Q4 2019 Earnings Call

being recorded

I would not like to turn the conference over to Michael Kadesh director of investor relations. Go ahead. Thank you for covering the fourth quarter 2019 results joining me on today's call are Jennifer Francis president and Chief Operating Officer and Rick Seidel Chief Financial Officer and Treasurer Thursdays call includes a presentation by management followed by a question-and-answer session. I would like to note that the transcription recording and retransmission of today's conference call are strictly prohibited without the prior written consent of Diversified Health Care trust or d h c today's conference call contains forward-looking statements within the meaning of the private Securities litigation Reform Act of 1995 and other Securities laws, these forward-looking statements are based upon dhcs present beliefs and expectations as of today Monday, March 2nd 2020. The company undertakes no obligation to revise or publicly release wage.

adults of any revision for the for the

Making statements made in today's conference call other than through filings with the Securities and Exchange Commission or sec. In addition. This call may contain non-gaap numbers including normalized funds from operations or normalized ffo even even charm or adjusted ebitda and cash basis net operating income or cash basis and reconciliations of net income attributable and shareholders to these non-gaap figures and the components to calculate ampofo or fad are available in our supplemental operating and financial data package found on our website at ww.w, h c r e.com actual results May differ materially from those projected in any forward-looking statements additional information concerning factors that can cause those differences is contained in our filings with the SEC investors are cautioned not to place undue Reliance upon any forward-looking statements now, I'd like to turn the call over to Jennifer. Thank you, Michael good morning to our shareholders and call participants and well.

to our year-end earnings call

For the portfolio of roughly 50% medical office and life science properties. We believe our new name more accurately depicts, both our portfolio of diverse high quality Healthcare real estate and are supposed to be moving forward at the start of the year. We announced the closing of the transaction to restructure our business arrangements with five star Senior Living effective, January 1st, 2020, which was a substantial Milestone and dhcs ongoing transformation.

I'd like to start the call this morning by touching Upon Our medical office and life-science properties now referred to referred to as our office portfolio segment, which represents approximately 48% of dhcs cash basis analyze for the fourth quarter of 2019.

This portfolio contains close to 12 million square feet comprised of roughly 7.3 million square feet of medical office buildings and four point five million square feet of life science properties where the weighted-average least offer a six point four years.

The analyst and investor communities frequently questioned us on our exposure to off-campus medical office building the demand for the delivery of Medical Care continues to be pushed away from hospital campuses to be closer to the consumer with more complex treatment such as total knee Replacements and extensive spinal cord procedures being removed from the CMS inpatient only list. We continue to see the benefit of owning assets more conveniently located off-campus and close to the patient and therefore more attractive to the medical providers leasing space from us as such we remain committed to our strategy of owning off-campus medical office bulb.

We were pleased to begin the new year with a new name Diversified Health Care trust or d h c.

DHC

Annualized life science Revenue 76% is generated from the top to life science States, Massachusetts and California. The life sciences industry is growing at as fast as paid since 2000 measured by employment and is supported by technological advances breakthrough Therapeutics. The growing Healthcare needs of an aging US population and increased FDA drug approvals June th these like science tenants have over 30,000 patents in place and have a robust Pipeline with over 850 drugs and development with products focused on cures and treatments for cancer diabetes heart disease Alzheimer's cystic fibrosis and rheumatoid arthritis to name a few.

We continue to report strong leasing results across our office portfolio segment. We executed approximately 394000 square feet of new and renewal leases in the fourth quarter with a 7.1% roll up and rent weighted average lease term of nine years and leasing costs of just $3.66 per square foot per year for a total of approximately 1.5 million square feet least in 2019 compared to 881 thousand square feet in the prior-year. We have roughly 1 million square feet of new and renewable deals in our leasing Pipeline and our lease expiration outlook for the upcoming year is significantly better than it was at this time last year.

looking at

Our office portfolio results compared to the same quarter last year. We recorded relatively flat same property Cash basis and Ally with a decline of less than 1% which was primarily driven by the same factors report in Prior calls vacancies and three properties in Minnesota and South Carolina and in Fremont, California.

During the quarter we signed a 32,000 square-foot lease at the property in the Minneapolis market for a twelve year term with an 8.5% roll up and rent and have subsequent to quarter-end signed two letters of along the same property which will bring its occupancy to over 65% We continue to have promising leasing activity at this property in South Carolina where we had a tenant vacate last year. We have a break for a full building tenant. The Fremont property is part of our disposition portfolio. These temporary vacancies were offset by continued strength in our life science properties where we saw same as cash basis and increase of 2.9% over the prior year due to strength on both coasts.

we've spoken in Prior calls about the

Is rent increase at our property in the seaport District of Boston and early 2019 in the fourth quarter. We had a 122000 square-foot full building life science tenant South of San Francisco renew for 10 years with a 36% roll up in rent.

As stated in Prior quarters were underway on the Redevelopment of the three-building life science Campus located in the Torrey Pines submarket of San Diego at a cost of approximately a hundred million dollars. We're still on track for an estimated completion in late 2020. We're in discussions with a number of potential tenants for the building and into Cepeda sizable role up and rent and strong Returns on our investment moving to our senior living Palm Leo in light of the recent restructuring with 5-star. We've introduced a new schedule in our supplemental. It depicts pro-forma Eva. For our senior housing operating portfolio or shock we believe is a meaningful transitional performance measure as it presents historical Community level operating results regardless of lease or management structure and removes the impact of any changes in the agreements during the periods presented.

During our second quarter. Mm.

Earnings call we mentioned that we expected double-digit same property noi declines in this segment with relatively flat revenues for calendar year 2019 looking at the full year results are the same property shop portfolio which contains 224 communities and represents roughly 90% of the overall units in the shop portfolio reported revenues up sixty basis points above average rate growth up twenty basis points and occupancy of 84.2% due to expected wage pressure and five stars labor initiatives full-year. Ibadan for the shop Portland was down 7.3% while this payment slightly better-than-expected. We note that the labor initiatives will be ongoing and will carry into twenty-twenty.

Moving to the fourth quarter results in the same property shop segment. We reported ten basis points of average rate growth offset by a decline in occupancy to 83.8% resulting residencies and services decreasing fifty basis points.

He was primarily affected by three regions which five star has identified as focused markets within these regions. There have been challenges related to instability in Regional or Community leadership as five star, You just continues its transformation.

As a result extra corporate and operational resources were deployed during the fourth quarter of 2019 and action plans were developed and implemented to stabilize these regions.

In addition to these challenges since the third quarter of 2017 the South Carolina market had an average annualized inventory growth of 8% compared to the National growth rate of 3.2% off five star who develop a targeted sales strategy to combat this new Supply and we are optimistic that these Regional and Community Investments and Management and strategy will improve results moving forward.

As expected same property, even for the shop portfolio was down close to $11 or 16.3% in the fourth quarter of 2019 compared to the prior-year. This was largely due to the full quarter effect of five stars labor initiatives in addition to increases in other property operating expenses as we've mentioned previously five star has actively adjusted in its team members to attract and retain talent in the dress prevailing wage pressure across all Industries and markets. We support five stars investment in its people and believe this will lead to even better service in a residence and ultimately increased rent growth and profitability.

five stars learning

Earnings call is scheduled for this afternoon at 1:00 Eastern and we encourage you to listen to hear it's senior leadership discuss their initiatives.

We announced the acquisition of a $169 unit active adult rental property in Plano, Texas at the end of 2019 which represents our entry into the age qualified active adult housing market as we transition out of high Acuity stand-alone skilled nursing. We're excited to turn toward what seminar industry referred to as independent living light. We believe that the active adult Market will fill the gap for those members of the Aging US population that don't want or need the services provided an independent and assisted living communities, but desire the activities and socialization provided in active adult residents. We were interested in these this property specifically as it has synergies with our two senior living communities in the Dallas Market, we want to be clear. However that this acquisition is just the beginning of a normal oil recycling program and does not shift our Focus from executing on our stated disposition plan and deleveraging.

on disposition

As of today, we're pleased to have assets valued at close to eight hundred million dollars either sold or under agreement to sell our disposition program Target remains nine hundred million dollars of property sales office and it's part of our standard asset management practices will continue to evaluate our portfolio for Capital recycling opportunities. Now turn the call over to Rick to provide further discussion of our financial results for the month. Thank you Jennifer. I'm good morning everyone. I'll be discussing some of the fourth quarter Financial results beyond what Jennifer discovered normalized ffo for the fourth quarter of 2019 with 70.8 million dollars or Thirty cents per share, which was up $0.03 per share compared to the same quarter last year. The majority of the increase in normalized ffo was primarily the result of not incurring a business management incentive to our Mr. In 2019 compared to the Forty point six million dollar in Santa Fe recognized in the fourth quarter of 2018.

This is largely offset by the five-star rent reduction in our triple net lease senior living communities that we've discussed previously.

January we declare fifteen cents per share dividend payable in the first quarter of 2020 the normalized ffo payout ratio for the fourth quarter based on this dividend was approximately 50%

in addition to not recognizing an incentive management fee in 2019 are based business manager. Please continue to be paid on market cap and not on the historical cost of our real estate as a result total General and administrative expenses were down forty eight point nine million dollars in 2019 compared to the prior-year which we believe demonstrates the strong alignment of interests between our Mr. And d h c share home.

Turning to Capital expenditures. We spent twenty two and a half million dollars in recurring capex in the fourth quarter and twenty eight point three million dollars on Redevelopment projects in both our office portfolio and Shop segment wage in our office portfolio. We continue to make progress on the repositioning and Washington DC that we've discussed on prior calls.

Looking into twenty-twenty the majority of our office portfolio Capital spend will be focused on our Redevelopment project and Torrey Pines the Jennifer mentioned earlier and we are excited about two additional Redevelopment plan for 20 28. These assets are in the Boston and Tempe markets and represent opportunities to further enhance our high-quality portfolio in our shop portfolio our Redevelopment Capital spend for the quarterback primarily related to lease communities in 2019 going forward that will be increased Redevelopment Capital expenditures to reposition our portfolio and address capital projects that were deferred as a result of the League's.

Moving to our balance sheet, we end of the third quarter with thirty seven point four million dollars of cash.

And and $538 outstanding on our revolving credit facility.

During the fourth quarter. We repaid R350 million dollar Term Loan that was scheduled to mature in January of 2020 and obtained a new short-term $250 Term Loan to provide us with increased flexibility in the timing of our disposition.

As of December 31st our debt to adjusted ebitda was 7.3 times down slightly from last quarter. We will continue to use asset sale proceeds from our disposition program to reduce debt.

That concludes our prepared remarks operator. Please open up the line for questions.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star then to our first question is from Drew back from Bexar. Go ahead.

Hey, good morning.

Good morning question on the just the Torrey Pines Redevelopment. I guess can you give some kind of update on negotiations you may or may not be having with potential tenants there and then I'm Rick. I know you suck digital redevelopments and I think ten p and in Massachusetts are those related twenty maturities and and will there be some down time that we can expect to to occur with those?

So on the Torrey Pines, you know, we've had very good leasing activity. We have proposals out most of them, you know, we're expecting that the three buildings will suck up being multi-tenant. So, you know, we could see a full building tenant for one of them. But as I said on in the prepared remarks, we've had proposals we expect roll up syndrome. So it's been it's been pretty active.

Okay saying yeah, tell me that could you repeat your second question? I was asking you about the the Tempe and Massachusetts or developments that Rick mentioned are those related to 20 lease maturity choice. And will there be any significant downtime associated with those or that are reconnecting with this?

They are.

Expected some lease expirations in 2020. Both our markets we feel very good about in in Massachusetts in Lexington. Mass is a very strong Life Sciences market and Tempe is is one of the stronger markets in Arizona. So we expect the redevelopments will commence kind of mid-year on both of those off and continue on for the balance of 2020.

Okay, and any comment on Roi expectations on this I expect that will you know will certainly have Roll-Ups in rent in both of them? I think we're expecting, you know High single to low double-digit returns.

Okay, thank you. And then just one more for me on the the asset sales that are planned. I guess you can you talk about the the cap rate on what's been executed or what's kind of spoken for thus far vs. What remains kind of breaking down to bring that down to the two pools for modeling purposes?

Yes.

I mean we've been saying we're expecting cap rates that are around. Um, seven caps. They've come in slightly lower than that so far off. I I would just say that they're a blended cap at around 7.

Okay, and I guess the related question too as you sell these assets might there be any need for Acquisitions from a a 1031 exchange perspective just for tax purposes, We see some of that or is the tax situation Rick sort of whatever you to do that without any offsetting Acquisitions, you know at this point. We've worked with our tax team and the disposition Palm. We've identified we shouldn't have any any need for a 1031 exchange for me. Thank you. Thanks.

Our next question is Vikram Malhotra from Morgan Stanley. Go ahead seating the questions. So just first on seniors housing wage are who I think you mentioned that uh, maybe it was the thing. You mentioned that the expense trend has been going higher wage should go higher recently or in twenty twenty. I'm just wondering can you give us a broader sort of view on occupancy and just keep it. Are you talk to you know in 2 Q talked about nineteen being down? What are your Highlander expectations for 20 in terms of the shoppie Bedard?

if it comes so

From a shop perspective. We've generally forecasted Revenue to be flat fish. The team is intentionally D emphasizing occupation and focusing on profitability. We had come to realize that there was a number of properties in the portfolio that were fairly well occupied that just weren't generating the contribution. Margin. We were looking for so part part of five stars initiatives. They've kind of reinvented their Asset Management. Sorry their revenue management system and are really focusing to drive results. They're off as a result. We may see occupancy lag a little bit compared to the past but the occupancy we do add will be good solid profitable occupancy going into twenty-twenty. We expect labor costs elevated. We are intentionally really investing in the teams again. We'd like to think we're being somewhat conservative with the flat Revenue estimate because as we've upgraded song

The local and Regional teams, um were expecting better results. So they're very much working too kind of

Right the ship and get things trending in the right direction. And unfortunately, there's a there's a lag in the financials to see some of those uh, you know, there's a lot of things off the team is doing they're doing great work, but you just don't see the results in the financials. So we expect the earlier half of 2020 will continue to kind of post these these larger declines and you break and then it'll it'll flatten out later in the year. So for the full year, we're we're modeling, you know, excluding the properties. We've got slated for disposition. We're we're probably, you know down 8 and 1/2 to 10% or so underneath the darn basis. Um, but again, I mean, I don't think that really tells the true story of of some of the winds that that that have happened. I mean, I'm just making a quick list of some of the things that have been accomplished in in 2019. They've they've really they've rolled out what they call their Ops Essentials Frameworks. It's really changing.

The way communities are operated kind of standardizing things and making sure people have the right tools at their disposal. Uh, they've implemented a smart spend Initiative for strategic sourcing and sustainable cost reduction. These are things that cost them money during the year and have driven down re bad arm, but will pay off with returns later. I mentioned that they had relaunched Revenue management boxing on T. They've also provided some new tools and and launched a new programs to improve Employee Engagement, which is as everyone knows is critically important in the senior living space. Um, well, there's been a reorganization of the operations and a focus on the resident experience which will really excited about five stars invested in its employee learning platform. They've designed a new executive director incentive plan.

All the licensing work that we have to do in order to complete the restructuring transaction has been completed.

And and that uh involved a lot of site visits and inspections bye-bye stated by uh State inspectors so that the team was really supportive of all in that, uh, we've done a full Capital needs of sucks all of our properties, uh, you know, not to mention the fact that five stars got our new leadership team that that again is Jennifer mentioned we encourage you to listen to their call because I think they tell their story better than we do.

Okay, that's helpful, and then just on the list again just senior housing if I if I would just use the performer number, which you gave what you really helpful in the supplement. What would be the SFO impact if this had been converted for the full quarter of nineteen? I'm getting to about five pennies if that's correct, but just wondering if if you have a more refined phone number.

I don't have it on a pro-forma basis. The one thing I would say on an SFO basis is that believe it or not? We've actually out performed the model that we had from from August 4th of 2019 Al performed by two cents a share on both fo and uh internal e r r c a d metric. Um again, we we kind of anticipation of this and uh, you know, that was our April model as as the labor initiatives really took too cold during the third quarter. We had updated some of our some of our internal models. I think we had shared with the rating agencies updated projections back in October. So for the full year, we actually met those expectations and and again out performed on a cat basis by about $0.05 per share. Also, I think a lot of that a lot of that Capital spending is just being shifted from nineteen to twenty. We are anticipating elevated capex in twenty-twenty, but I don't think that's a surprise based on everything we've been saying since this wage

structuring started and

Given the elevated capex. So if we look at the the goal that you had the of having so many 80% fat payout and The Leverage coming down sounds like that's probably shifting out into next year. If I'm correct. Like how are you anticipating leverage and the timing of disposition The Leverage and the fact payout for this year twenty-twenty was always expected to be a little higher. We were we were a little bit careful in describing how we were setting the dividend and it was based on uh-huh c a d in the future and that future was generally twenty Twenty-One. So we're hoping to get a lot of this this one-time stuff behind us in 2020 and be well positioned for twenty Twenty-One as we see, you know, once we start seeing ebitda growth in our senior living portfolio it you should be really well-positioned from a from a leverage and and CID, uh perspective as well.

Okay, great. Missed the last one. I know if you had any discussions with 5-star, but given sort of the shop exposure now, it might be early but just any specific measures that are being taken in case sort of the the coronavirus start to spread more rapidly here in the US sure. They do have have taken measures. Of course, you know the blue still offer the greatest threat to senior living right now, but at this point I think every operator including five star needs to be prepared for the coronavirus. They've assembled the task force off with strategic sourcing clinical and operations, you know, one of the issues that that operators will have to deal with is is assuring their supply chain wage, but also obviously having emergency preparedness information available to all of the employees and they're doing that the you know their SharePoint site down.

and and they're actively

Working on infection control again. This is stuff that they always do but they've they've got a heightened elevation because of the Coronavirus.

Okay, great. Thank you, Jennifer. Sure.

Our next question is from Bryan Mayer from B Riley FBR. Go ahead. Good morning, Jennifer speaking with the dividends discussion. You were just having Vikram, you know, just to be clear though after the dividend cut early last year, even if it takes two twenty Twenty-One to get the fat at about 65% There's just simply no appetite by the management or the board to change this dividend anytime in the foreseeable future. Is that clear?

Absolutely. I mean there's the only Appetite For Change is I hope in twenty one. We're talking about increasing it. But as of now though, I think we were conservative enough and off again. It payout ratios will be a little bit elevated next year. We're still anticipating, you know, a normalized ffo payout ratio on the 50s next year so far this year off. So, we we believe we're well-positioned. I just wanted to highlight that with the dividend today approaching 10% So moving on to the office position the $539 million.

Do you?

Dissipate that to be substantially completed in the second and the third quarter or it could tail off until you know latter part of 2020. And then can you remind us what Apple recycling activity level will look like, you know kind of as we hit 2021 and 2022.

I think my beer is is our Target on dispositions. You know, I think would be you know, where we are happy with where we are right now would be over nine hundred five hundred million really it's fires on some of these deals that have fallen out of agreement had had done what they they said they were going to do moving into these deals. But so I would say yeah, I probably make sense and as far as capital recycling the rate by which at which we recycle Capital we've were were putting together lists of properties that we think might make sense based on recent transactions where we think we've maximize value, but I don't know that we have a specific targeted amount that we hope to recycle every year.

Okay.

And then lastly for me. Can you talk a little bit more about you talked about the region challenges and I think you noted South Carolina in your prepared comments, you know, was that mostly a supply issue and I'm constantly perplexed when I look at, you know, not just your information but some others where we see occupancy levels decline but rate goes up and you know, I know the end game whether it's hotels or anything and you know, you always want ready to go up cuz most of that drops to the bottom line versus occupant keep going up and great coming down with squeezes margins, but could you talk a little bit about the nuances of occupancy declined and rate increases and and how to you kind of way the two in order to optimize, you know, the revenue

That's really specifically what five stars updated Revenue management platform is all about trying to make sure that we're were charging for service is appropriately trying to make sure we're not giving certain Services away that results in a in a sub-optimal profitability margin, um, you know, the supply is certainly part of it. It's it's difficult to push rate when you're when you're new competitors are giving the product away on the flipside, uh are well established communities should generally have an established reputation, you know, frankly. We should have a lower cost. So if we should be able to win a competition on calls, but the question is whether that makes sense and whether we're willing to certain off again ugh the Charleston South Carolina market, for example over the last few years has seen an incredible amount of new Supply coupled with uh, you know, there's there's been a a fair amount of of birth.

voluntary and involuntary down there as a result of five stars, uh

You know focused regions program, so I don't want to say too much about it specifically, but I mean, we're pleased with the focus and the intensity of home of the additional resources, the five stars dedicated to certain regions and uh, we expect to see that continue forward.

Okay. Thank you.

Thanks, Brian.

Our next question is from Michael Carroll from RBC Capital markets. Go ahead. Yeah, Jennifer. Can you provide us some additional color on the shop results wage? I know you continue to indicate that the 2019 results while they were down or better than new expectations. Can you help us understand what your expectations are going forward should we expect these type of declines to continue as we go into twenty-twenty like this is maybe I can take that one. I do expect the same type of of decreases in q1 off and probably cute too before it flattens out for Q3 and Q4 kind of bring us back to that 8 and 1/2 to 10% number for the year most likely month. And again, I mean really trying to upgrade the talent in in a number of these properties both front line staff, but most importantly that that executive director role I think birth

Five Stars hired and

Edible amount of of new CDs this year and uh, we're we're pretty excited about that. I think the numbers over 86-82 for the for the portfolio which is which is pretty incredible when you think about it. There's also been a number of additional Regional folks put in and those costs are you know, because they're in the communities everyday are actually allocated down to the community. So we're we're seeing that as kind of an unfavorable comp where it's a cost that wasn't there last year, but it's a cost. We all agree is is necessary and a good thing to drive future results. Um, so again, there's there's number in people and and platforms, um, you know from a cost perspective we've continued to see elevated repair and maintenance expense again, as part of making sure that the communities are well positioned to compete. Uh, you know, I don't I don't think too many other people have talked about it much but we've seen increases in Insurance expense as well. Um, I think that's kind of ugh Market wage.

Doesn't really matter the industry. I think we've all seen insurance rates climb. Um, we've had some this particular quarter. We've had some real estate tax increases.

That were in the process of trying to appeal. So it's a it's a lot going on. But I think the the key thing is the investments in people.

Okay, and then with regard those initiatives that was started in 3Q nineteen and how long are those going to cause labor costs to continue to grind higher? I mean is this a package type uptick or a step up in labor cost expenses or her how should we think about that? I'd say we've been talking about this with Katie since she kind of took over in January of nineteen. Um, you know, a lot of it was planning out and doing some market analysis and really assessing kind of where we were and then the execution on the plan really started off, you know in the second quarter to three is really really where we started to see that increased labor and they've largely addressed the the big issues and I think we're kind of at a new life for labor. But again, really hopeful that we'll see it turn into Revenue growth soon to offset.

Okay, and then have you?

seeing those Investments turn the revenue growth yet, or is it too early to tell still think it's too early to tell

Okay, but we have we have toured a number of properties are asset managers are excited about the the teams that are in place and the things that they're doing, you know, some of these communities are smaller and they may only have you know, four or five movies a month. So it's it's kind of hard to say specifically what's driving it but um, we're excited about the direction off. Okay, and then can you talk to us a little bit about the investment strategy? I mean specifically I know that the active adult facility is something a little bit different versus the rest of the portfolio wage and was there any contemplation of not doing that acquisition in buying back stock instead?

Well, we're very excited about the acquisition. I'm sure I'll talk to you about this talk talk a lot about how Senior Living in independent living a very different today than it was ten or fifteen years ago. And and and it's it's it's higher Acuity in in the independent living and dead. So we've been very interested in the active adults over 55 because again, we think it it looks more like what Independent Living looked like ten or fifteen years ago. So we were very excited when the opportunity came was presented to us because it's so close to a couple of our senior living communities. We felt like there was some synergies there. So so no, we didn't we we were excited about it and didn't think about uh, anything else associated with it.

When you consider buying back stock at these current levels.

Absolutely. I think it's something the board has discussed. The the challenge we have is again, we're in the middle of a disposition program to reduce our leverage to try to maintain the investment-grade rating and um,

I I think where we are today, I trying to maintain access to that to that capital is is really important for us. So we really make a lot of sense to talk about our share repurchase program or excuse me. I'm right now, you know, I I think as I said, I mean we've we've kind of performed very much in line with with our previous expectations. But um,

You know if if concerns about some of the headlines with with this new virus or other things caused the rating agencies to to to downgrade us further, then you know thousands we could potentially reset leverage targets, but it's too early for that and we're continuing to to March along with the stated stated plan, but it is something that the board has discussed several times. I mean, I think we're we all agree the shares are undervalued for the assets that we have at this point.

Thank you.

Again, if you have a question, please press * then 1 our next question is from from me. Go ahead.

Yes, good morning. I just wanted to talk with on the MLB portfolio for four minutes at the same store. Noi growth from the MLB portfolio was negative for all of nineteen negative during the quarter as well. Just kind of curious as you start to think about 20-25. I just kind of think about you know, the the longer-term performance of the MLB put a relatively appears who seem to kind of deliver this kind of two and half 3% you know the same store in a while. I am on a very consistent basis.

Yeah, so, you know, we we are generally negotiating increases in our in our leases. I know in the last quarter off the for the leases that we negotiated both new and renewal leases. We had close to a 3% annual increase in the leases that we negotiated in in rent money, but we've some of the vacancies that we've had have have offset that so I I think that our our office portfolio segment is going to be probably flat to to up just a bit in 2020.

What what like what what do you think it takes to kind of get it to this kind of want to have 3% number that everybody else? Yeah kind of, you know, put out there. Yeah. I think I I think executing on some of the Redevelopment some programs that we have, you know with Torrey Pines and and some of our other properties where we're investing in real life getting those assets. Once we get those least up and pulled into into our back into our portfolio. I think that will start seeing some growth and then that's just one of the question you did make a comment in your earlier earlier part of the call about the lease expiration is much better this year. But you just kind of walk us through what some other stuff that might be expiring in 20, 20, 20 21, like see some parts of Cedar is electronic kind of what those conversations on light bulb.

no one maybe it's

I was expecting any any major non-renewals from any of your life sentence.

The tennis that you just mentioned, we we don't have any expected vacating coming up. We've got a little over a million square feet of leases that expire in 2023 and worried and active, you know, pretty far along active negotiations with about two-thirds of those tenants. We're we're actually feeling very good faith development properties that I talked about in the call in my prepared remarks and Lexington and in Arizona, I think are probably the two biggest lease expiration that where we we know the tenants are vacating. Gotcha.

Okay, thank you. Thank you.

This concludes that question and answer session. I would now like to turn the conference over to Jennifer Francis for closing remarks.

Thank you, and thank you for joining us on our fourth quarter earnings call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.