting out move in that quick in San for And was interested were paid surety us. wanted was as was a weren't actually process they And of that deal quickly. Antonio. was achieve familiar just the to off broker deal direct our knew of working could market, then the with value process sourcing our that knew a that, property we to maximizing seller and came of they as really an real There, close, interesting of a they us. where

on discounts, just one, we a that that have probably we gotten might telling we getting So weren't but through discount. got Rich

Todd Stender

it market the that So If ambitious? that cap in what something Xs? there? a is Is X, buying the rate you're expectation compression is

Todd Meredith

low probably Xs say Yes. is high I high mean Xs, I'd in Xs.

J. Douglas

Yes.

to I package some not going into it other if take a do this, think, but that portfolio. out were in a you properties we're Yes. with to nice Todd, portfolio, that

compression probably the see would high well You fives. into

of creation yes, value lot that there's there. so, a can And be had

Operator

question comes Mike next with JPMorgan. Mueller from Our

Michael Mueller

what facing the are today get back store X, way? of debts parking in almost Just drag or are rent any to mean CAGR, fine. I terms spreads elevated same in you're getting up headwinds that the P&L the the your bad what's bumps NOI it Because at today the there? in-place Is in X% to are P&L?

J. Douglas

talked operating then about, really was changes. expenses, things main Yes, it and that the the we've parking, then occupancy

great, parking, deferred said, XX than which of average this issue. last is So side like average the are quarter, probably rent, on basically below collected points even revenue an lower the that. basis is any. back XX, expense It's little all negative NOI. I We've But bad we other not now, growth. that's impacting unusual. if is But On but that we revenue an pass a of expenses on trending a operating operating the operating on debt so occupied, that's side bit to our minimal, more through our revenue because reduces expenses. Right the per had frankly

and Now for the a is it NOI XX, year, the then through, to quarters bottom the rolling basis loss last line, still XX third call which that's I in did positive in points. second experience us. But occupancy of we

And that's have revenue one-to-one so going growth. to we a on to that always up, impact end say going you're the

close mid-Xs. So bring then to your a into revenue X. NOI that And the it's to could X that growth with you as X% the really down to margin, down take our

the can basis XXX as almost impact you occupancy. have relates So to point it

absorption. operating and see to that to of that expenses we the all see we as think back, averages that back normalizing, or coming least frankly even long term see at X%, we're some bottoming together, parking and over NOI although hopefully out, the can to able model the long-term if quarter When that gets move of could each the more think revenue kind see model we occupancy you more as So it you that build grow. around of we back get that is those and

Michael Mueller

said know off. you was parking I then And it. Got the

year the picture, Just of -- how I portion year, bigger many think off was that you perspective everything thinking have put revenues, it if over parking? XX% from into versus just else on what but to parking side? revenue comes $XXX of

Todd Meredith

exact low. you... get Yeah, it's for number very out the I'll

Robert Hull

So less than X%?

Todd Meredith

about going was say X%. Yes. to I

J. Douglas

million runway a of quarter a of on million a revenue XXX It's X year ago.

it's X. than So less

Operator

from Instructions] Capital [Operator Daniel Bernstein One. question next comes Our with

Daniel Bernstein

seeing like to an like you that you're was rates desire due that one-off peers' -- and or one trend didn't to just expand quarter. just stay TIs really a tenant in up if the trend in Just changes I know quick maybe actual impact to in might or going into there's and how thing both and buildings. a a buildings trying your that seems of kind have gone retention It you if and the first there question. occupancy about forward. might it movement how understand if how and your think I'm

J. Douglas

on little We're getting don't too on read into to think the around a unusual pandemic running much are wouldn't themselves their capacity, feet, like we been it I XX X at been safety move that full described. and It just running protocols comfortable people to running XX, focused I things does given back Dan, quarter. normal. it's they've higher. has back

explain that some So in may expansion it, lot of interest of we're a so seeing and also forth. but

too. So same may be I think rising, at help, bit the are some next we're the again, rising helps have that costs rents that suggesting maybe that not too. as people quarter is a better. some or little asked, are going edge, construction elsewhere, And But to perception

I think around a we're will bit. and in move still it range comfortable our little

it. read into too wouldn't much I So

plus. just XX been probably a XX think that we've I in range to it's in

Daniel Bernstein

change that terms but the they've what That inflation around a length lot of Would for asking of term, up? be in for tenants of in bounces with again, of especially length been too, that same the answer from going any terms term?

J. Douglas

while down. pandemic, make were trended There I were higher a in signed the commitment, of that. to little And big just position think midst and basis, the difference. that that were would say long-term of will last a I don't people percentage we've bit, year, long-term short-term with comfortable deals. to we a say probably we a weren't in a we a it long-term seen I on

think trend bit. result, a a they over our back normal than our don't to And more much that environment, expectations were getting I so as that may a are little down of year seen kind ago. But now have you averages different we're a

Operator

is a with Sadler from KeyBanc Markets. follow-up Our Capital next Jordan question

Jordan Sadler

supplement increased that exactly? through related leasing but if you the was what spiked a was Page or Can same deferral saw called wasn't I store sure reconciliations, or XX up, abatement, bit. me your just something there's a concessions. On I that what more is Thanks. remind I parsing that little is the it to on like that? just rent if that

J. Douglas

to tenants. really any it related that have be it's rent free of be multiple mostly to We things, some typically going tied is type new going to on Yes, don't will renewals. to but be

started. redevelopments that think inside the of a I the couple did our I we but -- to have have into that dig tenants specifics,

the little a free of end. up those end front so typically with bit rent And at

why would than that guess revenue. although the But this to So little previous. I'd you're overall my still that's quarter higher still that a specifically it be a little it's higher, the reason meaningful is say not seeing bit bit that

Jordan Sadler

that? no there There's abatement in like or anything

J. Douglas

not No, as some no. especially some across may like that. on where space it's or about still tenant, specifically having the one really next kind new out moving rent redevelopment to abatement's. they're a buildings, out is tenant, and be they but Nothing for a no, moving free This to you're helping rent from build building them of

Jordan Sadler

of also I relates That's And know to but your as think well. lease the your CPI structure, I preponderance are it fixed, Okay. as then helpful. there's a portion leases

often, was a the up popped I don't here we bit, So there but curious, theme sort cap little escalator? that this this talk about CPI I just know but upside, has on on the a on of is CPI

J. Douglas

I escalator. kinds of are would of of CPI X. have or out a whatever percentage under tied they're not But structure. CPI-based X% just there leases Overall, large are of and a say X to Generally, a will all leases have is. CPI X, our maybe It's cap no. more generally There our there is some a that

it ticking have running a risk? have starts with And that fixed about out. people fixed, so, historically, has done generally to frankly pointed than are regular where been. And a well, we more typically are We like, CPI you if questioned each have our for as is up better turn And renewal CPI with we well, closer also pretty that XX% leases, year. in up, X our

pressure reasonable amount janitorial leases if that, start have to we in a very of start can costs see look that on do to our to construction across try we we if costs recapture we the elsewhere, costs board So and think start that to does occur. to or

Jordan Sadler

teed tell of, you them? And happened have for a what to look And know I'm sort lastly, what how on versus we're middle, balance venture JV what just the closed, showing Okay. think some then handful joint Like what you out since of deals next here versus of showing I curious you've supposed these of And the figure quarter deals, this are what's is? some on of them the the these sheet I straight more up to got quarter. you and thinking deals. and difference you've not are HR like I'm of just examples trying up some deals transactions? that sort And

J. Douglas

think some of and I that where in a this that had was look if more had well as look it opportunity the occupancy. I quarter that quarter value-add fourth did looked Yes. of what really like a we upside some really purchased what did at we building in mean opportunity in an we terms you you the JV,

upside, where nice we that, going like we the might there did. those some are we to drag the see be a but And because in opportunities so JV. entertain lower we're those And think near-term of opportunities where occupancy,

County. real the our some we we buildings we buildings a fourth campus. And we campus that upside, And real around absorption to building placing past the been in the that around this bought in buildings. seem JV Orange into quarter One of really was have see other

participate And so that's where us see and share you'll the JV. to those

other on properties, additional is is Three there we off-campus side we quarter, put side. that the The some risk. buildings off-campus where were that this think really there in

out putting getting higher the capital, And so incremental we're but return. half that

have stuff keeping that's with sharing you said, we JV. intend And we're sheet. relationships that fairway, adjacent. opportunities The We're are or in down those nice -- our balance so the where those the And already we on on to. generally

our to discretion. show certain of of not deals before, As types we're deals. It's or we said certain number really them at a obligated

I And are think the Todd we're that that to the range. so opposed XX% our you'll around portfolio now of I see there off-campus the I that's breakdown on XX% us in in that are continue staying XX, think down out showing of Page JV, that. our supplemental, properties it's do that balance pointed to sheet And where as think

better really when the about that's make situations upside into some or the think off-campus sense have term drag, of think is, little and buildings. I So some that can richer, a rate's cap it those we near then you where the may maybe there's way and it, to get

Operator

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

Todd Meredith

forward of available day. any and you, we if And great you up look tuning for be you with soon. today. follow Sarah. NAREIT thank Have everybody We'll in at for Thank to most have a connecting questions, you

Operator

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

You now may disconnect.

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