Q4 2019 Earnings Call
In our earnings release issued last night, we provided full year 2020 guidance. He will provide more details in his prepared remarks.
As we position the company for twenty twenty. Let me describe how we see our current state of play.
First our portfolio is now well balanced across all three core private-pay segments of senior housing life science and medical office.
House and we continue to purposely and successfully execute our strategy of building a portfolio and platform that we believe will deliver strong results over the long term.
We have made progress and Achieve an alignment with the strongest operators and some of the most attractive markets in the country at the same time. We exited many non-core markets and selectively sold or redeveloped wage. That's to better position the portfolio.
More specifically in 2019. We announced 1.4 billion of non-core assets sales and reallocated that Capital into 1.4 billion of newer higher price point and higher barrier to an offer senior housing Acquisitions most notably our investments in the discovery and Oakmont portfolios and our partnership with else on our CCRC portfolio.
These transactions don't like broaden our base of leading operators, but also Advanced our goal of reducing concentration with anyone operator net effect of this redeployment has been to reduce our average property from 23 to 18 years proving our monthly rev poor by 45% to over 5,700 per unit and producer concentration with anyone operator 8% or less.
Science we materially expanded our operating portfolio through 1.2 billion of strategic Acquisitions and 307 million of completed developments in in our core markets. Yeah further establish a leading position and the Route 128 and West Cambridge submarkets a Boston growing this core Market from 0 to 1.8 million square feet and just two years including are active in their term development pipeline.
Medical office. We further expanded our proprietary development program with HCA accumulate in a pipeline of almost two hundred million and development spend in high-quality. Well located and anchored off campus Medical Office Buildings. We also welcome Justin Hill to lead business development for health Peaks medical office segment reporting our vision to expand the MLB flow business.
Second or acquisition development and Redevelopment pipelines are well positioned to support future growth and value creation through the relationships we have with our partners and operators. We have built a healthy opposition pipeline included options to purchase over 1.5 billion of senior housing developments on stabilization of Oakmont and Discovery over the next four years. We entered twenty-twenty with an active development pipeline of one point three billion almost sixty percent of which is pre-leased and we have a shadow pipeline for future development and Redevelopment projects of 1.4 by June 3rd. We are conservatively financed and R rated Triple B, + b w a one by the three rating agencies or balance sheet is strong and we have ample liquidity.
what the Ford Equity raised
Over the last several months where soul will be positioned to execute in our twenty-twenty plan while maintaining a year end 2020 net debt-to-ebitda ratio within our target range of mid-to-high.
I'm very pleased with the team we have in place and the enormous improvements. We've made on our infrastructure including systems Automation and data finally on the home front and 2019. We continued our long-standing tradition a commitment DSG receiving numerous Awards across every category. We also add a new Talent OR bored with the addition of several years not have an average tenure of five years.
In summary, we feel very good about a current position and are optimistic about our business for twenty twenty and Beyond before I turn the call over to Pete. I'd like to provide you some background or on the press release. We issued yesterday concerning our same-store shop policies.
Number of investors and analysts had communicated to us the desire for more comparability in the shop same-store metrics in the healthcare read space accordingly to provide Clarity of Health pick same store policies. We created a compilation and rationale of all the material components and posted this to the investor presentation section of our website Thursday of our policies remain unchanged. However, we modified two of our existing policies and added one item of new disclosure effective, January 1st 2020.
first going for
We will include all jv's at share with the recent addition of the Brookdale Senior Housing JV. We determined it useful to investors to provide the pro rata share of all JB's and our same song second going forward will remove future operators transition properties from same store to better align with Health Care industry practice. However, if material will continue to provide separate disclosure of transition portfolio results,
Last week we've begun providing the management fee component of operating expenses.
The 8th and understanding the impact of these changes. We have provided pro forma 2019 same store results as if these revisions were adopted for the full year 2019 wage. We've concluded that all of our other same-store shop policies represent best practices and provide detailed and transparent disclosure of our treatment and accordingly. No other changes will be made at this time. Also important to keep in mind that same store is purely a performance metric and does not affect gabardines f f o r a f f o finally in twenty-twenty will begin using the morning, and same-store terminology rather than same property performance to conform to others in our sector and most other reads with that. I'll turn it over to Pete speed. Thanks Tom. I'll start today with a review of our results provide an update on our recent Capital markets activity and and with the discussion of our 2020 guidance and related Assad.
Starting with our financial results the end of the year on a strong note for the fourth quarter. We reported ffo as adjusted of $0.44 per share and blending a same-store cash on a y growth of 3.6%
For the full year 2019 we've reported ffos adjusted of a dollar seventy $6 per share and Blended same-store cash and a y growth of 3.7%
turning to our recent balance sheet and capital markets activity. We had an active fourth-quarter starting with our data activities in November. We issued $750.00 bonds maturing in twenty Thirty.
Use the proceeds to redeem the remaining $350 of our December 20-22 bonds and repaid our revolver and Commercial paper balances.
Successful offering and Redemption extended are weighted average 10 or 2 approximately seven years and further improved our debt maturity profile. We ended the quarter with a net debt to adjusted A 5.6 times and 2.4 billion dollars of capacity under our line of credit moving on to our Equity activities from November through early January. We raised total gross proceeds of approximately eight hundred million dollars through a $547 follow-on offering and $250 under r m m program.
all of the
What he was was structured under forward contracts, which we expect to settle in 2020.
As of today, we have thirty-two million shares of common stock remaining under forward sales agreements for just over $1 billion dollars.
Utilizing forward contracts allows us to better match fund the equity required for identified acquisition opportunities and for our development and Redevelopment activity.
Removing the guidance. Let me spend a moment on our dividend for the full year 2019. Our dividend was fully covered with a fad payout ratio of 97% Once he may we expect our fad payout ratio to improve into the low ninety percent range accordingly our board decided to maintain our annual dividend at a dollar forty eight per share in 2012 with plans to revisit it again in 2021.
Turning now to our 2020 guidance. We expect full-year 20 20 FL as adjusted to range between a dollar seventy seven to a dollar eighty $3 per share and Blended same cash and a y growth of 2 to 3% The components of our Blended same store growth rate are as follows life science at 4 to 5 % medical office at one point five to 2.75% senior housing and -1 to positive 1% and other at one point seven five to 2.5%
We expect earnings.
And same store growth to be lower in the first half of 2020 compared to the second half as we face more difficult comparables early in the year.
Who did within our guidance are the following high-level sources and uses starting with our sources of capital 1 billion dollars of equity from the drawdown of our forwards five hundred million off non-core dispositions, including the North Fulton Hospital purchase option and just over three hundred million dollars of debt capacity from a user's perspective. We anticipate the following $800 of Acquisitions consisting of the post Oakmont purchase options and other pipeline opportunities 850 million dollars of capital spend, which is fully funded and is primarily driven by the development and Redevelopment activities and 225 million dollars to repay debt related to the Brookdale transaction.
Let me spend a minute now on our ffo as adjusted earnings roll-forward the midpoint of our 2020 ffo guidance assumes for pennies of Positive Growth compared wage 2019.
Starting with the positives. We see six pennies of positive impact primarily from our Blended same store noi growth Assumption of 2.5% We see for pennies of positive impact wage developments coming online vast majority of this benefit is from the final phases of the cove and the first phase of the shore. We see two pennies of positive impact from transactions off in 1 and 1/2 Pennies from the Brookdale transaction and it half penny from 20 20 Acquisitions moving now to some of the offsets. We have negative for Pennies from the rollover impact of our 2019 Capital recycling which was heavily back-end weighted a 2019 dispositions included some of our final Legacy portfolio cleanup transactions wage the PrimeCare dfl and the UK asset these dispositions came with high cap rates, but also materially dearest our portfolio.
We have -2 pennies as a result of a deferred revenue recognition impact related to certain leases.
Counting
Rules do not allow recognition of rental Revenue NFL until tenant in Improvement projects are substantially completed even if cash rent is received from the tenant or 12:20. This amounts to just over ten million dollars more than half of this is associated with the Celgene lease at the shore where they're TI build-out was delayed due to the merging with Bristol-Myers shortly though. We do get to include this cash rent. In fat. We have one penny of drag from higher year-over-year development and Redevelopment spend money. Oh, this isn't immediate term drag we continue to see opportunities for significant long-term value-creation with our development and Redevelopment projects.
You've accelerated phase three of the short we have broken ground on the boardwalk in San Diego and we have added more developments.
Finally, we see negative one penny from various other items.
Net net with all the puts and takes we are guiding to four pennies of increase in 2020 compared to 2019 perhaps there is a bit of conservatism in our guidance as well as she page Forty-Eight of our supplemental for a complete list of guidance assumption.
I want to briefly touch on the guidance addendum. We added to our website we felt it was important to expand on some important topics first. We included a quick overview of the post-acquisition month and how it's synergistically fits within our portfolio and expands our Boston footprint second. We included an update on the status of our development pipeline.
As a result of our pre-leasing success, we expect positive earnings contribution from our active development pipeline for the next several years.
Third we included a quick update on our Brookdale transaction, which closed just last week. We reaffirmed the modest ffo accretion. And as we mentioned the transaction is neutral to fax, finally 4th. We included additional detail on our 2020 guidance where they projected sources and uses a breakdown of the components of our Blended same store noi growth as well as an f f o roll-forward.
Do you house keep?
Items before I turn the call over to Scott starting with ccrcs the first quarter we expect to book a gain on consolidation in the $100 to $150 range and an approximate $100 management fee termination expense. Both items will be excluded from ffo as adjusted.
We are nearing completion of the fair value analysis of all components of the CCRC including the fair value of non-refundable entrance fees or more commonly referred to as n rest home. If their value of in place and wraps is expected to be approximately 400 to 450 million dollars and amortized over an expected actuarially determined same length of stay of approximately six to seven years. These items are covered in more detail in the guidance of Denton moving on to some financial reporting items that will take effect and the first things first we are aligning the definitions of fad cash and why and adjusted ebitda to reflect the non-refundable entrance fees on a gap amortization basis in accordance with accounting consolidation rules.
2020 cash and Recollections are expected to approximate.
And amortization second refundable entrance fees of approximately three hundred million dollars will now be included in accrued liabilities and excluded from NetApp. Lastly. We are changing the name of fad to a f f o to be consistent with industry Norms these changes along with a few others are outlined on page 49 of the supplemental with that. I would like to turn the call over to Scott. Thank you Pete. I'll start with our segment level operating results for a full year 2019 in life science wage, which represented 32% of our same-store pool. We reported cash in a white growth of 6.2% above the high end of our original guidance range outperformance was driven by leasing activity and mark-to-market both of which exceeded expectations.
For the full year, we actually cute at two million square feet of leasing including more than seven hundred thousand square feet in the fourth quarter.
In medical office, which represented 44% of our same-store pool. We reported cash and why growth of 3% which was above the high end of our original guidance range outperformance was primarily driven by mark-to-market strong retention and higher-than-expected at rents at Medical City Dallas. We leased more than 2.7 million square feet in 2019 exceeding our expectation.
Moving to senior housing triple-net represented 13% and Shop 5% of our total same-store pool full year senior housing cash and increase to 1.5% with triple net growing 2.4% and Shop declining 1% in December. We closed on the previously-announced joint venture of our nineteen property Brookdale managed shop portfolio. These properties were removed from the shop same-store numbers in accordance with our policy in effect in 2019 in which unconsolidated jv's were excluded from same store. And we not removed these assets all our full-year shop same-store results would have been -6.5 percent slightly above our original guidance additionally had our new same-store definition been in place in 2019 our shop. Yep.
adults would have been -2
.7% due to transition properties being excluded and joint ventures being included at year.
Senior housing portfolio outside the same store pool includes recent acquisitions with Discovery and Oakmont triple-net conversions with sunrise in Oakmont the CCRC page and our Redevelopment and held for sale properties. The scale of this portfolio is significant and the asset-quality will be accretive to our same-store pool when they've added based upon our policies.
In terms of performance in general Oakmont and the ccrcs have been strong while results have lagged expectations at Discovery in Sunrise where numerous initiatives are underway to improve performance.
During two transactions since our last earnings call. We've closed on over one point eight billion dollars of Acquisitions and dispositions.
Starting with life science. We continue to grow in Boston in San Diego.
run your
Tracked to acquire the post a $320 Class A Life Science Campus located near our Hayden research campus in Boston. The price represents a 5.51% cash cap rate.
426000 square foot campus is 100% leased to for biotech and Innovation tenants with an 11-year weighted average lease term and roughly 3% off calaters Additionally the campus likely has potential for increased density over time the post enhances our cluster strategy offering leasing flexibility Faith tenants, which is so critical in my science real estate.
That end in December we closed on the previously-announced 333 million dollar acquisition of 35 cambridgepark drive a newly-built Class A Life Science property in West Cobb in the building is next door to the property and planned and parcel that we acquired in early 2019 gradient four hundred and forty thousand square feet of contiguous based upon completion of the development.
San Diego we expanded our development Pipeline with the addition of the boardwalk this one hundred and sixty four million dollar project is located on Science Center Drive and Torrey Pines, This is an A+ site and will be Health Peaks Flagship in San Diego campus includes three adjacent Health Peak Holdings and browsed of to land sites, totaling 105,000 square feet of ground up development that will flank both sides of an eighty-five thousand square foot property that will be redeveloped on stabilization. The campus is projected to generate an estimated yield on cost of 7%
We've made significant progress leasing our active development pipeline at the shore. We executed a ten year lease for $182,000 square feet with Johnson biopharma part of the Johnson & Johnson family of companies representing approximately 60% of phase II
chances
Has expansion rights that can be executed over the course of twenty twenty. We continue to see strength and positive momentum in South San Francisco where we enjoy number one market share loss.
And in Boston, we're now 57% free least at our 75 Hayden development project the two recently signed leases total 122000 square feet long, and we're seeing strong interest and activity on the remaining space at the property.
Would be not to senior housing 2019 was an extremely active year since our last earnings call. We closed several important transactions including the the position of Brookdale is interest in the CCRC portfolio and the transition of operations to LCS the sale of 18 triple net lease properties back to Brookdale.
She'll have a 46.5% interest in the nineteen property Brookdale shop portfolio to a sovereign wealth fund and or exit from the UK say additionally you've reached agreement on our remaining six property Master Lease with capital Senior Living who will release one point nine million dollars of security deposits to help peak upon signing to finish documents in exchange for converting the six properties into a structure effective February one annual rent on the properties is currently 4.5 billion dollars with trailing 12 months ebitda of three point seven million dollars.
all of our
Apple Senior Living properties are well along in the disposition process and upon completion of the sales will have no further Investments with capital Senior Living.
We also delivered our proprietary Asset Management platform, which we call Vision. We look forward to showing it off in person having rebuilt our senior housing team. We've now built the technology platform as well.
Relationships continue to drive our deal flow in December. We signed an agreement with Oakmont which provides Health pick the option to acquire up to 24 of Oakmont development property upon stabilization based upon a pricing formula with a year one cash cap rate equal to 5.5%
The properties are concentrated in California with an estimated value of one point three billion dollars.
The Acquisitions are expected to be offered in tranches between 2020 and 2023 and would be paid for in part with down units at each closing help peak would enter into a job the incentivized management contract with Oakmont creating a strong alignment of Interest finally in our medical office segment. We added an on-campus m o b in Nashville to suck element program with HCA you 172 thousand square foot Class A building has an estimated spend a $49 million dollars and is located on one of our Flagship campuses.
project is 40
5% pre-leased with active discussions on the remaining space
We also delivered the 90,000 square-foot on campus at Grand Strand Medical Center. This project was our first development in the program.
Project was 71% leased upon delivery with strong momentum to lease up the remainder of the space.
Taking a step back 2019 was just an incredible year for the company and it goes Way Beyond strong operating results high quality Acquisitions and leasing activity log more important. We solidified and grew she external relationships and further established a team of skilled and collaborative colleagues that extends well beyond the individuals you hear from on these earnings calls.
Those human assets or even more valuable than our high-quality portfolio.
Not turn to call back to the operator for Q&A.
Well now begin the question-and-answer session ask a question, press star one on your touchtone phone with the speaker phone. Please pick up your handset before pressing the keys off your question, please press * then two.
Ask yourself the please limit yourself to two questions at a time now will pose momentarily to assemble of our roster. Our first question comes from nickel eco-reps your bank, please go ahead.
Everyone Pete you mentioned that the guidance is perhaps conservative. Can you elaborate on which items would drive the range higher and what you were talking about there?
Yeah. Hey Nick good question, you know a blended guidance does assume some modest deceleration when you look at same store growth wage, I think about MLB's we finished 2019 at 3% The component midpoint is around 2 for which was the same as last year with you. Remember we had some strong Advance at Medical City Dallas which is difficult to forecast so that certainly factors in you know, within Life Sciences. We finished last year at 6.2% We had a very very strong year. The component midpoint is in the mid fours, which actually was the same we had last year as well, you know, Market fundamentals remain strong certainly would like outperform again this year but as you know, there's some lumpy leases and you know, the mark-to-market swear, we ultimately end up the the rent's seem to be moving upwards.
faster than
Downward so look we think there's some potential upside there and then in senior housing, I think tripling that is generally in line. It's more of a straightforward business to forecast and then shop on an apples-to-apples basis. I would say is modestly improving but still a challenging environment. So that's how I think about the the various segments heading into twenty twenty months. It's helpful and then second question is is on the post-acquisition you made and also just the rest of the Boston portfolio. I mean the the the difference between the cash and GAP seal off the post-acquisition seems pretty big and even more so than a straight-line rent benefit would suggest so I guess I'm wondering if there's there's a big Market to Market rent benefit off that acquisition and maybe you can also just give us a feel for you know, the rest of the Boston portfolio that's in place. You know where you think the those in place rents are down.
versus market today
I'll start with the post first, you know, one thing about the post one were very excited about it. And if you look we put some nice pictures of of that asset in the guidance addendum weighted average lease term is long on that asset over ten years. So that obviously is a contributor to some of the differences between wage Gap versus cash. There is a little bit of a a mark-to-market on those leases as well. Although the the straight-line impact is by far the biggest driver of that, you know as we think about Boston generally, you know, where we are relative to Market. I would say some of the newer assets we bought a used an example 35 cambridgepark Drive, the weighted average rent. There is in the very low 70s asking rents in that market and we included this and birth.
And for class a new space is approaching the mid-80s and some of those rents were signed releases were signed give or take, you know, a year year and half ago, So you've seen some some significant movement in rental rates, which is also driving down the, you know, initial cash cap rates as well as something to keep in mind, but we're certainly benefiting from that on the yields on the development. We're doing especially at 75 Hayden where we are significantly exceeding our underwriting there. We saw it would be in the mid-fifties from a rent perspective. It's a different market and West Cambridge, but we're actually approaching mid-sixties at this point in time on a blind faith basis for the leases we signed as well as the conversations. We're having right now with tenants. So things are moving in a good direction for us and and we're certainly taking advantage of it.
Hey Nick, it's Pete. So.
Okay, just just one. That's that's helpful.
One other follow-up on that is on the 7,500 and as we think about 101 101 starting as a development, it sounds like those those yields could be even higher than the than the range that you guys provide in in that development page the Delight science page that's in the guidance addendum. You actually get over 8% maybe right?
I'm 75 Hayden, you know, we still have some more leasing to complete their but based on the rents are just quoted. Yes, we could be above that the high end of that range, you know, we're a little conservative and how we show those ranges until we have leases signed. But certainly we're trending in a in a good direction there. I'd say on 101 Thursday. We're still working through the entitlements there and we will work on finalizing our costs. It's a little bit more expensive developing in West Cambridge than it is in Lexington. We've gotten a subsurface parking there, but certainly the rents are helping us from the yield perspective. So more to come on that hard to comment a day without our our final budgets being done on that.
All right. Thanks Pete.
From Jordan Sadler keybanc Capital markets, please. Go ahead.
Thanks. Good morning. I wanted to see if you could you talked about some of the conservatives and baked into the same sort of pool. I guess I'm curious if you could maybe walk through the non same-store pool specifically, you know, the Cadence of the of the total shop portfolio performance throughout 2020 and how that will contribute to ffo as we know it seems to our portfolio is less than 25% of total Shop Palm Atlanta. Why?
Yeah, I'll try to handle that because most of the life science and m o b or flu outside of development is already captured same-store pool. It's really the senior housing portfolio off cuz we really started over. I mean we blew apart virtually every asset that we own either selling it converting it to shop restructuring leases change operators Acquisitions Redevelopment hardly an asset remained untouched from three years ago. So about 80% of that senior housing pool is not in same-store package that includes the ccrcs which are performing extremely well and that closed the transition from Brookdale to LCS on February one performance right up through the closing date under Brookdale operations were really strong and we haven't seen any noticeable fall off in performance so far. So that's fantastic. That would potentially be up dead.
Next question is
I'd to earnings guidance.
Because you saw we baked in up to ten million of degradation. So that would be fantastic. That's a big number 210 million dollars of total in Owasso. That's significant. Sunrise is a Min wage. Peace as well. That's not in same-store today. We've done a lot of surgery on that portfolio as well. Frankly. A lot of the PrimeCare assets. We rolled past generation assets and more secondary markets and we sold out of those and even what remains there are a number of assets, um, 10 to 15 that are being sold. So that would be left with the portfolio about 25 higher-quality Sunrise assets that are kind of in their core markets. They're really good at the a plus sites in the primary markets and and we've tried to hold on to those cuz we think they'll do a great job and that's material amount of n a y in the range of 70 million dollars including the two ccrcs that they operate for so those will start off.
Becoming part of same store in a quarterly basis in 2020, but they won't be part of the full-year pool until 2021 and then there's the Oakmont portfolio both the triple conversion assets as well as the Acquisitions that's going to be 30 plus million dollars. I don't know why it's pretty material all in California for the most part brand new at least the acquisition that we've done. I wouldn't call that Elisha portfolio. Although it's very new real estate. They lease them up so quickly that they're essentially stabilized within a couple of months of opening nonetheless. They should have strong growth over the next several years and hopefully well into the future those again will be added to the quarterly same-store pool throughout the course of twenty twenty and then they come into the full year of 2021. And then the last material Edition would be the discovery acquisition as we noted in the prepared comments. That was a lease up portfolio that did not fill up in 2019.
the way we expected it to
They've shown some recent momentum. They made a number of changes to personnel and local initiatives that we think will start to pay off over the course of twenty twenty. So those assets will become part of the quarterly same-store pool in twenty-twenty as we move through the year and then in 2021, they would become part of the full-year pool. So a long way of saying that God by the end of 2020 and certainly in the twenty Twenty-One the results of the senior housing portfolio will start to appear in a meaningful way within that same storage pool. So, you know, we've had the same challenge Jordan that our best assets and frankly the majority of the pool in senior housing is not in same-store. So it's been it's been challenging for us as well. That's just a function of all the surgery we had to do to hopefully build what we think is going to be a great portfolio over time and as we look for it over the next 24 months the vast vast majority of our senior dog
portfolio will start to become
part of same store
It's that's that's I appreciate that you walk through that. I guess the part that I'm trying to understand and maybe this from modeling perspective and trying to take I could absolutely take it offline. But I think her audience would probably appreciate just how the total noi from the total shock portfolio flows, you know throughout the year, right? I mean is this going to be dead rising gradually or you know with less of a seasonal impact because of you know, the pieces that have you know, some momentum or a little bit of lease up that generally about how it's going to perform. Yeah gradually improving throughout the year.
I think that's fair. But the the major components are the ccrcs which are mostly stabilized Sunrise which is a stabilized portfolio Oakmont, which is essentially a stabilized portfolio and then Thursday, you should have some lease up benefit over the course of the next 24 months.
Okay.
Okay, and then separately can you can you offer the same store guide, you know particularly for life-sign and Shop using the old methodology. I'm just curious how much contribution you'll see if any, you know from the inclusion of the CCRC portfolio as well.
Yeah, let me Jordan. It's Peter talk about the the life science same-store. I do want to provide a little bit of background on this and Tom touched on it in the Q&A portion of our last call, you know, I've described before the cluster within a cluster strategy within our markets and that we are able to really support our tenants as they have success in a row.
You know, I want to give you an example cuz I think this is will be helpful. So Global blood Therapeutics is a tenant in the Cove phase one at least sixty seven thousand square feet long and we collect about four million of rent next month. They're moving into the co phase four and we'll least a hundred sixty four thousand square feet and we will get over ten million dollars off, but they're vacating a building that's in same store and moving into a building that is not in same-store, even though we're receiving over six million dollars of rent office is a very good thing and we've subsequently back filled all of that space. It just has some downtime between 1/8 and the new tenant how long it takes possession. We have a similar example with myokardia at phase one of the shore so we updated our policy to remove the vacated building from birth.
because it
Wasn't going to provide what we believe is the right organic growth number for how that segment is actually doing think we all know it's performing quite well. We have very strong lease Escalade. We also have very strong marked markets. So we have pulled those two assets out. It's really those two. There's one other smaller one as well in San Diego. So it is a good question. We are at you know, four and half percent for the midpoint. If we were not to have pulled those assets out. We would have been a few hundred basis points below. So in the 2% range, but Franklin as we look at it, we hope we keep signing more leases with existing tenants and collecting a lot more rent. And we're trying to provide what we we believe is the best organic growth number within our systems for pool. So that is the life sciences portion of that question on the ccrcs. Remember with the ccrcs. They are not insane store. They will not go in the same song.
That's right till.
Next year and also it Not only was it an acquisition of the interest we did know and were also transitioning to LCS. So that will go into the full-year pool in June. I believe it'll be $20.22 for the full year and it will start to go into the quarterly pool in 2021. Yeah, but what about what about with the author's just forgetting about the ccrcs just the if you lay it on the old methodology to the same store shop portfolio. What would that number of them?
Yeah, sure, whether the negative 2 and 1/2 one clarifying point on the stand-alone segments. So you'll have full disclosure off that segment started in 2020, even though it's not part of Saved store. So you'll get full transparency there. And then on the question about the same store, I want to make sure I'm not answering the right question. If you could just restate it. I'm just curious what seems to your shop. Noi guidance would be for 2020 if you hadn't changed my life. He's currently projecting -2 and 1/2. Yes. Okay. So the the major difference in that case would be that unconsolidated joint ventures would not be the pool. So that includes Brookdale and a few assets with an operator called em, B K and our our guidance for 2020 would have actually been better than the dog.
percent negative
2.5% that we reported yesterday primarily because of the Brookdale joint-venture portfolio. We've talked about that portfolio having its challenges being based primarily in Houston in Denver with a new Supply. So our guidance would have been better with our old policy. Got it. Thank you.
Thanks.
Next question is from John Kim BMO Capital markets, please. Go ahead. Good morning. Maybe I'll ask a question in different way. So your total wage order were down seasonally, but up sixty basis points year-over-year. Should we take that margin Improvement as a good run rate going forward as we as we look at 2020 John. Can you repeat that? It faded away. We couldn't hear your question sure about that your shop margins were down seasonally this quarter but up sixty basis points year-over-year. Should we take that margin Improvement as a good run rate going forward and we can look at margins on your total sharp portfolio.
Yeah, I want to make sure you're looking at the right numbers though that the margin for the overall shop portfolio is probably modestly better because of the help for sale assets which are the lower-quality property the margin on the same store portfolio would would would not have increased all that being said we do think they're substantial room for improvement on the June balance of the senior housing portfolio that we intend to hold long-term the margin today's in the mid-20s. We think there's clearly opportunity to improve that and at least five basis points as much as 10 basis points over time.
Okay, and then on your lease restructuring with a capital senior?
How much more do you need to do on your remaining triple-net portfolio specifically specifically with Harbor or maybe some of your other smaller operators? And is this any of this contemplative or guidance currently?
Yeah, if you look at the heat map on the supplemental we clean it up pretty dramatically that were about fifty data points on that chart two years ago were down to about four or five points off. The only two that are you know, well below 1.0 rent cover are de minimis in size. They have pretty good corporate guarantees standing behind them until the lease maturity dates off at which point we would sell those assets. They're not core to the portfolio, but it's also just such a small dollar amount that speech 33 wanted to look at it. It's changed dramatically over the last couple of years as you can see that and then you talked about say John we did a big restructuring with them last year where we went from 14,000 multiple leases with multiple different maturity dates down to a way of assets that are based in Florida where they're located. We Consolidated all of the wage.
Into one Master Lease did a ten year term substantially improve the credit and guaranteed.
Fine that lease we also agreed to give them ten million dollars of capital to renovate the building. So they're just now getting started with those projects. So over time we expect that ranked coverage improve, but until the renovations are done, I think you'll see it stay below the 1.0 * rent cover. But we feel like we've done the work that's necessary, Brookdale portfolio has an eight-year term that's in a Master Lease with the full credit of Brookdale. And then the the only other material least is with Ages, which is a 10 year lease with strong red cover and very good asset. So hopefully we've we've done our work on the triple-net portfolio.
So a year from now the heat map will improve significantly for it is today.
Well, the only thing that truly going to happen now are the two small dots on the leases that mature over the next three to four years those will eventually go away but you won't see it's add anything to the heat map because really not doing a new triple net leases.
Thank you.
next
next question comes from Morgan Stanley, please. Go ahead.
Thanks, just on the ccrcs. Can you maybe I missed this? Can you you mentioned you've baked in some degradation? Can you give us a sense of how you view sort of the growth in that portfolio in twenty-twenty and then and just again relates to the ccrcs. Can you clarify the initial when you present it the the analog from the CCRC that he was about fifty 1 million is the is the amortization of the all the non-refundable fees. Is that included or partly included in that number?
Yeah, it was $55 million in the presentation Vikram and that number represents both the the the total Noy including the cash n r f as well as the total I ended up including the amortization of the of the and wrapped their essentially the same number. So I think that's really important point to understand. It. Sounds like there's been some misunderstanding about that point and I think it's a practical point that economically the end of that we acquired is 55 million dollars whether you measured on a cash basis or an amortization basis.
that in
Includes the four to five hundred million, um that that uh, the fair value there will be amortized over the six years or so that number includes that that 6:55 isn't everything else. Yeah back from this is Tom. Yes, it includes the amortization of the non-refundable entrance fee for the 51% that we just acquired in that thought it as well as for the 51% We just require and the number you're looking at and that deck. Okay, and then just the trajectory in 2020.
Yeah, that portfolio is performed. Well for a number of years we have good disclosure in the presentations that we do each quarter with the long run off historical and why growth in that portfolio in in occupancy. It's been a steady upward slope in 2020 vs. 2019 was an extremely good year for the ccrcs. The total was up almost 6% of course, it bounces around quarter-to-quarter, but for the full year, it was really strong growth were not expecting similar growth in 2012-13 exactly are projecting for that presentation the potential for some degradation, but all signs to date suggested. We may have some upside to the to the guidance number.
Okay, great. And just on the on the shop portfolio. Can you kind of maybe give us a bit more color on what's embedded in that? -2.5? I know I know it's a small piece of the overall pool. But just how are you seeing sort of the the moving pieces between you know occupancy rent growth and expenses?
Yeah, happy to do that. We're projecting a modest increase in occupancy the Brookdale portfolio, which is now included at share. We're projecting negative growth. Just given the the last six months in that portfolio. It's not going to turn around overnight. So that's weighing down the shop same store portfolio who would otherwise hit done a reasonable occupancy growth. The Rev poor growth is pretty muted. We're projecting about 2% in 2020 just the reality of market conditions today with the primary operating expenses, of course labor that cost has been growing at around 5% per year and we're projecting that that will continue in 2020.
Great. Thank you.
Next question is from Michael Carroll RBC Capital markets, please. Go ahead.
Yeah, thanks, Tom. Can you talk a little bit about your today and appeared at least for the past several quarters that Peak has been mainly focused on the development side wage, I guess with the addition of Justin did the team compete be more aggressive on the acquisition side, too.
I'll start with that includes if you've got something to add it has been one of our objectives as we go into twenty-twenty to start working on the flow business page will be similar to what we've had in senior housing and life-science the additional the addition of Justin Hill working with Tom Clark and Scott breaker. We think is a big step forward and I do think through relationships. We will have a number of opportunities that come out of that. So that is definitely part of or that's definitely one of the significant goals. We have this we're going to 2020, I think 2019 was actually a little bit slow on the transaction front for MLB's and and there was not a lot of high-quality portfolios out there. We are hearing interesting months. There should be a several decent size portfolios coming to Market and we'll certainly take a look at those and
you know hopefully be able to
to execute on some
okay, and then are you focused on the larger transactions or or would you pursue I guess on the smaller individual type portfolios to individual assets also?
I think it's more likely to be a slow business like we're doing in my science and senior housing, which is very targeted approach. We don't have a very Senior Resource to allocate the time to travel around the country to see sights and and meet with Partners in Sellers and he's just as extremely skilled at doing that. So there's no doubt that the activity will pick up in the back office segment the the big portfolios, you know, pretty much everybody gets a chance to see those we look at all of those. It may be that on occasion will find the risk-adjusted returns appropriate but I would put that more in the occasional category or opportunistic. That's not going to be the primary way. We grow our business in any of the three segments.
Okay, great. And the last one for me?
Scott I think you mentioned in your prepared remarks that there is increased density at the post that you could do. Can you provide us some more color on that? And what should we expect? Yeah, it's just thirty-six acre campus with a sea of surface parking lots spaces. So that's not a near-term priority, but it's certainly something that we do life science Acquisitions. Whether it's the the towers at zero point or the Cambridge the the same cambridgepark drive too many too many syllables on that one Cambridge Park Drive acquisition or the post where when we do Acquisitions in life science, we always look for the opportunity to build scale on that campus over time. We've just found that to be such a critical component of life science real estate to have that local density in scale.
Okay, great. Thank you.
Next question is from Richie Anderson SMBC, please go ahead good morning everyone. So just getting back to the CCRC. I just want to make sure I have this right off your you'll run about 85% rental revenue and about 15% amortization. Is that is that about right?
For total in terms of the total revenue one.
I would characterize that differently Rich when you look at the total amount of income generated on the ccrcs. It's about sixty percent from the in rafts refundable entrance fees and about 40% from the and why your numbers just so you have them as it's about sixty-five million for the unrest in about 45 million net pack is coming to about a hundred and ten million. Okay. So meaning, okay. I was just looking at the revenue. I was looking at slide forty-seven on your supplemental and trying to sort of just look at the revenue side of the equation. I think it's probably easier to reach the way we think about it as had time described it. Okay, Monday is essentially the annual rent we receive from our residence and then the unrest is broken out separately and that's the you know entry off.
peace that we receive
When they move in so, okay. So set up to a a bigger question. So, you know you now own it one hundred percent your hack Bob and weave through a lot of you know disclosure noise that you know, you did a good job explaining in your in your in your disclosure materials last night, but I'm wondering if and you know, I know you have a you like to ccrcs. I know you're you're somewhat the exception of that a lot of people have avoided that space But you know, perhaps there's a long story here, but I'm wondering when you think of all the work you've had to do to explain the the disclosures and what not and now owning a hundred percent. Have you given your life like a sort of a a card in their back pocket and the optionality should it not work out very well that it's easier to Simply to sell a portfolio that you own a hundred percent than than if it's dead.
kind of wound up in a joint venture
I think I think if it's in the unlikely event, that doesn't work out. Well, we certainly have given ourselves that that card but we feel very confident that it's going to work out you mentioned the the accounting and some of the confusion that came out of it. We had a few different calls with analysts last night very knowledgeable analyst long as we walk through the economics and how they match up to the cash that's generated. And I think the analyst all came to the conclusion as well as some others that that we've had opportunities to talk to over the prior month that the accounting does capture the economics of these deals, but I do think there's been some misinformation out there that frankly I'd like to take a minute. Not not you give me the question Rich to set the record straight on it. I think it's important because this is a in my view a very favorable asset class and a great opportunity but one with high barriers-to-entry and hard to get into so I'm going home.
on that
We mentioned earlier at the ccrcs in this portfolio generate about a hundred ten million dollars of ffo and the two buckets and we talked about that the Noy and the non-refundable fees wage. And what's important about these two buckets is the NY produces about a ten to 15% margin by itself. The non-refundable fees adds to that margin and brings it more. Like I'm not a 25% margin in other words. The non-refundable fees are a critical component of the income to generate a profitable return on the CC our portfolios page. Someone one considers the fair value that that has to be assessed that has to include those non-refundable fees some facts the average senior resident enters the communities around age eighty and they usually pretty healthy at that point and they have an eight to ten year Actuarial life of stay the non-refundable fees are then amortized over these eight to ten year life.
so it produces a
Amortization of income based on providing those services and providing those those units and that shelter and those services to these seniors month. So when when we look at the major points of the the transaction, I think the first one is when we underwrite the under wrote those down and we underwrite future deals. We look at on a cash not a gap or ffo basis. That's how we underwrite it. So the the underwriting is based on cash, but the fact is is that Gap also follows the money and GAP generally gets to the right place on this stuff and and and especially in this type of an accounting office. The annual income being recorded on this stuff is roughly equivalent to the cash being received.
Which is really important when considering that the accounting meant record reflects the economics the and refs this important point that I think gets missed the and rep or absolutely I can the prepaid rents are not accounted for very similarly, which as you know is is consistent across all forms of real estate long as you pick it up and purchase accounting. You don't ignore prepaid rents. If you had rent that was prepaid for three years on a particular property and you went to buy that property you're not going to ignore that your purchase price or get a reduced purchase price to record a deferred revenue and you'll recognize that income in over that 3 year period of course, you'll do that and that's true for any real say, well it's true for these these non-refundable fees are just simply prepaid rents on the end wraps for seniors. So those and wrap Center amortized over an eight to ten year life now you got wage.
nice white eight to ten years because
It's assessed by actuaries every quarter. So it's not us making these numbers up actuaries. Look at the numbers determine the appropriate life to amortize this and that's the period of time in which we bring this thing come in off for the existing Residence at the date that we did the acquisition the value of the and refs are are simply booked as deferred revenue under Gatt thousand for the the the new Resident, of course as they as they come in rather than recognize. All those in reps have one time and say that's $150,000 number rather than recognize at all one time and gap an income and and fat which I think you would object to we then amortize that over that eight to ten year period in which we're going riding the service. This makes perfect sense under Gap where you're expecting some kind of a matching principle. Of course, the stuff is not there's nothing esoteric or fancy going on here wage.
The cash to recognize for deferred revenue.
Importantly follows the cache and that cash in this case comes from a deferred purchase price just as if you had bought an asset that had prepaid rents up front. Of course, you're going to pay less for that asset. If you're not going to be collecting those rents because your your your seller collected a whole bunch of those rents on day one and the the next day you bought the asset and you're going to get those wages rental payments, so that that's that's that's fairly basic. So when when we go through and we think about some of the principles is that Gap is usually designed at the phone and the economics and in this particular case it absolutely does Gap is designed to report income in the correct. And it usually gets that right off this case. It absolutely does Gap is designed to create a matching a revenue and expenses. All of these principles are spot-on in the CCR song.
Accounting and so some of the misinformation that we heard.
Around I I felt very important to set the record straight and I'm glad to take more questions on this. I guess it it does. I mean it's important that that every every real estate in the country is required not optional required to use this kind of accounting across a whole vast array of different things that are counted for when you purchased real estate. And so there's nothing special here. I just wanted to bump some of the stuff that I've heard out. All right, that's it's Six Sigma question or answer to a question. I wish if I have a good one and then then just one quick one. You haven't disclosed the the cap rate or the echo Behind The Sovereign wealth JV. Is there a reason for for that or or did I just miss it someplace?
Oh, hey Rich Scott here. When we announced that the last quarter we talked about a a cap rate on sale of about 6% Okay? I don't remember. Thank you. Yep of the asset management fee and that's on a trailing twelve that performance has been weaker more recently. So it just depends what time. You're you're looking at home. It's in that range. Okay. Thanks. I'm sorry I missed that. That's all I have. Thanks. Thanks Rich.
Next question is from the sofa City, please go ahead. Yeah, it's Michael Bell. I'm in here with Nick first off. You know Tom and Pete. I do appreciate having the industry appreciate you spending the time with Cintas and willpower to work towards some commonality and also being able to put out a presentation which lays out every item think it's really helpful for the street to have. So just thank you for doing that. I want to come back to the life science same-store change you made and you know, I know you want to be, you know, working with your tenants and partners with your tenants. It's possible Global blood could have looked at Alexandria Kilroy. They could have looked at biomed um, a variety of different other landlords in the area for the increase square footage that they needed and so you would have lost them if you couldn't satisfy them potentially dead.
And maybe there's some other Dynamics but you potentially could have lost a 10 in your exist.
In building this not going to your development and therefore the asset should stay the same store because it is you know, it is it's part of your organic growth of having to backfill when a tenant need to something else. And so I don't I appreciate the color and the desire to think about something. I actually don't think it's the right methodology change to make because it is a vacancy that you're going to have to deal with whether they go to your own building or someone else's shouldn't matter.
Hey Michael, it's Pete here. I appreciate the point. Maybe I should clarify it, you know with global blood we proactively allowed them out of their lease. So we would not have lost them. It would have stayed within their current premises and not moved, but we might have lost them from expanding within our portfolio, but we serve we could have you know, held them to their current lease and not allow them to get out of it earlier. We proactively elected to allow them to get out of their lease because they needed more space and I I should just clarify to that within the the policy, you know, we will not remove a building unless and will be fully transparent on this because we show fully sequential buildings come out, you know, we have basically said unless we are getting you know, significantly more revenues from that tenant for their move than dead.
We would not.
Be removing them. So it it's more of a proactive choice on our part. We could have said no made them stay in their building but given up significant increases in rep because they needed more space. So our choice is to work with our tenants and I actually will tell you in San Francisco. We've heard over and over again the fact that where the dominant landlord that many many tenants look to lease with us because of their opportunity to grow and if you look at our tenant base, it's heavily weighted towards biotechs. We do have some Pharma exposed as well, which is pretty big but those are the tenants where you can actually see significant growth and partnering with them is quite important. You might how much fun before you respond if I could add something for you. I do appreciate understand the question. It's something we grappled with some as to the best approach. We did conclude that it's better information dead.
If removing a tenant out of let's just say 25.
Square feet that had six years remaining on the lease into a hundred thousand square feet that might have a ten year lease at a higher rate. It just shows same-store decline wage when in fact, it was very profitable to the company it it did feel strange in the same store. But one thing I'm going to catch these guys by surprise a little bit, but he probably won't collaborate me too much. One thing I will do is we will footnote in some way that is is not in the in the in the fine print the impact of the of these transactions of what it would add on same stores we go forward cuz we're not trying to obviously hide it we want to put that out there so you can see it if that would be a reasonable solution. So how much term will is left on the lease. I I may have written down the numbers wrong, but I think I heard four million of rent sixty-seven thousand square feet ten million of rent hundred sixty four thousand square feet, which seems that it's basically 60 bucks wage.
Same thing rent. And so I guess I was making the numbers are wrong, but I was surprised the rent stayed the same when you get the new bill, and I assume you have all.
TI's that you put in the existing space and give a massive amount of tea is for the new space to just help us walk walk me through the economics here of what really was exchanged other than more space and how much time was left off. Yeah, so I don't know that have the exact term on me but I would say they moved into phase one of the Cove it was close to a ten year lease. So they had north of you know, five years left on their term on the T. I build out perspective. I would say that we built more of a and we do this often Michael with tenants that we think have a life upside opportunity build very generic space. So we're not doing a whole redo in the eyes of the original TI package that we gave to Global thought in their initial lease was around $150 and then the renewal or she's been the new lease we signed with a backfill tenant is substantially higher than what dead.
Global blood was paying but also the T eyes were substantially below that hundred and fifty given it was more of a generic space that was built out initially.
And the rent is it was the $60 a foot the right thing in both cases or negative red numbers you quoted or not right off. Okay, I believe we were a slight picked up. But remember we had some escalators for when they signed their initial lease and then we ultimately signed them for probably around 5 and our monthly low sixties for phase 4 is actually a pretty strong rent within that market page eighteen of the guidance. Were you have the Rolfe and it's helpful just to go from one to the other we talk a little bit earlier in the call about the non same-store shop assets given all the Transitions and get everything you've done in that portfolio. What would the change be from? Like, where does that show up on this reconciliation? You know, how many pennies is that adding potentially to 2012?
and since operation
Blue eyes and improve. Yeah. So yeah, it's certainly adding within the development earnin. So the two big tenants I talked about myocardium Global blood those are big contributors and I said in my prepared remarks, you know phase four of the Cove, which is global blood. I'm talking about the shop shop portfolio. Oh, sorry hath fact that the shop your your shop your normal chakra, but it's a small percentage of your entire shop portfolio, which is captured in the two and half percent Blended but you clearly are getting upside as you made all those Transmissions you had all the down in Hawaii in 2019 that affected you I would have assumed that there is a positive benefit as assets stabilized and ramp. Where is that being captured?
For the transmission assets are in the same store pool for 2020 because they will have had a full year of comparable results under a, operator. So you're not missing anything there. But to the point I made earlier almost eighty percent of the senior housing portfolio is not in same-store even in 2028. They will start being added to the quarterly pool throughout the course of twenty twenty, but that's not captured in the guidance number. So there actually is a substantial amount of upside or downside in earnings based on the results of that non same store portfolio. That's what I'm trying to get at is what's what's embedded in your buck eighty guidance for that nonsense changed or shop pool, which is the largest parship portion of your shop assets. What are you assuming from an increase decrease or not rep.
Is in better than that.
Radius of f oh, yeah, so so Michael and obviously the roll-forward is is at a very high level if we did every single adjustment. It wouldn't be able to fit on a month and a half by 11 but big picture within 20 20 transactions, you know, Scott mentioned the ccrcs being the biggest component that is not in same-store that is picked up in that 2020 transactions. We talked about the penny and half of accretion from the Brookdale transaction. So a big chunk of it is picked up there. And then also when you look at the 2019 Capital recycling. Also mentioned the Oakmont and Discovery Acquisitions, if you look in that table footnote see you got 2019 acquisition wage is actually includes Oakmont and Discovery, but that's also offset as we look at this for the capital recycling we did as well as some of the funding so the, you know positive
Impact of those is awesome.
Adding some of the you know negative from the capital Recycling and that also point out, you know, we do have that other bucket down there which you know is a bit of a catch-all but but does obviously pick up some other things as I said, this is more high level but going through those three items ccrcs Oakmont and Discovery, that's the absolute vast majority of non SVP senior housing or shout that sets right there last question on the dividend and time you referenced the board maintained and we'll think about it next year. Can you at least tell us what the framework that our mindset that they made that decision to then re-evaluate and twenty Twenty-One how they you know, what are the what are they looking for? The current trajectory of fact, yes, I would indicate you're going to be able to cover more than 20 20 than you did in 2019 right arguably if you're able to hit the guidance that you've laid out your dividend coverage map.
The year should improve.
Rather than go down. But just maybe help us understand. What's the framework? What are they thinking about from a dividend perspective next year?
Absolutely. I can give you some insight on that. That was a a robust conversation. We had some very good viewpoints around the room. That's nice that are yield is quite strong. But that coming out of the restructuring that our coverage was was quite was quite high or quite low in other words at 97% And as we look at it, we also knew that we were going to have a fad Improvement during the year and we could have easily be raised the dividend some to capture at least some growth and certainly provide an indication of where we're going because that's where we see ourselves going as we look forward the next two or three years automatically at the current time the board decided. Let's stay put the yields good we've got we've got excellent growth on the horizon. Let's get that. Let's get that covered.
in a stronger place
First so that we're happy with that along with all the rest of our metrics and we can always revisit that it could be mid gear. It could be twenty Twenty-One, but we've had probably twenty Twenty-One. There should be a good opportunity to revisit that then so because our yield is is so high and the coverage could use a little bit of improvement. That's how we came to that conclusion. So I mean frankly we could have easily added if we change but we felt that we would seek to get the better coverage first and then move on to start increasing the yield after that. So there wasn't it was much more about whether to raise than 2 cup.
Oh, yeah the work cut never came up in a room. Okay, that's what I want to know. Thanks. Again. So, I think it's pretty important to note that for this. There was a lot of term left and you know, they're now doing in a ten year lease at the co-pays for and you've already released that speeds. It sounds like right. We've already released it. It's just a matter of down time to get the new tenant in. Thank you.
Questions from Jonathan. Who is Raymond James, please? Go ahead.
Hey, good morning out there on the c c r c as in Tom, all the details are greatly appreciated. But looking at page forty-nine of the supplement talks about the accounting change. That's the club the first quarter huge clarify that you will be booking effectively 45 million event and why through cash and or will the full $110 million off the $65 million of unrest amortization also be booked in there. Yeah Jonathan, it'll be the hundred ten because we'll be under consolidation at that at that point. So it'll be the full amount of the analyzer and Andres the amortization femoral head. Rest. Got it. Okay, and then maybe one for Scott. I think you mentioned the recently-acquired discovery and Oakmont properties are a little behind relative to underwriting. I think you said there were some Personnel changes. So what happened there versus your expectations when you bought them, you know less than a month.
You gotta clarify Oakmont is you know on schedule is not ahead of schedule. I mentioned that Discovery was behind that's at least a portfolio nine assets that we acquire and both of them are generally doing well the other four fell behind so we were expecting some pretty significant occupancy Improvement the opposite happen. Those for properties off Discovery had a number of transactions that they were working on in 2019, which ended up being a bit of a distraction unfortunately and and in shortly after our acquisition last April significant change in Personnel at the property and Regional level that needed to be sorted out over the course of 2019. So we think that they addressed those things but um, but occupancy today in that portfolio sits in the high seventies, which is roughly where we acquired it when we're expecting that that will eventually stabilize well into the ninety percent range so dead.
They're behind.
We still think they're great operator. We still confident in the assets. But certainly we're not happy with the first year performance are the rep for Trends kind of in line with your expectations. It's just the just the odd but yeah, it's been mostly in occupancy problem.
Okay. All right. I'll jump off. Thanks for the time.
It's Johnson.
Next question is from Steven the Barclays, please go ahead great. Thanks a good morning at Tom and Payton Scott. All the 2020 guidance details are definitely helpful. You know, one of the men chefs excite. Well first you mentioned in your prepared remarks, you had one point four billion of announced non-core assets sales over the past year or so. Yeah, that was well above the original guidance. So for twenty twenty, you're projecting another five off of dispositions just remind us whether this the twenty-twenty disposition guidance is fairly generalised just as a place marker or is there is some pretty good internal visibility in which properties and property type of you plan to sell just the five hundred million, maybe a realistic for this year. And should we assume that most of the additional sale activity will be in senior housing or is that not the right assumption? Thanks.
Yeah.
Hey, I can start with that. It's Pete and Scott want that anything he can so, you know, the five hundred million what's included in there is the North Fulton purchase option package, which is around eighty million dollars. It also includes the you know help for sale assets which we do disclose in our supplemental that's about another three hundred million dollars. When you you back out on a trip on that assets. We sold Brookdale which is included in that too. And then there's there's certainly some other non-core assets within you know may as well as potentially a Moby's that are not, you know, very significant, but certainly would make up the balance there. We don't intend to sell anything in life sciences so long I would say $500 is our initial, you know guidance on that. If that number were to go up we certainly would be looking to recycle that Capital into acquisition.
for development
Band, so we wouldn't have it built up just to raise cash. We'd want it to go up in order to fund some, you know, half a recycling activities. So that's the way we think about it. Okay. Got it. Just quickly on senior housing you gave us some clarity last quarter talked about softness and markets like Houston and Denver is you know standouts now the more time it's past just curious if there is any oil changes in these quote-unquote standout markets either for the better or worse or Dynamics still pretty similar to what was happening in mid 2019 as we enter twenty twenty now,
Yeah, I don't think there's anything materially different from comments. We would have made six months ago the past couple of years. We've been a bit more cautious than than most about Thursday of the industry and how long it would take for it to turn around. I think that turned out to be the correct assessment for sure from where we sit today occupancy across the sector is generally flat which is certainly improvement from where it's been the past three or four years but too often I think that occupancy is coming at the expense of discounting and incentives and those aren't being picked up by the data that a lot of people like to focus on so, you know, we don't see rents growing at 3% at least not gnashing certainly they are in particular markets, but not at the industry-wide level. We think it's more likely in the one to 2% range with flat occupancy growth. You can assume that revenues growing want to 2% off.
And if labor is the vast majority of your operating expenses going 5% a year on a 30% margin business. It's pretty simple math to understand why that industry wage has been declining in the 5 to 10% range. So we see that improving slightly throughout the course of twenty twenty, but we don't think we've yet. Inflection point despite the fact that occupancy is flat. We really need to see both flat occupancy and pricing power or a dramatic increase in occupancy. So that Revenue growth can be faced with expense growth and we're just not there yet as an industry, but getting closer for sure.
Yeah, go ahead. Sure who know? I'm sorry finish your question. No, I was going to ask one more quick one. May I go ahead first or rather? Have you coming on and the the prior question first choice was going to make a comment. I recognize the calls going long. We had lots of topics. We had a lot of materials for you guys to review and I apologize there was just so much complexity and so much information to get to you that we felt without it. It had been very hard to discern what is taking place in our in our business. We've got another half a dozen six people. I would ask that ass questions quickly. If we could just please request that you do and we'll try to give quick answers just to get through the rest of the the questions, but we'll go as quickly as we can at this point. So yeah, please continue.
All right, just a quick one here. Just to send you can comment on this. Is there any color on what?
To the plan sale of the I think it was six additional Capital Senior Living properties got over and above what you announced previously.
Yeah, we had a good dialogue with Jim and her team they have important strategic initiatives on their end which included reducing their lease liabilities wage Health equals, the smallest partner, they should certainly have others they were not core assets for us and we've talked about having two or three years ago thirty different senior housing operating Partners. Today, we're down to about twenty would like to get down to about 10 and we were not looking to grow with CSU. So it made sense both for us and for CSU strategic actually that relationship we think that combination of releasing the security deposits and the likely sale price for those assets will result in a perfectly good outcome for them rather than having yet, you know, another underwater triple-net-lease. We've been working hard to get rid of those.
Okay, great. Thanks.
Next question from Chad vanacore, please. Go ahead. All right, so I'm going to keep it to one question in the interest of time. Just thinking about capex and look pretty high this quarter. I think that run rate for twenty twenty and was this quarter was that related to accelerated development or was that catch up for earlier in the year?
Yeah, hey Chad, it's Pete, you know cats access historically been back and waited for us. So the fourth quarter tends to be the highest quarter, which is why we focus more on a full-year cat fax number and not just a fourth-quarter number because you could get some, you know, misleading, you know, take out information there. So what would focus you more on the the full-year number and then from a guidance perspective, you know, we do include cat backs in the supplemental Eis the recurring capex there and others. So I just encourage you to look at that additional detail for what we're budgeting for 2020.
Okay. Thanks Jeff.
next question
comes from a mate. Oh, I go find your Amazon. Yo, please go ahead. Yes, good afternoon. I just wanted to follow up on some questions in regards took a position Outlook again. Most of your peers don't really give guidance, but you kind of given an 800 million dollar guidance. Is that something very specific that's out there or is that more of a kind of just a generic placeholder number?
Yeah, a good question Tayo, you know, we've raised these Equity forwards and in our sources and uses we fully deploy those and you can see what they're getting deployed in a capitalist and Acquisitions and and the you know, Brookdale transaction on the acquisition front that includes the post. So that's three hundred and twenty million when you take the balance took just under $500 million. We announced our Oakmont purchase option agreement a couple of actually about two months ago and some of that money is identified for those although hard to get into specifics on timing right now, but certainly that's within our plan for some of those and then the balance of that is a little bit on our, you know pipeline off. So that's how we came up with the the eight hundred million dollar number right? I think that's a quick second question the engine lease Amendment and extension. You just talk a little bit about wage.
You know why that was.
On I'm kind of what's the worst case scenario if they do decide to terminate early? Yeah. So we we actually very strong relationship with the engine and we had for years, you know, the transaction that we announced in December. We believe was a a win-win, you know, as part of the agreement Amgen extended their maturities on three bolts that are most important to them and we were able to spread out the you know, lease maturities. It will vacate one building that they currently occupied and then the other three buildings they lease are actually submerged. So now we have full clarity that extension rights on those subleases there and we have an opportunity to talk to the market about those buildings. It's a a main and Main location right next to the Cove. It's over 10 Easter Point campus. So I guess worst case they would just vacate all of their leases birth.
But it would get spread out over the next you know, four years would be the worst case.
To say what they'll end up doing with the buildings. They extended the leases on they have the right to stay in those through 2029. So I would say best case is on those three buildings. They stayed for the full ten year term essentially that they renewed for so hard to gauge now, but we felt quite good about having Clarity on that campus and an opportunity now to, you know work with other tenants either sub-tenants for the market on leasing up some of those buildings great. Thank you. Thanks Jeff.
operator
Yes, next question from Daniel Bernstein Capital One, please. Go ahead. Good morning. I still good morning. Barely wage. Yes. One thing is that they later we can talk more a little bit more offline about the immunization cchcs. I don't want to go back over it again given the time but I do want to talk to you guys about it. The one question I had is you have a bunch of debt 2325 that's around 4% yield. Obviously call it 20 22 said earlier. Did you bake in any refinancing into your 2020 guidance?
Yes.
No, we did not make any refinancing it to our guidance, you know, if you look over the last six months, we've done a lot of bond deals and actually extinguished much of the debt that we had sharing twenty twenty-two twenty-two. So we have not baked in any additional, you know, debt issuance has and redemptions and Thursday and I don't want to put you in a corner on long-term seniors housing fundamentals, but you know, you look at your portfolio. It's around 85% occupancy think historically it's probably been higher than that, you know, do you think the industry is going to get back to that maybe your back to that upper eighties occupancy within seniors housing over say the next three five years them. Is there. Kind of website embedded within your portfolio or if you can take a little bit longer than that.
Yeah, I think the portfolio we built we'll get back to that level. I think three to five years. Is it comfortable window to get there? Okay.
Okay. That's all I have. Thanks.
Next question Michael Miller JPMorgan, please. Go ahead Hi Guess on the same. Sort definition. What's the two things? What's the trigger for the transmission assets to go back into town store pool. And then secondly, we look at the 2019 performance on the new definition of minus 2.7% versus the -2.5 twenty guidance. Should we read into that? You're expecting slight Improvement or is the property mix changing where it's driving that little bit of improvement.
I'll take the first one and Pete the second. This is Tom for the transition. It's you have to have comparable operators in both. So if we if we're moving from one Shopper back later to another we will pull it out of the same store pool for transition purposes, but I'll remind you if it's material in that portfolio will continue to disclose it both ways have in the past. So you won't lose anything from what we give any in the past paid the second part.
hate to do this like the
Can you repeat the question?
Yeah, I guess when we look at 2019 shop performance of minus 2.7% under the new definition versus 2020 guidance of -2.5 is that slight investment based on operations getting better or is the full full size changing from year to year that's driving that Improvement.
Yeah, it is a a bit of a different pool Michael because of the transition portfolio, which under this definition would not have been in the 2019 same result, but they will be in the twenty20 same-store pool under both the Old and the new policy. I think the best apples-to-apples comparison. Is that okay? If we had used the 2020 same store policy our 2019 results would have been negative roughly 4% off is the guidance of negative 2.5% So there is slight Improvement built into twenty-twenty relative to 2019. That's not a perfect apples-to-apples comparison because of the pools, but that's as close as we can get and that's primarily the the reduction in size of the Brookdale portfolio frankly.
It rather than 100%
Sheraton 53.5% and that's the portfolio that's been dragging down performance. That's just the reality. We don't think that last forever but that has been the case the past two years got it. Took that's helpful. Thank you from Lucas Green Street advisors, please go ahead just ask one. So there's a capital Chasing Life Science these days. I'm curious how you think that impacts the the supply outlook for that segment.
Yeah, you know, it's a good question Lucas. We're certainly seeing kapre compression. It's no longer this Niche asset class. There's a lot of capital chasing the space off and driving cap rates down. And also when you add to the mix the fact that you've got a lot of increased demand from tenants looking to lease space you have a virtuous cycle which I've talked about in the past. So and you're also seeing a lot of pre-leasing happening well in advance, so I think where we are today, it's likely that will see additional development in each one of our markets. We are obviously participating in that in all three markets, but we're certainly mindful of making sure that we would look to match whatever New Jersey apply. We deliver with our view on where demand is from a tenant perspective within the marketplace.
operator
next question comes from Joshua. Dennerlein Bank of America Merrill Lynch, please go ahead. Hey guys, the post-acquisition you kind of expanded in the 128th a some market for the Boston life science. What kind of draws you do that submarket and you know there any other submarkets you really like in Boston?
Yeah, we we actually really like the Lexington Market primarily because if it's you know location for the two and also the T. And we like the West Cambridge Market because that is exactly where the T. Stop is. So we see some real synergies between owning assets and West Cambridge as well as in Lexington. I know the post office in Waltham, but if you look at the map, it's less than a mile from our Aid and research campus. So we we we like the suburb play but what's important to us is making sure that our tenants can utilize the transit system to get to and from their workplace because traffic in Boston is not easy to navigate and and as we look at the suburbs will continue to accessibility for our tenants to you know, access that Transit.
Okay, is that it for questions operator?
Yes, and I'll come back home for any closing remarks. Just a couple of comments. I will say that the C C R C Class of a Samsung portfolio. We consider to be a great opportunity for us. We recognize that there's a little bit of education on the account. It's not that difficult when we have an opportunity to go one-on-one with people we've done some of glad to do that with anybody's to call in or teeth can help. I do apologize for the length of the call. There was just so much going on. I'm guessing for the sanity of our team and for you. It'll be less busy next year, and I do thank you all for joining the calling your interest in health Beach. So we'll see you soon. Thank you.
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