Q1 2020 Earnings Call

May 7, 2020

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Operator: Sam.

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[Analyst] (Mizuho): It.

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Thursday Thursday

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Greetings, welcome to the Physicians Realty Trust first quarter 2020 earnings conference call at this time. All participants are in a listen-only mode a question-and-answer session will follow the formal presentation off. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad, please note. This conference is being recorded. I will now turn the conference over to your host rather page said president and general counsel. You may be good.

Thank you. Good morning. And welcome to the Physicians Realty Trust first quarter 2020 earnings password call and webcast joining me today are John Thomas chief executive officer. Just Tyler Chief Financial Officer Dina Taylor Chief investment officer murph's I'm executive vice-president Asset Management, Gianluca Chief, accounting and George Strait of Officer. Laurie Becker senior vice president controller and Dan Klein deputy chief investment officer.

Bradley Page: Foreign.

Foreign.

Operator: Welcome to the Physicians Realty Trust Q1 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Bradley Page, Senior Vice President, General Counsel. You may begin.

Rims call Jon Thomas will provide a summary of the company's activities and performance for the first quarter of 2020 and yours today as well as our strategic Focus for the remainder of twenty G20. Tyler will review our financial results the first quarter of 2020 and I saw that for the remainder of the year then Mark time will provide a summary of our operations for the first quarter of 2020 following that we will open the call for questions.

Bradley Page: Thank you. Good morning, and welcome to the Physicians Realty Trust First Quarter 2020 Earnings Conference Call and webcast. Joining me today are John Thomas, Chief Executive Officer; Jeff Theiler, Chief Financial Officer; Deeni Taylor, Chief Investment Officer; Mark Theine, Executive Vice President, Asset Management; John Lucey, Chief Accounting and Administrative Officer; Lori Becker, Senior Vice President, Controller; and Dan Klein, Deputy Chief Investment Officer. During this call, John Thomas will provide a summary of the company's activities and performance for the first quarter of 2020 and year to date, as well as our strategic focus for the remainder of 2020. Jeff Theiler will review our financial results for the first quarter of 2020 and our thoughts for the remainder of the year. Then Mark Theine will provide a summary of our operations for the first quarter of 2020. Following that, we will open the call for questions.

This call will contain forward-looking statements as defined by the private Securities litigation Reform Act of 1995. They are based on the current beliefs of management and information currently available to us. Our actual results will be affected by known and unknown risks trying and certain needs factors that are beyond our control or ability to predict. Well, though. We believe our assumptions are reasonable are forward-looking statements are not guarantees of future performance. Our actual results could differ materially from our current expectations with those anticipated or implied in such forward-looking statements.

For more detailed description cancel risk another important factors that could cause actual results to differ from those contained in any forward-looking statements. Please refer to our filings with the Securities Exchange Commission with that I would now like to turn the call over to the company's CEO John,

Bradley Page: Today's call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. They are based on the current beliefs of management and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable, our forward-looking statements are not guarantees of future performance. Our actual results could differ materially from our current expectations and those anticipated or implied in such forward-looking statements. For a more detailed description of potential risks and other important factors that could cause actual results to differ from those contained in any forward-looking statements, please refer to our filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to the Company's CEO, John Thomas.

Today's call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. They are based on the current beliefs of management and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable, our forward-looking statements are not guarantees of future performance. Our actual results could differ materially from our current expectations and those anticipated or implied in such forward-looking statements. For a more detailed description of potential risks and other important factors that could cause actual results to differ from those contained in any forward-looking statements, please refer to our filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to the Company's CEO, John Thomas.

Thank you Brad. Thank you for joining us this morning Physicians Realty Trust to enter twenty-twenty with a healthy portfolio a strong balance sheet and a pipeline poised for growth. We will add you to our first quarter 2020 earnings call which we are happy to discuss today. Although we know you may be more interested in current events. And please report the entire Doctrine as healthy and working efficiently effectively and in most cases remotely from home with a small team rotating through our dock headquarters to keep doxies Central operations working and Performing very, well. We are pleased to report that are poor choice of a medical office facilities has remained resilient during this difficult time 248 of our 260 medical facilities have remained open to serve patients without interruption in 93% off sweets are currently operational.

John Thomas: Thank you.

John Thomas: Thank you. Brad. Thank you for joining us this morning. Physicians Realty Trust entered 2020 with a healthy portfolio, a strong balance sheet, and a pipeline poised for growth. We welcome you to our Q1 2020 earnings call, which we are happy to discuss today. Although we know you may be more interested in current events, I'm pleased to report the entire DOC team is healthy and working efficiently, effectively, and in most cases remotely from home.

John Thomas: Brad. Thank you for joining us this morning. Physicians Realty Trust entered 2020 with a healthy portfolio, a strong balance sheet, and a pipeline poised for growth. We welcome you to our Q1 2020 earnings call, which we are happy to discuss today. Although we know you may be more interested in current events, I'm pleased to report the entire DOC team is healthy and working efficiently, effectively, and in most cases remotely from home. With a small team rotating through our DOC headquarters to keep DOC's essential operations working and performing very well. We are pleased to report that our portfolio of medical office facilities has remained resilient during this difficult time. 248 of our 260 medical facilities have remained open to serve patients without interruption, and 93% of our tenant suites are currently operational.

These providers are bravely answering the call to treat patients and provide Essential Health Care Services. We honor their bravery and sacrifice after my comments are DDP and Chief Financial Officer. Jeff provided financial report for quarter one with balance sheet updates through April 30th and March 9 r e z P Asset Management will provide a quarter one operating report as well as a general update our operations since April first, I will then address April and May rent collections before taking your questions.

With a small team rotating through our DOC headquarters to keep DOC's essential operations working and performing very well. We are pleased to report that our portfolio of medical office facilities has remained resilient during this difficult time. 248 of our 260 medical facilities have remained open to serve patients without interruption, and 93% of our tenant suites are currently operational.

Instead of covid-19. We were gearing up for a strong 20/20 of operational excellence and external growth in anticipation of this growth. We right-sized our balance sheet by raising 239 million of em in the first quarter very efficiently through our ATM is the covid-19 situation intensified in March. We did not and have not since contractually committed any new capital to Acquisitions month. We completed the conversion of 1 loan to ownership in Fort Worth, Texas with a modest additional investment and we continue to find our development projects.

John Thomas: These providers are bravely answering the call to treat patients and provide essential health care services. We honor their bravery and sacrifice. After my comments, our EVP and Chief Financial Officer Jeff Theiler will provide a financial report for Q1 with balance sheet updates through 30 April and March. Theine, our EVP, Asset Management, will provide a Q1 operating report as well as a general update on our operations since 1 April. I will then address April and May rent collections before taking your questions. Prior to the onset of COVID-19, we were gearing up for a strong 2020 of operational excellence and external growth. In anticipation of this growth, we rightsized our balance sheet by raising $239 million of equity in Q1 very efficiently through our ATM.

These providers are bravely answering the call to treat patients and provide essential health care services. We honor their bravery and sacrifice. After my comments, our EVP and Chief Financial Officer Jeff Theiler will provide a financial report for Q1 with balance sheet updates through 30 April and March. Theine, our EVP, Asset Management, will provide a Q1 operating report as well as a general update on our operations since 1 April. I will then address April and May rent collections before taking your questions. Prior to the onset of COVID-19, we were gearing up for a strong 2020 of operational excellence and external growth. In anticipation of this growth, we rightsized our balance sheet by raising $239 million of equity in Q1 very efficiently through our ATM.

One of our to development projects at least in ecology a subsidiary of investment-grade rated McKesson completed certificate of occupancy and rent has commenced. We remain very well-capitalized 55.1 times.

We expect to be able to proceed with our previously targeted Investments. Once the Capital Market stabilized and economic conditions add Clarity Doc's relationship-based investment strategy and history of repeat business continues to benefit our long-term business plan as the medical office owners. We were working with have all agreed to postpone transactions for the time being.

John Thomas: As the COVID-19 situation intensified in March, we did not and have not since contractually committed any new capital to acquisitions. We completed the conversion of one loan to ownership in Fort Worth, Texas, with a modest additional investment, and we continue to fund our development projects. One of our two development projects leased to US Oncology, a subsidiary of investment grade rated McKesson, completed certificate of occupancy, and rent has commenced. We remain very well capitalized, finished the quarter with a debt to EBITDA ratio of 5.1x. While we slowed down our external growth in March and April, we expect to be able to proceed with our previously targeted investments once the capital markets stabilize and economic conditions add clarity.

As the COVID-19 situation intensified in March, we did not and have not since contractually committed any new capital to acquisitions. We completed the conversion of one loan to ownership in Fort Worth, Texas, with a modest additional investment, and we continue to fund our development projects. One of our two development projects leased to US Oncology, a subsidiary of investment grade rated McKesson, completed certificate of occupancy, and rent has commenced. We remain very well capitalized, finished the quarter with a debt to EBITDA ratio of 5.1x. While we slowed down our external growth in March and April, we expect to be able to proceed with our previously targeted investments once the capital markets stabilize and economic conditions add clarity.

As of today, we haven't lost any of the investment opportunities that we were expecting to complete in the second and third quarter or otherwise do this foreign teens and consequential economic and capital markets certainty. We pulled our 2020 acquisition guidance on March 19th why we cannot commit to the timing volume or investment price of our anticipated transactions. We do offer the opportunity to proceed with the acquisition activity at the appropriate time and our pipeline remains robust.

John Thomas: DOC's relationship-based investment strategy and history of repeat business continues to benefit our long-term business plan as the medical office owners we were working with have all agreed to postpone transactions for the time being. As of today, we haven't lost any of the investment opportunities that we were expecting to complete in Q2 and Q3 or otherwise. Due to quarantines and consequential economic and capital market uncertainty, we pulled our 2020 acquisition guidance on 19 March 2020. While we cannot commit to the timing, volume, or investment price of our anticipated transactions, we do expect the opportunity to proceed with acquisition activity at the appropriate time, and our pipeline remains robust. Many aspects of the future remain unclear. As you know, the U.S. federal government has pumped trillions of dollars into the U.S. economy with hundreds of billions of those dollars directed to health care providers.

DOC's relationship-based investment strategy and history of repeat business continues to benefit our long-term business plan as the medical office owners we were working with have all agreed to postpone transactions for the time being. As of today, we haven't lost any of the investment opportunities that we were expecting to complete in Q2 and Q3 or otherwise. Due to quarantines and consequential economic and capital market uncertainty, we pulled our 2020 acquisition guidance on 19 March 2020. While we cannot commit to the timing, volume, or investment price of our anticipated transactions, we do expect the opportunity to proceed with acquisition activity at the appropriate time, and our pipeline remains robust. Many aspects of the future remain unclear. As you know, the U.S. federal government has pumped trillions of dollars into the U.S. economy with hundreds of billions of those dollars directed to health care providers.

Many aspects of the future remain unclear as you know, that US federal government has pumped billions of dollars into the US economy with hundreds of billions of those dollars directed to Health Care Providers while the overnight Financial impacts of covid-19 are still uncertain for our health system Partners. It appears likely that the federal government subsidies in whatever form will not be enough to offset the direct and indirect costs. One of the most important factors for the recovery. The healthcare system will be how quickly the employment rate improves to offset any potential spike in the Medicaid population.

Nevertheless, we believe that the Lessons Learned From The Crisis will improve the efficiency capacity and appropriate utilization of healthcare services in the US.

Early in the shutdown our outpatient facilities including surgical facilities. We're seeing an increase in volume as inpatient Hospital shifted cares, the outpatient settings many off-campus in order to prepare for the exact to need for their inpatient facilities. Unfortunately, however, a state and local governments realized there wasn't the testing capability and adequate PPE to provide for necessary, but perhaps non-urgent Health Care Services began to place restrictions on non Urgent Care specifically surgery that can be scheduled and temporarily delayed.

John Thomas: While the overall financial impacts of COVID-19 are still uncertain for our health system partners, it appears likely that the federal government subsidies, in whatever form, will not be enough to offset the direct and indirect costs of the pandemic. One of the most important factors to the recovery of the healthcare system will be how quickly the employment rate improves to offset any potential spike in the Medicaid population. Nevertheless, we believe that the lessons learned from the crisis will improve the efficiency, capacity, and appropriate utilization of healthcare services in the US. Early in this shutdown, our outpatient facilities, including surgical facilities, were seeing an increase in volumes as inpatient hospitals shifted care to the outpatient settings, many off campus, in order to prepare for the expected need for their inpatient facilities.

While the overall financial impacts of COVID-19 are still uncertain for our health system partners, it appears likely that the federal government subsidies, in whatever form, will not be enough to offset the direct and indirect costs of the pandemic. One of the most important factors to the recovery of the healthcare system will be how quickly the employment rate improves to offset any potential spike in the Medicaid population. Nevertheless, we believe that the lessons learned from the crisis will improve the efficiency, capacity, and appropriate utilization of healthcare services in the US. Early in this shutdown, our outpatient facilities, including surgical facilities, were seeing an increase in volumes as inpatient hospitals shifted care to the outpatient settings, many off campus, in order to prepare for the expected need for their inpatient facilities.

Well, the US has been growing. It's

For years, we are realizing now more than ever that are most precious High Acuity facilities May best be preserved for complex medical needs like covid-19. This would naturally leads the vast majority of healthcare specifically Surgical and routine necessary procedural care being directed to less intensive modern and Convenient Medical Office Buildings, preserving Hospital capacity the most complex medical services and highlighting the opportunity for Doc in the years ahead.

John Thomas: Unfortunately, however, as state and local governments realized there wasn't the testing capability and adequate PPE to provide for necessary but perhaps non-urgent healthcare services, they began to place restrictions on non-urgent care, specifically surgery that can be scheduled and temporarily delayed. While the US has been growing its outpatient capacity for years, we are realizing now more than ever that our most precious high acuity facilities may best be preserved for complex medical needs like COVID-19. This would naturally lead to the vast majority of healthcare, specifically surgical and routine necessary procedural care, being directed to less intensive, modern, and convenient medical office buildings, preserving hospital capacity for the most complex medical services and highlighting the opportunity for DOC in the years ahead.

Unfortunately, however, as state and local governments realized there wasn't the testing capability and adequate PPE to provide for necessary but perhaps non-urgent healthcare services, they began to place restrictions on non-urgent care, specifically surgery that can be scheduled and temporarily delayed. While the US has been growing its outpatient capacity for years, we are realizing now more than ever that our most precious high acuity facilities may best be preserved for complex medical needs like COVID-19. This would naturally lead to the vast majority of healthcare, specifically surgical and routine necessary procedural care, being directed to less intensive, modern, and convenient medical office buildings, preserving hospital capacity for the most complex medical services and highlighting the opportunity for DOC in the years ahead.

Well, we don't know the total impact that's covid-19 on these numbers the CMS Office of the actuary published April 3rd. It's most recent estimates of National Health Care spending in the United States. According to the x-rays with the US national Healthcare span is expected to grow at an average annual rate of 5.4% from 2019 to 2028.

BMS in the report estimated that National Health Care spending reached 3.81 trillion dollars and 2019. It would increase to just over four trillion dollars in June 2020.

CMS projected that by 2028 health-care spending would reach 6.19 trillion dollars and what account for 19.7% of GDP up from 17.7% off 2018.

John Thomas: While we don't know the total impact of COVID-19 on these numbers, the CMS Office of the Actuary published 3 April its most recent estimates of national healthcare spending in the United States. According to the Actuary's report, the US national healthcare spend is expected to grow at an average annual rate of 5.4% from 2019-20. CMS in the report estimated that national healthcare spending reached $3.81 trillion in 2019 and would increase to just over $4 trillion in 2020. CMS projected that by 2028 healthcare spending would reach $6.19 trillion and would account for 19.7% of GDP, up from 17.7% in 2018. Short-term shocks don't change these long-term tailwinds, driven by the growth in the aging population and people generally living longer.

While we don't know the total impact of COVID-19 on these numbers, the CMS Office of the Actuary published 3 April its most recent estimates of national healthcare spending in the United States. According to the Actuary's report, the US national healthcare spend is expected to grow at an average annual rate of 5.4% from 2019-20. CMS in the report estimated that national healthcare spending reached $3.81 trillion in 2019 and would increase to just over $4 trillion in 2020. CMS projected that by 2028 healthcare spending would reach $6.19 trillion and would account for 19.7% of GDP, up from 17.7% in 2018. Short-term shocks don't change these long-term tailwinds, driven by the growth in the aging population and people generally living longer.

Don't change these long-term Tailwinds driven by the growth in the Aging population and people generally living longer. There are lessons to be learned by the events of the last three months most of which we believe will be beneficial to our real estate investment thesis and strategy.

Yeah, well now review our financial results for quarter one and then Mark will show the result of his teens. Yep.

Thank you, John. And the first quarter of 2020 The company generated normalized funds from operations of fifty two point seven million dollars, which was an increase of 11% over the comparable quarter last year normalized ffo per share was $0.26 versus $0.25 in the same quarter of last year and our normalized funds available for distribution were twenty-five cents per share or fifty point five million dollars an increase of 20% over the comparable quarter of last year.

John Thomas: There are lessons to be learned by the events of the last three months, most of which we believe will be beneficial to our real estate investment thesis and strategy. Jeff will now review our financial results for Q1 and then Mark will share the results of his team. Jeff.

There are lessons to be learned by the events of the last three months, most of which we believe will be beneficial to our real estate investment thesis and strategy. Jeff will now review our financial results for Q1 and then Mark will share the results of his team. Jeff.

As a capitalist change alongside the covid-19 pandemic we have taken concrete steps to reduce our investment activity consequently in our March covid-19 Thursday. We withdrew our previously issued acquisition guidance and has postponed the majority of our deals until we have more visibility on the capital markets. We did however complete several Investments that were already in Prosper in the quarter. We invested a total of $19 with the vast majority of that going towards a 45,000 square-foot building in Westerville, Ohio anchored by the investment-grade rating, Ohio State University Wexner Medical Center.

Jeff Theiler: Thank you John. In Q1 2020, the company generated normalized funds from operations of $52.7 million, which was an increase of 11% over the comparable quarter last year. Normalized FFO per share was $0.26 versus $0.25 in the same quarter of last year, and our normalized funds available for distribution were $0.25 per share or $50.5 million, an increase of 20% over the comparable quarter of last year. As our cost of capital has changed alongside the COVID-19 pandemic, we have taken concrete steps to reduce our investment activity. Consequently, in our March COVID-19 update, we withdrew our previously issued acquisition guidance and have postponed the majority of our deals until we have more visibility on the capital markets. We did, however, complete several investments that were already in process.

Once the short-term rent abatement and following the completion of see I work in June the investment will produce an initial cash deal that 6.1% We also converted a $47 loan into the ownership of Texas Oncology 98,000 square-foot Fort Worth cancer center and m o b which is expected to yield 5.5% once stabilized.

subsequent to the end of the quarter

We funded the final four point six million dollars committed under our Denton Texas construction loan and provided another $13 mezzanine lone for a healthcare building in Columbus, Ohio in thumb our total year-to-date Investments have been thirty six point six million dollars. We do not have any other transactions in the closing process at this time. And our only remaining investment obligation is the $5,014 needed to complete our Sacred Heart KFC development.

Jeff Theiler: In the quarter we invested a total of $19 million with the vast majority of that going towards a 45,000 square foot building in Westerville, Ohio anchored by the investment grade rated Ohio State University Wexner Medical Center. Once the short term rent abatement ends following the completion of TI work in June, the investment will produce an initial cash yield of 6.1%. We also converted a $47 million loan investment into the ownership of Texas Oncology's 98,000 sq ft Fort Worth Cancer Center in MOB, which is expected to yield 5.5% once stabilized. Subsequent to the end of the quarter, we funded the final $4.6 million committed under our Denton, Texas construction loan and provided another $13 million mezzanine loan for a healthcare building in Columbus, Ohio. In sum, our total year to date investments have been $36.6 million.

In the quarter we invested a total of $19 million with the vast majority of that going towards a 45,000 square foot building in Westerville, Ohio anchored by the investment grade rated Ohio State University Wexner Medical Center. Once the short term rent abatement ends following the completion of TI work in June, the investment will produce an initial cash yield of 6.1%. We also converted a $47 million loan investment into the ownership of Texas Oncology's 98,000 sq ft Fort Worth Cancer Center in MOB, which is expected to yield 5.5% once stabilized. Subsequent to the end of the quarter, we funded the final $4.6 million committed under our Denton, Texas construction loan and provided another $13 million mezzanine loan for a healthcare building in Columbus, Ohio. In sum, our total year to date investments have been $36.6 million.

On the capital side. We raised $239 on the ATM in the first quarter prior to the market downturn had a weighted average share price of $19.57 per share off utilize the majority of these proceeds to pay down our line of credit which reduced our consolidated debt and 29% of gross objects and gave us an annualized consolidated debt to income ratio of 5.1 times as of the date of this earning stall. We have approximately two hundred twenty-eight million dollars drawn on our $850 revolving credit facility. I'm leaving 622 million dollars available to draw in another thirty million dollars of cash on hand.

Jeff Theiler: We do not have any other transactions in the closing process at this time, and our only remaining investment obligation is the final $14 million needed to complete our Sacred Heart ASC development. On the capital side, we raised $239 million on the ATM in Q1 prior to the market downturn at a weighted average share price of $19.57 per share. We utilized the majority of these proceeds to pay down our line of credit, which reduced our consolidated debt to 29% of gross assets and gave us an annualized consolidated debt to EBITDA ratio of 5.1x. As of the date of this earnings call, we have approximately $228 million drawn on our $850 million revolving credit facility, leaving $622 million available to draw and another $30 million of cash on hand. Our debt maturity schedule is advantageous with no material term debt maturing until 2023.

We do not have any other transactions in the closing process at this time, and our only remaining investment obligation is the final $14 million needed to complete our Sacred Heart ASC development. On the capital side, we raised $239 million on the ATM in Q1 prior to the market downturn at a weighted average share price of $19.57 per share. We utilized the majority of these proceeds to pay down our line of credit, which reduced our consolidated debt to 29% of gross assets and gave us an annualized consolidated debt to EBITDA ratio of 5.1x. As of the date of this earnings call, we have approximately $228 million drawn on our $850 million revolving credit facility, leaving $622 million available to draw and another $30 million of cash on hand. Our debt maturity schedule is advantageous with no material term debt maturing until 2023.

Our debt maturity schedule is advantageous with no material term debt maturing. They'll 2023 at the current time. We aren't overly worried about liquidity, but will closely monitor our operations month-to-month and adjust our short-term capital buffers as appropriate.

At this point I'd like to highlight the additional disclosure. We put out the sport Iran covid-19 related to statistics. We understand that investors and analysts are interested in how our portfolios bearing in this uncertain environment. So we have tried to provide you as much information as possible in this covid-19 supplement. You can find breakouts by Specialties as well as utilization statistics and projected reopening dates wage. Also provide more details on our April and May collections a bit later in the call.

The rap up on operations for the first quarter. We generated same-store and growth of 1.6% Our G&A came in slightly under budget at nine million dollars primarily due to lower travel legal and other miscellaneous expenses.

Jeff Theiler: At the current time, we aren't overly worried about liquidity but will closely monitor our operations month-to-month and adjust our short-term capital buffers as appropriate. At this point, I'd like to highlight the additional disclosure we put out this quarter on COVID-19 related to statistics. We understand that investors and analysts are interested in how our portfolio is faring in this uncertain environment, so we have tried to provide you as much information as possible in this COVID-19 supplement. You can find breakouts by specialties as well as utilization statistics, and projected reopening dates. JT will also provide more details on our April and May collections a bit later in the call. To wrap up on operations for the first quarter, we generated same-store NOI growth of 1.6%.

At the current time, we aren't overly worried about liquidity but will closely monitor our operations month-to-month and adjust our short-term capital buffers as appropriate. At this point, I'd like to highlight the additional disclosure we put out this quarter on COVID-19 related to statistics. We understand that investors and analysts are interested in how our portfolio is faring in this uncertain environment, so we have tried to provide you as much information as possible in this COVID-19 supplement. You can find breakouts by specialties as well as utilization statistics, and projected reopening dates. JT will also provide more details on our April and May collections a bit later in the call. To wrap up on operations for the first quarter, we generated same-store NOI growth of 1.6%.

The current capital expenditures were also lower than budget at 3 million dollars as we went through our portfolio and prioritized are spending appropriately.

And finally based on the rest of the year certainty for uncertainty. We've adjusted some of the two twenty20 guidance that was issued on the previous earnings call. I've already mentioned we withdrew our acquisition guidance in March based on Capital market conditions. So that remains withdrawn

We will also be the DNA guy unchanged at this point at thirty three point five million dollars for thirty five point five million dollars for 2020 are recurring Cat-Back expected to be a little lower as we delay some non-essential projects. So our new expectations of the year is 17 million and ninety million dollars versus our previous guidance of 24 to 26 million month. I will now turn the call over to Mark to walk through our portfolio statistics more detail.

Jeff Theiler: Our G&A came in slightly under budget at $9 million, primarily due to lower travel, legal, and other miscellaneous expenses. Recurring capital expenditures were also lower than budget at $3 million as we went through our portfolio and prioritized our spending appropriately. And finally, based on the rest of the year certainty for uncertainty, we've adjusted some of the 2020 guidance that was issued on the previous earnings call. I've already mentioned we withdrew our acquisition guidance in March based on capital market conditions, so that remains withdrawn. We will also leave the G&A guidance unchanged at this point at $33.5 million to $35.5 million for 2020. Our recurring CapEx is expected to be a little lower as we delay some nonessential projects, so our new expectation for the year is $17 million to $19 million versus our previous guidance of $24 million to $26 million.

Our G&A came in slightly under budget at $9 million, primarily due to lower travel, legal, and other miscellaneous expenses. Recurring capital expenditures were also lower than budget at $3 million as we went through our portfolio and prioritized our spending appropriately. And finally, based on the rest of the year certainty for uncertainty, we've adjusted some of the 2020 guidance that was issued on the previous earnings call.

Thanks, Jeff.

We delivered strong first-quarter results building on. Excellent performance in 2019. And I'd like to start by recognizing the outstanding efforts of those on our operations team executed consistently during the challenges of the past couple of months. As you know, we've invested a considerable amount of time and energy cultivating a unique culture with talented young age the team members who truly care about our HealthCare Partners and it's paying dividends now despite working remotely and practicing social distancing our asset management property management and leasing teams continue to function as a high level and have shown great strength and resilience.

I've already mentioned we withdrew our acquisition guidance in March based on capital market conditions, so that remains withdrawn. We will also leave the G&A guidance unchanged at this point at $33.5 million to $35.5 million for 2020. Our recurring CapEx is expected to be a little lower as we delay some nonessential projects, so our new expectation for the year is $17 million to $19 million versus our previous guidance of $24 million to $26 million. I will now turn the call over to Mark to walk through our portfolio statistics in more detail. Mark.

Jeff Theiler: I will now turn the call over to Mark to walk through our portfolio statistics in more detail. Mark.

Before focusing and how we are navigating through the current environment. I'd like to share a few highlights from the first quarter.

Mark Theine: Thanks Jeff. We delivered strong Q1 results building on DOC's excellent performance in 2019, and I'd like to start by recognizing the outstanding efforts of those on our operations team who have executed consistently during the challenges of the past couple months. As you know, we've invested a considerable amount of time and energy cultivating a unique culture with talented and engaged team members who truly care about our healthcare partners, and it's paying dividends now. Despite working remotely and practicing social distancing, our asset management, property management, and leasing teams continue to function at a high level and have shown great strength and resilience. Before focusing on how we are navigating through the current environment, I'd like to share a few highlights from Q1.

Doc's portfolio at the end of q1 2020 was an industry-leading 96% least including 59% least directly to investment-grade Quality tenants and they're sung varies which we believe is more than any other publicly-traded portfolio in the healthcare real estate market.

Leasing results in the first quarter were strong within 86% tenant retention rate renewal leasing spreads of approximately 1% and positive portfolio net absorption a 26,000 square-feet.

Looking ahead. Has less than 5% of its portfolio scheduled to renew in any year through the end of 2023. We believe the low number of lease expiration month should result in lower levels of volatility and net operating income as well as require significantly Less in concessions for tenant improvements and leasing commissions compared to other MLB pork with much greater levels of annual lease expirations in this uncertain Market.

Mark Theine: DOC's portfolio at the end of Q1 2020 was an industry-leading 96% leased, including 59% leased directly to investment grade quality tenants and their subsidiaries, which we believe is more than any other publicly traded portfolio in the healthcare real estate market. Leasing results in the first quarter were strong with an 86% tenant retention rate, renewal leasing spreads of approximately 1%, and positive portfolio net absorption of 26,000sq ft. Looking ahead, DOC has less than 5% of its portfolio scheduled to renew in any year through the end of 2023. We believe the low number of lease expirations should result in lower levels of volatility in net operating income as well as require significantly less in concessions for tenant improvements and leasing commissions compared to other MOB portfolios with much greater levels of annual lease expirations in this uncertain market.

DOC's portfolio at the end of Q1 2020 was an industry-leading 96% leased, including 59% leased directly to investment grade quality tenants and their subsidiaries, which we believe is more than any other publicly traded portfolio in the healthcare real estate market. Leasing results in the first quarter were strong with an 86% tenant retention rate, renewal leasing spreads of approximately 1%, and positive portfolio net absorption of 26,000sq ft. Looking ahead, DOC has less than 5% of its portfolio scheduled to renew in any year through the end of 2023. We believe the low number of lease expirations should result in lower levels of volatility in net operating income as well as require significantly less in concessions for tenant improvements and leasing commissions compared to other MOB portfolios with much greater levels of annual lease expirations in this uncertain market.

Moving the same store. Noi growth are 238 property same-store MLB portfolio generated cash noi growth of 1.6%

The same store noi Grill is slightly below our average annual rent escalation of 2.3% as a result of a 20 basis-point declined in occupancy in the same store took bolio primarily from a 20 1980 square foot vacancy at our Meadowview MLB in Kingsport, Tennessee and short-term rent abatement at a $17,500 worth of surgery center in Cornwall, New York, which recently renewed for a new 15 year term in Q4 2019.

One final highlight from the first quarter. I am extremely proud to share that both available Cancer Center in Dallas, Texas and Northside Town Lake MLB in Atlanta, Georgia birth, the regional award for the outstanding building of the Year. Also known as Toby from Boma for their respective regions these outstanding MLB's demonstrating the exceptional quality wage portfolio will next Advanced diplomas International Toby, competition in June. We're. We'll have two of the six entries competing for the top award.

Mark Theine: Moving to same-store NOI growth, our 238-property same-store MOB portfolio generated cash NOI growth of 1.6%. The same-store NOI growth is slightly below our average annual rent escalation of 2.3% as a result of a 20 basis point decline in occupancy in the same-store portfolio, primarily from a 21,980 sq ft vacancy at our MeadowView MOB in Kingsport, Tennessee, and short-term rent abatement at a 17,500 sq ft surgery center in Cornwall, New York, which recently renewed for a new 15-year term in Q4 2019. One final highlight from the first quarter: I am extremely proud to share that both the Baylor Cancer Center in Dallas, Texas, and Northside Town Lake MOB in Atlanta, Georgia, earned the Regional Award for the Outstanding Building of the Year, also known as TOBY from BOMA, for their respective regions.

Moving to same-store NOI growth, our 238-property same-store MOB portfolio generated cash NOI growth of 1.6%. The same-store NOI growth is slightly below our average annual rent escalation of 2.3% as a result of a 20 basis point decline in occupancy in the same-store portfolio, primarily from a 21,980 sq ft vacancy at our MeadowView MOB in Kingsport, Tennessee, and short-term rent abatement at a 17,500 sq ft surgery center in Cornwall, New York, which recently renewed for a new 15-year term in Q4 2019. One final highlight from the first quarter: I am extremely proud to share that both the Baylor Cancer Center in Dallas, Texas, and Northside Town Lake MOB in Atlanta, Georgia, earned the Regional Award for the Outstanding Building of the Year, also known as TOBY from BOMA, for their respective regions.

They told me Awards recognize.

ones in building operations policies management Community involvement and ESG efforts

No turning to the current operating environment and our focus on the covid-19.

The health and safety of our HealthCare Partners and our team members has of course been the top priority in early March is the first covid-19 has emerged in our markets. We quickly commenced and cleaning procedures and communicated extensively with our HealthCare Partners and our entire operations team, including an informational webinar featuring. Trustee member. Dr. William Abner.

Mark Theine: These outstanding MOBs demonstrating the exceptional quality of DOC's portfolio will next advance to BOMA's international TOBY competition in June, where DOC will have two of the six entries competing for the top award. The TOBY Awards recognize excellence in building operations, population policies, management, community involvement, and ESG efforts. Now turning to the current operating environment and our focus on the COVID pandemic, the health and safety of our healthcare partners and our team members has of course been the top priority. In early March, as the first COVID cases emerged in our markets, we quickly commenced enhanced cleaning procedures and communicated extensively with our healthcare partners and our entire operations team, including an informational webinar featuring DOC trustee member Dr. William Ebinger.

These outstanding MOBs demonstrating the exceptional quality of DOC's portfolio will next advance to BOMA's international TOBY competition in June, where DOC will have two of the six entries competing for the top award. The TOBY Awards recognize excellence in building operations, population policies, management, community involvement, and ESG efforts. Now turning to the current operating environment and our focus on the COVID pandemic, the health and safety of our healthcare partners and our team members has of course been the top priority. In early March, as the first COVID cases emerged in our markets, we quickly commenced enhanced cleaning procedures and communicated extensively with our healthcare partners and our entire operations team, including an informational webinar featuring DOC trustee member Dr. William Ebinger.

At that time. We also formed a covert task force to review and enforce operational procedures that included but are not limited to janitorial frequency and product selection Palm scheduling and use of PPE for essential employees social distancing signage in building common areas and elevators.

air filtration and management of construction activities

across the portfolio. It's the entire team worked tirelessly to implement these new procedures to ensure our buildings promote a healthy environment.

Nearly all of our facilities remained open during the month of April and the vast majority expect to start increasing patient volumes again in early to mid-may under enhanced guidelines for safe patient care.

Most recently as an example in Atlanta, Georgia our largest market the governor has begin reopening select businesses to start rebuilding the economy as of this week. 93% of Doc space was utilized those offices temporarily postponing patience isn't not open primarily includes dentist ophthalmologists plastic surgery and physical therapy offices.

Mark Theine: that time, we also formed a COVID Task Force to review and enforce operational procedures that included, but are not limited to, janitorial frequency and product selection, scheduling and use of PPE for essential employees, social distancing, signage in building common areas and elevators, air filtration, and management of construction activities. Across the portfolio, the entire team worked tirelessly to implement these new procedures to ensure our buildings promote a healthy environment. Nearly all of our facilities remained open during the month of April, and the vast majority expect to start increasing patient volumes again in early to mid-May under enhanced guidelines for safe patient care. Most recently, as an example in Atlanta, Georgia, our largest market, the Governor has begun reopening select businesses to start rebuilding the economy. As of this week, 93% of DOC's occupied space was utilized.

that time, we also formed a COVID Task Force to review and enforce operational procedures that included, but are not limited to, janitorial frequency and product selection, scheduling and use of PPE for essential employees, social distancing, signage in building common areas and elevators, air filtration, and management of construction activities. Across the portfolio, the entire team worked tirelessly to implement these new procedures to ensure our buildings promote a healthy environment. Nearly all of our facilities remained open during the month of April, and the vast majority expect to start increasing patient volumes again in early to mid-May under enhanced guidelines for safe patient care. Most recently, as an example in Atlanta, Georgia, our largest market, the Governor has begun reopening select businesses to start rebuilding the economy. As of this week, 93% of DOC's occupied space was utilized.

Interestingly utilization and profitability at the light Carol tax also improves considerably during March and April as the demand increased through the covid-19 cases and CMS expanded the scope of Cairo packs can provide an accelerated reimbursement payments.

Looking ahead to our leasing outlook for the remainder of the year. We expect strong tenant retention as practices simply remain in place during the covid-19 demek for the remainder of twenty twenty-five just 87 leases scheduled to renew representing 2.1% of a VR, but we do expect some leases to extend term early as part of agreement for near-term rent deferral.

Mark Theine: Those offices temporarily postponing patient visits and not open primarily include dentists, ophthalmologists, plastic surgery, and physical therapy offices. Interestingly, utilization and profitability at LifeCare LTACs also improved considerably during March and April as the demand increased due to COVID-19 cases and CMS expanded the scope of care LTCHs can provide and accelerated reimbursement payments. Looking ahead to our leasing outlook for the remainder of the year, we expect strong tenant retention as practices simply remain in place during the COVID pandemic. For the remainder of 2020, we have just 87 leases scheduled to renew, representing 2.1% of ABR. But we do expect some leases to extend term early as part of agreement for near-term rent deferral.

Those offices temporarily postponing patient visits and not open primarily include dentists, ophthalmologists, plastic surgery, and physical therapy offices. Interestingly, utilization and profitability at LifeCare LTACs also improved considerably during March and April as the demand increased due to COVID-19 cases and CMS expanded the scope of care LTCHs can provide and accelerated reimbursement payments. Looking ahead to our leasing outlook for the remainder of the year, we expect strong tenant retention as practices simply remain in place during the COVID pandemic. For the remainder of 2020, we have just 87 leases scheduled to renew, representing 2.1% of ABR. But we do expect some leases to extend term early as part of agreement for near-term rent deferral.

Well new leasing activity could slow in the future. We are seeing a strong pipeline of leasing activity at this time, including some recent inbound calls from on-campus practices took you off campus at Moby's as patients and families are hesitant to visit Hospital campus treating Tobin patients.

To conclude we are prioritizing the health and safety of our team members and those in our facilities first and using this time wisely to invest in our relationships with our hospital and physician Partners during this time of need. The high-quality nature of our HealthCare Partners has never been a more powerful differentiating component than it is today with the majority of our life investment-grade quality and approximately 7 year weighted average lease term remaining in the portfolio. We are well-positioned to endure this. With that I'll turn the call back over to Jake to discuss our success collecting April and May rent. Jay-Z.

Mark Theine: While new leasing activity could slow in the future, we are seeing a strong pipeline of leasing activity at this time, including some recent inbound calls from on-campus practices looking to off-campus MOBs as patients and families are hesitant to visit hospital campuses treating COVID patients. To conclude, we are prioritizing the health and safety of our team members and those in our facilities first, and using this time wisely to invest in our relationships with our hospital and physician partners during this time of need. The high quality nature of our healthcare partners has never been a more powerful differentiating component than it is today. With the majority of our tenants' investment-grade quality and approximately 7-year weighted-average lease term remaining in the portfolio, we are well positioned to endure this period.

While new leasing activity could slow in the future, we are seeing a strong pipeline of leasing activity at this time, including some recent inbound calls from on-campus practices looking to off-campus MOBs as patients and families are hesitant to visit hospital campuses treating COVID patients. To conclude, we are prioritizing the health and safety of our team members and those in our facilities first, and using this time wisely to invest in our relationships with our hospital and physician partners during this time of need.

Thank you, Mark.

We know there is one statistic that more than any other you want to discuss. We're very pleased to report our April 2020 cash rent collection stand at 94.4% of buildings. We anticipate collecting most if not all of the remaining 6% over time. We are already off to a promising start in may with over 74% collected as of May 6th, which is consistent with a projected surpluses.

The high quality nature of our healthcare partners has never been a more powerful differentiating component than it is today. With the majority of our tenants' investment-grade quality and approximately 7-year weighted-average lease term remaining in the portfolio, we are well positioned to endure this period. With that, I will turn the call back over to JT to discuss our success collecting April and May rent, JT.

During April. Received inquiries from tenants who represented 21% of our annual base rent or ABR about their options for paying rent during the covid-19 pandemic job inquiries largely came from small tenants and Latorre Surgery Center tenants and the Specialists that performed surgical care like opthamologist and orthopedic surgeons hit hard by the national and state limitations with performing non-urgent surgery that can be postponed. Is used as period of time to engage with all of our tenants and on a case-by-case basis assist them with the process of applying for a job paycheck Protection Program loans and or Medicare grants in advance payments.

Mark Theine: With that, I will turn the call back over to JT to discuss our success collecting April and May rent, JT.

John Thomas: Thank you, Mark. We know there is one statistic that more than any other you want to discuss. We are very pleased to report our April 2020 cash rent collections stand at 94.4% of billings. We anticipate collecting most if not all of the remaining 6% over time. We are already off to a promising start in May with over 74% collected as of May 6, which is consistent with April's pace of collections. During April, DOC received inquiries from tenants who represent 21% of our annual base rent or ABR about their options for paying rent during the COVID-19 pandemic. These inquiries largely came from small tenants, ambulatory surgery center tenants, and the specialists that perform surgical care like ophthalmologists and orthopedic surgeons.

Before the cares Act was even passed we had retained two different Consultants Each of which were active in medical practice management and the FDA process for these tenants who pursued PPP medical assistance with other sources of liquidity. We waved least late the obligations and patiently work with our tenants while they Source working capital to pay rent through these programs in the antenna sprouting just over 5% of our ABR have not paid April rent as far but again, we believe most if not, all of this rented collectible and will be collected.

John Thomas: Hit hard by the national and state limitations on performing non-urgent surgery that can be postponed, DOC has used this period of time to engage with all of our tenants and, on a case-by-case basis, assist them with the process of applying for federal Paycheck Protection Program loans and/or Medicare grants and advance payments. Before the CARES Act was even passed, we had retained two different consultants, each of which are active in medical practice management and the SBA process. For these tenants who pursue PPP, medical assistance, and other sources of liquidity, we waived lease late-fee obligations and patiently worked with our tenants while they sourced working capital to pay rent through these programs. In the end, tenants representing just over 5% of our ABR have not paid April rent thus far.

Hit hard by the national and state limitations on performing non-urgent surgery that can be postponed, DOC has used this period of time to engage with all of our tenants and, on a case-by-case basis, assist them with the process of applying for federal Paycheck Protection Program loans and/or Medicare grants and advance payments. Before the CARES Act was even passed, we had retained two different consultants, each of which are active in medical practice management and the SBA process. For these tenants who pursue PPP, medical assistance, and other sources of liquidity, we waived lease late-fee obligations and patiently worked with our tenants while they sourced working capital to pay rent through these programs. In the end, tenants representing just over 5% of our ABR have not paid April rent thus far.

We refer you to our covid-19 supplemental update posted this morning for more details.

Well our April rent collection for strong and may is off to a good start. We do expect tennis to continue to have constraints on the revenue Collections and working capital for the remainder of the second quarter fortunately with the increase in PPE production. Our Outpatient Care Facilities can now start providing surgeries that had been delayed.

Many of our providers are reporting full schedules and expanding surgical hours to the weekends as well.

By the end of this weekend, the government prohibitions on scheduled surgery had expired for ninety 1% of Doc's AVR this is updated as of this morning with the addition of Maryland overnight and it's better than reported in our covid-19.

John Thomas: But again, we believe most, if not all, this rent is collectible and will be collected. We refer you to our COVID-19 supplemental update posted this morning for more details. While our April rent collections were strong and May is off to a good start, we do expect tenants to continue to have constraints on their revenue collections and working capital for the remainder of the second quarter. Fortunately, with the increase in PPE production, our outpatient care facilities can now start providing surgeries that have been delayed. Many of our providers are reporting full schedules and expanding surgical hours to the weekends as well. By the end of this weekend, the government prohibitions on scheduled surgery have expired for 91% of DOC's ABR. This is updated as of this morning with the addition of Maryland overnight is better than reported in our COVID supplement.

But again, we believe most, if not all, this rent is collectible and will be collected. We refer you to our COVID-19 supplemental update posted this morning for more details. While our April rent collections were strong and May is off to a good start, we do expect tenants to continue to have constraints on their revenue collections and working capital for the remainder of the second quarter. Fortunately, with the increase in PPE production, our outpatient care facilities can now start providing surgeries that have been delayed. Many of our providers are reporting full schedules and expanding surgical hours to the weekends as well. By the end of this weekend, the government prohibitions on scheduled surgery have expired for 91% of DOC's ABR. This is updated as of this morning with the addition of Maryland overnight is better than reported in our COVID supplement.

In addition as of this week. Only two of our buildings are currently closed one day Wellness Center at least a common spirit and a small Legacy building. Our provider tenants are anxious to care for their page and get back to work.

We're now happy to address your questions.

And at this time will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line in the questions you you may start to if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key. One moment, please while we pull for questions.

our first

our first question is from Michael Corolla from RBC Capital markets, please go see what your question.

John Thomas: In addition, as of this week, only two of our buildings are currently closed, one, a wellness center leased to CommonSpirit, and a small legacy building. Our provider tenants are anxious to care for their patients and get back to work. We're now happy to address your questions.

In addition, as of this week, only two of our buildings are currently closed, one, a wellness center leased to CommonSpirit, and a small legacy building. Our provider tenants are anxious to care for their patients and get back to work. We're now happy to address your questions.

Yeah, thank you. And I also wanted to thank you guys for providing the the covet supplement presentation. Looks like there's a lot of good details in this presentation. I wanted to dive into the uncollected burn-in.

10th of rent that have requested for deferral that you denied why were these denied and is there concerns on the collectability of the 3% of friends that weren't paid from this bucket off?

Operator: At this time we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Our first question is from Michael Carroll from RBC Capital Markets. Please proceed with your question.

Yeah, Mike is JJ and we hope you are all safe and your family as well. I'm going to ask Jeff to respond to that question.

Hi, Mike know it's a great question. So, you know in April we received rent deferral or rent, you know questions from about 21% of our time and you know, we have a pretty good advantage in processing these requests because over the past three years. We really invested an enormous amount of time sources into building a dedicated credit department that tracks tenant financials actively and so we have a really good sense of you know, what their usual revenues volumes are as well as the resources available to pay rent. And so as these requests come in we put them through a really detailed review process. And then we segregate them into a Genesis that have the resources or aren't showing enough negative impacts in their business and we think they can still pay rent versus the ones that are really showing uh, significant struggles and birth

John Thomas: Yeah, thank you. I also wanted to thank you guys for providing the COVID supplement presentation.

Michael Carroll: Yeah, thank you. I also wanted to thank you guys for providing the COVID supplement presentation. Looks like there's a lot of good. Details in this presentation. I wanted to dive into the uncollected rents in April, of rents that have requested for deferral that you denied. Why were these denied? Is there concerns on the collectability of the 3% of rents that weren't paid from this bucket?

Jeff Theiler: Looks like there's a lot of good.

John Thomas: Details in this presentation.

Jeff Theiler: I wanted to dive into the uncollected rents in April, of rents that have requested for deferral that you denied.

John Thomas: Why were these denied?

Jeff Theiler: Is there concerns on the collectability of the 3% of rents that weren't paid from this bucket?

John Thomas: Yeah, Mike, it's JT, and we hope you are all safe and your family as well. I'm going to ask Jeff to respond to that question.

Jeff Theiler: Hi, Mike. No, it's a great question. So, you know, in April, we received rent deferral or rent, you know, questions from about 21% of our tenants. And, you know, we have a pretty good advantage in processing these requests because over the past three years, we've really invested an enormous amount of time and resources into building a dedicated credit department that tracks tenant financials actively. And so we have a really good sense of, you know, what their usual revenues and volumes are, as well as the resources available to pay rent. And so as these requests come in, we put them through a really detailed review process, and then we segregate them into tenants that have the resources or aren't showing enough negative impacts in their business, and we think they can still pay rent versus the ones that are really showing significant struggles.

The ones that were working with and giving them additional time as they Avail themselves of government resources, like, you know, the Medicare acceleration payments or or the PPP loves those types of things. So, um the the tenants that were rejected or their relief requests were rejected were ones that we had done the credit work on and determine that they had the ability to page.

Okay, then the 7% of that you're in discussion with at least on the April billing to me. Looks like the majority of that was was already paid. Should we assume that that's a good starting point for a potential. Was it May and June deferrals will come from from that bucket.

Now it's a great question Mike. So, you know in the first week of May of those 7% of tennis that we were working with about half of them received their, you know, government assistance or have since been able to pay their their May rent. So, you know, I think what probably the way to look at it is you cut that bucket roughly in half. So 3% or so of the total ABR we're still working with um, and then the other ones have had a successful resolution already.

Jeff Theiler: And those are the ones that we're working with and giving them additional time as they avail themselves of government resources, like, you know, the Medicare acceleration payments or the PPP loans, those types of things. So the tenants that were rejected or their relief requests were rejected were ones that we had done the credit work on and determined that they had the ability to pay rent.

And those are the ones that we're working with and giving them additional time as they avail themselves of government resources, like, you know, the Medicare acceleration payments or the PPP loans, those types of things. So the tenants that were rejected or their relief requests were rejected were ones that we had done the credit work on and determined that they had the ability to pay rent.

Great. Thanks Jeff. Thanks, man. Thank you. Bye.

John Thomas: Okay, and then the 7% of that you're in discussion with, at least on the April billings, I mean, it looks like the majority of that was already paid. Should we assume that that's a good starting point for potential?

Michael Carroll: Okay, and then the 7% of that you're in discussion with, at least on the April billings, I mean, it looks like the majority of that was already paid. Should we assume that that's a good starting point for potential? Was it May and June deferrals? Will. Come from that bucket?

And our next question is from Joseph from City. Please proceed with your question. Hi, this is Michael Griffin on for Nick just curious, you know, you mentioned States reopening Central medical procedures starting up again. I'm wondering what your thoughts and how long it will take to work through that pent-up demand for those non-essential procedures.

Bradley Page: Was it May and June deferrals? Will.

John Thomas: Come from that bucket?

Jeff Theiler: No, it's a great question, Mike. So in the first week of May, of those 7% of tenants that we were working with, about half of them received their government assistance or have since been able to pay their May rent. So I think probably the way to look at it is you cut that bucket roughly in half. So 3% or so of the total ABR we're still working with. And then the other ones have had a successful resolution already.

Yeah, that's a great question. You know, we don't have a solid sense that but again, you know most all of April's work was delayed or deferred and so, you know some of the facilities but we talked to him, you know performed almost no surgery in April, you know have very full schedules are asking us to expand hours into the evenings open on Saturdays and things like that. So often, you know, we think May and June will be very full schedules. That's what again most of our providers reporting to us. And then you know, the question I think is then you know how quickly can they then build up a new schedule this patient's return to the you know, the clinical setting the diagnostic setting and now that we don't know yet got it and then one more a question on deferrals for referrals, that would be granted. What what do you do? You have a sense of the length of time frame for repayment?

John Thomas: Okay, great. Thanks, Jeff.

Michael Carroll: Okay, great. Thanks, Jeff.

Jeff Theiler: Thanks, Mike.

John Thomas: Thank you, Mike.

Operator: Our next question is from Nick Joseph from Citi. Please proceed with your question.

Jeff Theiler: Hi, this is Michael Griffin on for Nick. Just curious, you know, you mentioned states reopening non-essential medical procedures starting up again. I'm wondering what your thoughts on how long it will take to work through that pent-up demand for those non-essential procedures.

Nick Joseph: Hi, this is Michael Griffin on for Nick. Just curious, you know, you mentioned states reopening non-essential medical procedures starting up again. I'm wondering what your thoughts on how long it will take to work through that pent-up demand for those non-essential procedures.

John Thomas: Yeah, that's a great question. You know, we don't have a solid sense of that, but again, you know, most of all of April's work was delayed or deferred. And so, you know, some of the facilities that we talked to performed almost no surgery in April, you know, have very full schedules, are asking us to expand hours into the evenings, open on Saturdays, and things like that. So, you know, we think May and June will be very full schedules. That's what again, most of our providers are reporting to us. And then, you know, the question I think has been, you know, how quickly can they then build up a new schedule as patients return to the, you know, the clinical setting, the diagnostic setting, and you know, that we don't know yet.

You know, we we really approached. This is Jeff said not in kind of automatic deferrals for any specific requests. It's been on a case-by-case basis. We haven't we haven't specifically granted deferrals at all off again. We on specific conditions. We've laid late fees in anticipation of tennis paying the rent and we've had no tenants ask for abatement. No tenants have threatened to not pay they've just met ask us for you know time to pay where where they can and again we've evaluated those in a case-by-case basis. So yeah, I think the the one situation we know that they have the best color on kind of wind. They'll get em caught up is probably a June July kind of time frame, but that's a small percentage of the the unpaid buildings in April and very comfortable to that ten. It will be able to get caught up with if not by the end of the quarter early and that's like a third quarter.

Jeff Theiler: Got it. And then one more question on deferrals. For deferrals that would be granted, what do you, do you have a sense of the length of timeframe for repayment?

Nick Joseph: Got it. And then one more question on deferrals. For deferrals that would be granted, what do you, do you have a sense of the length of timeframe for repayment?

Okay, that's it for me. Thank you. Thank you.

John Thomas: Yeah, you know, we've really approached this, as Jeff said, not in kind of automatic deferrals for any specific requests. It's been on a case-by-case basis. We haven't specifically granted deferrals at all. Again, on specific conditions, we've waived late fees in anticipation of tenants paying their rent. And we've had no tenants ask for abatement, no tenants have threatened to not pay. They just, you know, asked us for, you know, time to pay where they can. And again, we've evaluated those on a case-by-case basis. So I think the one situation we know they have the best color on, kind of when they'll be able to get caught up, is probably a June, July kind of timeframe.

Our next question comes from Connor service key from berenberg. Please proceed with your question. Good morning everyone. Thanks for having me on the call. Happy to hear the team is doing well. First question for me. I mean seeing how the practices typically generate revenue from lower Acuity procedures are the ones most affected and while it's good to see that some states are loosening restrictions. I mean, how are you guys looking at the possibility of a second week in the fall and winter months. I mean any commentary here from your team or conversations with your tenants would be appreciated here. Yeah, a great question. And again, we hope all your family's safe as well the you know the issue for the reason elective surgery or scheduled surgery, which I think is a better term, you know, we're really restricted in most States was the lack of faith. So the get surgical gowns the math all the things that need just you know, protect the both the the health care teams, but you know, the patients themselves. Yep.

John Thomas: But that's a small percentage of the unpaid billings in April, and very comfortable that that tenant will be able to get caught up, if not by the end of the quarter, early in the Q2, Q3.

But that's a small percentage of the unpaid billings in April, and very comfortable that that tenant will be able to get caught up, if not by the end of the quarter, early in the Q2, Q3.

Jeff Theiler: Okay, that's it for me. Thank you.

Nick Joseph: Okay, that's it for me. Thank you.

John Thomas: Thank you.

Operator: Our next question comes from Connor Siversky from Berenberg. Please proceed with your question.

Jeff Theiler: Good morning, everyone.

Connor Siversky: Good morning, everyone. Thanks for having me on the call. Happy to hear the team is doing well. First question from me, I mean, seeing how the practices typically generate revenue from lower acuity procedures are the ones most affected. And while it's good to see that some states are loosening restrictions. I mean, how are you guys looking at the possibility of a second wave of COVID in the fall or winter months? I mean, any commentary here from your team or conversations with your tenants would be appreciated here.

Our tenants are telling us that you know, they've been able to start stockpiling, you know with them as they were shut down in April and many of which never saw in their community.

Operator: Thanks for having me on the call. Happy to hear the team is doing well. First question from me, I mean, seeing how the practices typically generate revenue from lower acuity procedures are the ones most affected. And while it's good to see that some states are loosening restrictions. I mean, how are you guys looking at the possibility of a second wave of COVID in the fall or winter months? I mean, any commentary here from your team or conversations with your tenants would be appreciated here.

He's never saw a big wave. And in fact, we're loaning out from the PPD that they were stockpiling to the inpatient facilities that were starting to see some some covid-19. And so, you know, that's the big issue. So it's they candy can't the inpatient hospitals if there is a way and if they've got the they can they can be a beneficial part of the system versus just shutting down and so against our anticipation is most of the tents were talking to Providers were talking to are in a second wave event, you know, they will have time to just talk policy p and be able to stay open and and contribute to the Health Care system and not just be shut down. But again, that's that'd be you know volumes and you know other things outside of of their control in our control as well, but that's the anticipated response to the phone. No.

John Thomas: Yeah, Connor, great question. And again, we hope all your family's safe as well. The issue, the reason elective surgery or scheduled surgery, which I think is a better term, you know, was really restricted in most states, was the lack of PPE. So the surgical gowns, the mask, all the things they need just to, you know, protect both the healthcare teams. But, you know, the patients themselves. You know, our tenants are telling us that, you know, they've been able to start stockpiling PPE, you know, with, as they were shut down in April, many of which never saw in their communities, never saw a big wave. And in fact, we're loaning out some of the PPE that they were stockpiling to the inpatient facilities that were starting to see some COVID patients. So, you know, that's the big issue.

All right, cool, appreciate the color there and then you know, I think we're operating under the impression here. The acquisition markets going to be used through the end of the year and you know, I think it kind of levels the playing field to some degree or are you just exploring any new opportunities here or can you provide any color on kind of your strategic views going forward when it comes to expanding the portfolio in the future? Yeah, I'm going to ask do you need to comment as well? But just a month before he he weighs in, you know send my prepared comments and the good news is most of the the pipeline that we had built up in the fourth quarter and early in the first quarter fourth quarter of nineteen and the first quarter of this year than we expected to capitalize and invest in the second quarter and third quarter is still there and the sellers if you will the developers and the owners of those buildings are Physicians and patients are waiting on us to you know, get through this situation to proceed and we don't know what the the price will be. But we and you know, hopefully can have a meeting of the minds with those with those Sellers and get back to age.

John Thomas: So they can decant the inpatient hospitals if there are the ways, and if they've got the PPE, they can be a beneficial part of the system versus just shutting down. And so, again, our anticipation is that most of the tenants we're talking to and providers we're talking to are in a second wave event. They will have time to stockpile the PPE and be able to stay open and contribute to the healthcare system and not just be shut down. But again, that's subject to volumes and other things outside of their control and our control as well. But that's the anticipated response for the fall.

So they can decant the inpatient hospitals if there are the ways, and if they've got the PPE, they can be a beneficial part of the system versus just shutting down. And so, again, our anticipation is that most of the tenants we're talking to and providers we're talking to are in a second wave event. They will have time to stockpile the PPE and be able to stay open and contribute to the healthcare system and not just be shut down. But again, that's subject to volumes and other things outside of their control and our control as well. But that's the anticipated response for the fall.

Operator: All right, cool. Appreciate the color there. Then I think we're operating under the impression here the acquisition market's going to be muted through the end of the year. I think it kind of levels the playing field to some degree. Are you guys exploring any new opportunities here or can you provide any color on kind of your strategic views going forward when it comes to expanding the portfolio in the future?

Connor Siversky: All right, cool. Appreciate the color there. Then I think we're operating under the impression here the acquisition market's going to be muted through the end of the year. I think it kind of levels the playing field to some degree. Are you guys exploring any new opportunities here or can you provide any color on kind of your strategic views going forward when it comes to expanding the portfolio in the future?

To the growth, you know when when conditions arise but anyone else to weigh in as well. Well, I I I think that one of the things we're doing we're taking a very active process to watch all the deals that are in the market what few are out there and continue to monitor both who are the sellers and what their expectations are and if she has said we've been fortunate that the sellers that we've been working with our understand the the situation and are holding back as we watch what happens in the market, but we're watching as close as we can all the deals that are out there potentially coming.

John Thomas: Yeah, I'm going to ask Deeni to comment as well, but just before he weighs in, I said in my prepared comments, the good news is most of the pipeline that we had built up in the fourth quarter and early in Q4 2019 and the first quarter of this year that we expected to capitalize and invest in the second quarter and third quarter is still there. And sellers, if you will, the developers and the owners of those buildings are physicians in particular, are waiting on us to get through this situation to proceed. We don't know what the price will be, but we hope we can have a meeting of the minds with those sellers and get back to the growth when conditions arise. But Deeni, why don't you weigh in as well?

Thanks to the color there. That's all for me.

And and our next question is from Jonathan Hughes from Raymond James. Please proceed with your question.

Hey, good morning. I'll Echo Mike's earlier, think of it supplements very helpful. So thanks for that on the investment-grade tenants. I noticed April collections there at 97% Is that normal? Like say versus a year ago. I'm guessing I would have expected it. Maybe be more like like a hundred percent given the quality of that that front screen. Yeah, it's a great question Jonathan Jim home. I was well with your family the yeah, it's really to us subsidiaries of investment-grade tenants one's a very large multi-specialty group. That's only partly owned by the wage some great tennis. So it's one of those unfortunate situations where they're kind of caught in limbo between they're they're too big for the the PPP program kind of one of those flaws in the in the way the PPP was structured and they're not wholly owned by the health system. So it's there's you know, kind of

Jeff Theiler: Well, I think that one of the things we're doing, we're taking a very active process to watch all the deals that are in the market, what few are out there, and continue to monitor both who are the sellers and what their expectations are. And as JT has said, we've been fortunate that the sellers that we've been working with understand the situation and are holding back as we watch what happens in the market. But we're watching as close as we can, all the deals that are out there potentially coming.

Operator: All right, thanks for the color there. That's all from me.

Nick Joseph: All right, thanks for the color there. That's all from me.

John Thomas: Thanks.

Operator: Our next question is from Jonathan Hughes, from Raymond James. Please proceed with your question.

John Thomas: Hey, good morning. I'll echo Mike's earlier comments on the COVID supplement. Very helpful.

Jonathan Hughes: Hey, good morning. I'll echo Mike's earlier comments on the COVID supplement. Very helpful. So thanks for that. On the investment grade tenants, I noticed April collections there at 97%. Is that normal, like, say, versus a year ago? I'm guessing I would have expected it maybe be more like 100% given the. Quality of that rent stream.

Tricky for the health system, too.

To step in and pay rent on behalf of positions that they are only partly owners them that that is the situation. I've mentioned a minute ago where we fully expect to get that resolved by the end of the quarter off because of as as the health system steps in and and works with that position group to get them back busy working in be to uh, get their rent caught up. So we're fully fully confident in Iraq resolution of that one. The other is a small again. It's in a joint venture with the health system Health System majority owner and you know, unfortunately against similar situation had stepped into to pay that rent, but we expect to get it collected in another kind of flaw in the in the PPP program or Shake Shack, um, you know did qualify and even though with 60,000 employees but a surgery center that's partly owned by Health System can't benefit in their similar structure because there again had to count all the health systems employees as well. We tried to get that fixed and round two of them.

Bradley Page: So thanks for that.

John Thomas: On the investment grade tenants, I noticed April collections there at 97%. Is that normal, like, say, versus a year ago? I'm guessing I would have expected it maybe be more like 100% given the.

Bradley Page: Quality of that rent stream.

John Thomas: Yeah, great question, Jonathan. Again, hope all is well with your family. It's really two subsidiaries of investment grade tenants. One's a very large multi-specialty group that's only partly owned by the investment grade tenant. So it's one of those unfortunate situations where they're kind of caught in limbo between, they're too big for the PPP program. It's kind of one of the flaws in the way the PPP was structured, and they're not wholly owned by the health system. So it's kind of tricky for the health system to step in and pay rent on behalf of physicians that they're only partly owners of.

Exactly, but didn't have quite enough momentum in the in the Senate.

John Thomas: That is the situation I mentioned a minute ago where we fully expect to get that resolved by the end of the quarter just because as the health system steps in and works with that physician group to A, get them back busy working, and B, to get their rent caught up. So we're fully confident in the resolution of that one. The other is a small ASC, again that's in a joint venture with the health system majority owner, and unfortunately again, similar situation, have not stepped in to pay that rent, but we expect to get it collected. Again, another kind of flaw in the PPP program where Shake Shack did qualify, and even though with 8,000 employees but a surgery center that's partly owned by health system can't benefit under a similar structure because they're again, have to count all the health system employees as well.

That is the situation I mentioned a minute ago where we fully expect to get that resolved by the end of the quarter just because as the health system steps in and works with that physician group to A, get them back busy working, and B, to get their rent caught up. So we're fully confident in the resolution of that one. The other is a small ASC, again that's in a joint venture with the health system majority owner, and unfortunately again, similar situation, have not stepped in to pay that rent, but we expect to get it collected. Again, another kind of flaw in the PPP program where Shake Shack did qualify, and even though with 8,000 employees but a surgery center that's partly owned by health system can't benefit under a similar structure because they're again, have to count all the health system employees as well.

Okay, and on the on the on the credit guarantee on investment-grade exposure and you bring it up, I mean how much of your I guess 57% off rent if you include Northside as investment-grade how much of that 57% investment-grade rent exposure is it paid explicitly by the system or is it paid by that Physician Group that might just be affiliated with the system kind of like the example you mentioned earlier where maybe that's just as a joint venture owner. So it's not a fully guaranteeing that lease payment. This is not precisely correct. But the 97% you see the paid is is more or less the direct payment by the health system percentage just to Unique situations where again with no credit no credit issue just to structure those two groups made it more complicated in this kind of situation.

John Thomas: We tried to get that fixed in round two of the CARES Act but didn't have quite enough momentum in the Senate. Okay, and on the credit guarantee on investment grade exposure, you bring it up. I mean, how much of your, I guess 57% of ABR rent, if you include Northside as investment grade, how much of that 57% investment grade rent exposure is paid explicitly by the system? Or is it paid by that physician group that might just be affiliated with the system? Kind of like the example you mentioned earlier, where maybe that system is a joint venture owner so it's not fully guaranteeing that lease payment. This is not precisely correct, but the 97% you see the paid is more or less the direct payment by the health system.

We tried to get that fixed in round two of the CARES Act but didn't have quite enough momentum in the Senate. Okay, and on the credit guarantee on investment grade exposure, you bring it up. I mean, how much of your, I guess 57% of ABR rent, if you include Northside as investment grade, how much of that 57% investment grade rent exposure is paid explicitly by the system? Or is it paid by that physician group that might just be affiliated with the system? Kind of like the example you mentioned earlier, where maybe that system is a joint venture owner so it's not fully guaranteeing that lease payment. This is not precisely correct, but the 97% you see the paid is more or less the direct payment by the health system.

Okay, that's helpful. And then my last one I know procedures are expected to come back in a hurry do the pent-up demand. But do you see any risks that that some may be overlooking due to the prevalence of of high-deductible health care plans, you know, do you think some people could actually put off these electives the ones that truly are elected to maybe even late 2021 after they hit their minimum and don't have to come out of pocket so much if that a risk that maybe you're you're thinking about it and your your operator position age groups are are discussing.

Yeah, you know that's that's a good question and potentially that's an issue. But again, these are what will be done in May and June or things that were already scheduled in March late, March and April. And so, you know again, I think I think the page those cases that already, you know, come to the conclusion that they they were going to defer the you know, the the case for any longer. Um, so we'll see I think I think the bigger issue is is a gap in back letting you know after the um, you know search and and um actually performing procedures to be clear in May and June is you know, how quick little patience go back to the the diagnostic and you know, kind of fill up the pipeline for you know for late summer and early fall and again back to that search question from before which is you know, is the PPP the PPE to be precise protective of women, you know available. And again, our providers are telling us they're stockpiling now and and expect to stay open during a second surge of the covid-19 in the fall at that if that occurs so great question, but we don't see that it's dead.

John Thomas: Just two unique situations where again, no credit issue, just the structure of those two groups made it more complicated in this kind of situation. Okay, that's helpful. And then my last one, I know procedures are expected to come back in a hurry due to pent-up demand, but do you see any risks that some may be overlooking due to the prevalence of high deductible healthcare plans? Do you think some people could actually put off these electives, the ones that truly are elective, to maybe even late 2020, 2021 after they hit their minimums and don't have to come out of pocket so much? Is that a risk that maybe you're thinking about in your operator and physician groups are discussing? Yeah, you know, John, that's a good question. And potentially that's an issue.

Just two unique situations where again, no credit issue, just the structure of those two groups made it more complicated in this kind of situation. Okay, that's helpful. And then my last one, I know procedures are expected to come back in a hurry due to pent-up demand, but do you see any risks that some may be overlooking due to the prevalence of high deductible healthcare plans? Do you think some people could actually put off these electives, the ones that truly are elective, to maybe even late 2020, 2021 after they hit their minimums and don't have to come out of pocket so much? Is that a risk that maybe you're thinking about in your operator and physician groups are discussing? Yeah, you know, John, that's a good question. And potentially that's an issue.

John Thomas: But again, these are what will be done in May and June are things that were already scheduled in March, late March, and April. And so again, I think the patients in those cases had already come to the conclusion that they weren't going to defer the case for any longer. So we'll see. I think the bigger issue is a gap in backfilling after the surge and actually performing procedures; to be clear, in May and June is, you know, how quickly will patients go back to the diagnostics and you know, kind of fill up the pipeline for, you know, for late summer and early fall. And again, back to that surge question from before, which is, you know, is the PPP, the PPE, to be precise, protective equipment, you know, available?

But again, these are what will be done in May and June are things that were already scheduled in March, late March, and April. And so again, I think the patients in those cases had already come to the conclusion that they weren't going to defer the case for any longer. So we'll see. I think the bigger issue is a gap in backfilling after the surge and actually performing procedures; to be clear, in May and June is, you know, how quickly will patients go back to the diagnostics and you know, kind of fill up the pipeline for, you know, for late summer and early fall. And again, back to that surge question from before, which is, you know, is the PPP, the PPE, to be precise, protective equipment, you know, available?

scheduled surgeries always got

That you know kind of seasonality to it, which is, you know, if you get to the early fall and you can wait till the end of the year and you've got your deductibles, you know burned out that's why December is so good for speeding surgeon's office.

Yep. Okay. I appreciate the color. Thank you for time.

And our next question is from Ayo from Mizzou. Ho plz we'll see what your question yes, good morning again. I think some of the supplemental information on the updates a very helpful with the updates some of the data you put just about when it's kind of sliced up. The rent rent collections are pretty interesting job specifically, it seems like again just kind of collected more of your rent some investment-grade versus your non investment-grade cannons, you've collected more rents from your own campus or off-campus tenants wage. Just kind of curious It's that kind of guiding your decision going forward regarding Investments and kind of how you kind of think about on the writing on a going forward basis.

John Thomas: And again, our providers are telling us they're stockpiling now and expect to stay open during a second surge of the COVID in the fall if that occurs. So great question, but we don't see that scheduled surgery's always got that, you know, kind of seasonality to it, which is, you know, if you get to the early fall and you can wait till the end of the year and you've got your deductibles, you know, burned out, that's why December is so good for orthopedic surgeons. Yep. Okay. I appreciate the caller. Thanks for the time. Yep.

And again, our providers are telling us they're stockpiling now and expect to stay open during a second surge of the COVID in the fall if that occurs. So great question, but we don't see that scheduled surgery's always got that, you know, kind of seasonality to it, which is, you know, if you get to the early fall and you can wait till the end of the year and you've got your deductibles, you know, burned out, that's why December is so good for orthopedic surgeons.

Jonathan Hughes: Yep. Okay. I appreciate the caller. Thanks for the time.

John Thomas: Yep.

You know Tire we again we think the outpatient off campus buildings, you know have performed, you know very well. It's the Affiliated off campus buildings, which is really The Sweet Spot of our investment thesis off and we got we actually was the best collecting grade. We had a 95% So oh other than the hospitals in L text which made a hundred percent. So we're we're very proud of that. But yeah, they all campus Affiliated. I will be you know, we think you know would have been the star in the last six weeks again, but for the lack of p p e and we think those again that's where patients are going to want to go and not go to the hospital and get mixed up with, you know, covid-19 and that. So again lots of raises for on campus buildings, but we think the, you know underlying thesis has been mentally reaffirm what we think will grow over time. As you know, our long-term view that off-campus Affiliated MLB's is really The Sweet Spot of our long-term strategy.

Operator: Our next question is from from Mizuho. Please proceed with your question.

[Analyst] (Mizuho): Yes, good morning again. I think some of the supplemental information and the updates are very helpful. With the updates, some of the data you put out just about when you kind of sliced up the rent rent collections are pretty interesting. Specifically, it seems like again, you've kind of collected more of your rents from your investment grade versus your non investment grade tenants. You've collected more rents from your on campus versus your off campus tenants. I'm just kind of curious, is that kind of guiding your decision going forward regarding investments and kind of how you kind of think about underwriting on a going forward basis and if so, how?

John Thomas: You know, Kyle, again, we think the outpatient off-campus buildings have performed very well. It's the affiliated off-campus buildings which is really the sweet spot of our investment thesis actually was the best collecting rate we had at 95%. So other than the hospitals and LTCH which paid 100%. So we're very proud of that. But the off-campus affiliated MOB we think would have been the star in the last six weeks again, but for the lack of PPE. And we think those, again, that's where patients are going to want to go and not go to the hospital and get mixed up with the, you know, COVID cases in that building.

Okay, that's helpful. Then one more for me again with hospitals kind of being the lifeblood of your of your business could just talk a little bit about you know, how you're feeling or what you're seeing in regards to all the federal and state 8 Hospital systems are getting whether it's part of the Cure is after what have you and whether you have a sense whether that's actually going to be enough if they need more Aid and what the what the implications are for kind of, you know, rent collectability. If not in April in maybe further down the road if Hospital systems are still kind of struggling with profitability as long as the patient mix of like a to kind of change postcode. We're just giving you know, we have Thirty million Americans who no longer have employment.

John Thomas: So again, lots of reasons for on-campus buildings, but we think the underlying thesis has been not only reaffirmed but we think will grow over time is, you know, our long-term view that off-campus affiliated MOBs is really the sweet spot of our long-term strategy.

So again, lots of reasons for on-campus buildings, but we think the underlying thesis has been not only reaffirmed but we think will grow over time is, you know, our long-term view that off-campus affiliated MOBs is really the sweet spot of our long-term strategy.

Yeah, great questions. I mean, I mean no question all the health systems and that's more great or otherwise have been really pinched, you know, not only to have you know, kind of high expenses and getting prepared for you know, covert Casas. But also the you know, the bigger issues than the opportunity cost of lost Revenue primarily from surgery that could be scheduled. And again, we think lots of systems, you know, we'll see more than ever the benefit of you know, shifting outpatient care and scheduled care to to outpatient care facilities in the future to to be better prepared for these kind of things were going forward in the near-term. Obviously, there's a pinch on both the revenue and expenses and you know, the profitability the you know, if I talked a lot of money into it is not pumped enough, um hospitals are still, you know, looking for more. There's going to be a cares act for or fourth round of legislation. I've got a pretty good summary wage.

[Analyst] (Mizuho): Okay, that's helpful then. One more for me. Again with hospitals kind of being the lifeblood of your business, could you just talk a little bit about again how you're feeling or what you're seeing in regards to all the federal and state aid hospital systems they're getting, whether it's part of the CARES Act or what have you, and whether you have a sense whether that's actually going to be enough or if they need more aid and what the implications are for kind of, you know, rent collectability, if not in April and May, maybe further down the road if hospital systems are still kind of struggling with profitability, especially as the patient mix is likely to kind of change post-COVID. Just given, you know, we have 30 million Americans who no longer have employment.

John Thomas: Yeah, Kyle, great question. I mean, I mean, no question. All the health systems, investment grade or otherwise, have been really pinched. You know, not only do they have, you know, kind of high expenses in getting prepared for, you know, COVID cases, but also the, you know, the bigger issue's been the opportunity cost, the lost revenue primarily from surgery that could be scheduled. And again, we think lots of health systems will see more than ever the benefit of shifting outpatient care and scheduled care to outpatient care facilities in the future to be better prepared for these kind of things going forward in the near term. Obviously there's a pinch on both the revenue, the expenses, and the profitability. The federal government has pumped a lot of money into it. It's not pumped enough. Hospitals are still looking for more.

At all my desk most of which seems to be pretty acceptable to the Senate.

And so we expect more money. They're one of the one of the big issues is, you know, part of the Medicare Advanced payments was just add advances in you know is a loan and so hospitals. There's a dead fairly large number with bipartisan support in the house of Congressman Congress people looking to convert that to if not appear Grant at least extending the term of those loans and the interest rates. So it's not to put pressure on hospitals. Just you know, when everything's kind of returning to normal then to then have a big, you know obligation that they would pay back to Congress. So will that turn into a grant that's a that's probably a fifty-fifty guess at best or or or outcome at best. But I do think a lot of momentum to ease the payback periods and payback terms, you know for that part of the Medicare money has been Advanced so bottom line is expect more Federal money to come in Thursday.

John Thomas: There's going to be a CARES Act, fourth round of legislation. I've got a pretty good summary of that on my desk, most of which seems to be pretty acceptable to the Senate. And so we expect more money there. One of the big issues is part of the Medicare advance payments, which just that advances and, you know, is a loan. And so hospitals, there's a fairly large number with bipartisan support in the House of Congressmen, Congress, people looking to convert that to, if not a pure grant, at least extending the term of those loans and the interest rates so as not to put pressure on hospitals, just, you know, when everything's kind of returning to normal to then have a big obligation that they have to pay back to Congress. So will that turn into a grant?

There's going to be a CARES Act, fourth round of legislation. I've got a pretty good summary of that on my desk, most of which seems to be pretty acceptable to the Senate. And so we expect more money there. One of the big issues is part of the Medicare advance payments, which just that advances and, you know, is a loan. And so hospitals, there's a fairly large number with bipartisan support in the House of Congressmen, Congress, people looking to convert that to, if not a pure grant, at least extending the term of those loans and the interest rates so as not to put pressure on hospitals, just, you know, when everything's kind of returning to normal to then have a big obligation that they have to pay back to Congress. So will that turn into a grant?

Put more money to go to the states to help, you know, the states offset their Medicaid costs. And as I mentioned in my opening comments, you know, the you know, the biggest issue really to your question is you know, how quickly can you get employment back some kind of normal rates and and get those people back on Commercial Insurance, you know, and they have opportunity for Coda right now, but that's you know long term. It's really about you know, the employer can offer insurance and that's the profitability to Health Care Systems. I will conclude that question happened to have a follow-up. I conclude that with you know, we're we're in touch with our largest Health System really all of our systems all of our tenants very routinely is Mark and and Amy Hall and myself and Jeff and others have been in communication with them and and you know again all of that's going to be legal, you know, we've been they're providing support to them and their buildings and helping to you know, manage the traffic flow with our, you know, our brave employees and partners that have you know, helped managers.

John Thomas: That's probably a 50/50 guess at best or outcome at best. But I do think there's a lot of momentum to ease the payback periods and payback terms for that part of the Medicare money that's been advanced. So bottom line is expect more federal money to come in, expect more money to go to the states to help the states offset their Medicaid costs. And as I mentioned in my opening comments, you know, the biggest issue really to your question is, you know, how quickly can we get employment back to some kind of normal rates and get those people back on commercial insurance? You know, again, they have opportunity for COVID right now, but that's long term. It's really about, you know, the employer commercial insurance, and that's the profitability of the healthcare systems. I will conclude that question. Happy to have a follow up.

That's probably a 50/50 guess at best or outcome at best. But I do think there's a lot of momentum to ease the payback periods and payback terms for that part of the Medicare money that's been advanced. So bottom line is expect more federal money to come in, expect more money to go to the states to help the states offset their Medicaid costs. And as I mentioned in my opening comments, you know, the biggest issue really to your question is, you know, how quickly can we get employment back to some kind of normal rates and get those people back on commercial insurance? You know, again, they have opportunity for COVID right now, but that's long term. It's really about, you know, the employer commercial insurance, and that's the profitability of the healthcare systems. I will conclude that question. Happy to have a follow up.

On the front end at the same time or health systems are all you know, many of which are starting to look for growth opportunities, you know, you know fully expect to see some Hospital consolidation coming out of this. Is that situation I talked about before, you know, hospitals will employ more Physicians asked us not less. So some of our Hospital systems that are investment-grade and have the capability to bring the girl in this in the future are looking for targets right now, you know for more consolidation, we just think will be part of that and and everybody will benefit eventually.

John Thomas: But I'll conclude that with, you know, we're in touch with our largest health system, really all of our health systems, all of our tenants, very routinely as Mark, Amy Hall, and myself, Jeff, and others have been in communication with them. And again, all of that's been a very collegial. We've been there providing support to them in their buildings and helping to manage the traffic flow with our brave employees and partners that have helped manage that on the front end. At the same time, our health systems are all, many of which are starting to look for growth opportunities. I fully expect to see some hospital consolidation coming out of this. Fully expect that. That situation I've talked about before that hospitals will employ more physicians at this, not less.

But I'll conclude that with, you know, we're in touch with our largest health system, really all of our health systems, all of our tenants, very routinely as Mark, Amy Hall, and myself, Jeff, and others have been in communication with them. And again, all of that's been a very collegial. We've been there providing support to them in their buildings and helping to manage the traffic flow with our brave employees and partners that have helped manage that on the front end. At the same time, our health systems are all, many of which are starting to look for growth opportunities. I fully expect to see some hospital consolidation coming out of this. Fully expect that. That situation I've talked about before that hospitals will employ more physicians at this, not less.

That's good. Thank you.

And our next question is from Daniel bernstine from Capital One, please we'll see what your question good morning and I'll let others comments that took you and your family and everybody's doing very often. I just want to follow up on the the last comments you made John. Do you see an opportunity for hospitals to increase their monetization wage, you know, assuming this everybody gets over this and hospitals come back to profitability, but they are losing money today. And you know, do you see a movie monetization to pick it up opportunities from that and coming your way?

John Thomas: So some of our hospital systems that are investment grade and have the capability to grow in the future are looking for targets right now for more consolidation. We just think we'll be part of that and everybody will benefit eventually.

So some of our hospital systems that are investment grade and have the capability to grow in the future are looking for targets right now for more consolidation. We just think we'll be part of that and everybody will benefit eventually.

Yeah, we we certainly do.

Dan and and again glad you're well and thanks for the the early morning, at that was helpful. So the there are already a couple of of The Prestige Hospital companies out there looking to monetize the Moby's there's one nonprofit that we're aware of this looking to the starting the package that they've been in the process of it, but I think they're you know starting to think about accepting that now, you know, we think a lot of hospitals that we systems that we've been talking to in in our world that you know, we're thinking about doing developments and finding it on their own or are you know more life to at least consider using third-party Capital like like box and and other so I think I think that's a very real realistic. And again, we're starting to see evidence of them ready and we certainly that's where we shine issue as you know, like we have done with comic spirit and north side and other other Healthcare Systems, you know over the years and and big will have great opportunities going forward to do that job.

[Analyst] (Mizuho): That's good. Thank you.

Operator: Our next question is from Daniel Bernstein from Capital One. Please proceed with your question.

Jeff Theiler: Good morning. And I'll echo others' comments that hope you and your family and everybody's doing very well. I just want to follow up on the last comments you made, John. Do you see an opportunity for hospitals to increase their monetizations? You know, assuming everybody gets over this and hospitals come back to profitability but they are losing money today and you know, do you see MOB monetizations picking up and some opportunities from that end coming your way?

Daniel Bernstein: Good morning. And I'll echo others' comments that hope you and your family and everybody's doing very well. I just want to follow up on the last comments you made, John. Do you see an opportunity for hospitals to increase their monetizations? You know, assuming everybody gets over this and hospitals come back to profitability but they are losing money today and you know, do you see MOB monetizations picking up and some opportunities from that end coming your way?

John Thomas: Yeah, we certainly do, Dan. And again, glad you're well and thanks for the early morning comment. That was helpful. So there are already a couple of the proprietary hospital companies out there looking to monetize some mobs. There's one nonprofit that we're aware of that's looking to starting to package up. They've been in the process of it, but I think they're starting to think about accelerating that now. We think a lot of hospitals that we systems that we've been talking to and are aware of that are thinking about doing developments and funding it on their own are more likely to at least consider using third party capital like docs and others.

And then the other question I had is in terms of leases and retention rates are higher hearing of early renewals. I think you made some comments about that later in the earlier in the earnings call here. Are you seeing any change in the terms of the way issues in terms of the the length of the lease or requirements on t i or rate? Just just trying to understand if there's some early signs they're on our pressure on rate and maybe term

Yeah, we I wouldn't say any anything you need. I mean one thing we've seen again, which is probably just temporary but may turn into a long-term is you know hospitals looking for every square foot of space. They can walk, you know in the near-term if they need to spread, you know, both their employees out and their and their impatience out there in this period of time but I think really more important to your question is, you know, I think what we're seeing this kind of routine leasing it's been you know, obviously a slow down because of in in kind of so you use the word speculative but where you where you're trying to you know Recruit new tenants to a building and and you can't, you know, rotate them through or show the space, you know currently but the health system, but we're directly engaged we've had some really nice extensions or renewals that kind of normal renewal rates and you know adding some term, you know, we'll see how the second quarter end so we could we could have more space space least. I mean just I can go in and then we've ever had and we have the most space least any MLB port phone number

John Thomas: So, I think that's a very realistic, and again, we're starting to see evidence of it already, and we certainly, that's where we shine, as you know, like we have done with CommonSpirit and Northside and other health care systems over the years, and think we'll have great opportunities going forward to do that.

So, I think that's a very realistic, and again, we're starting to see evidence of it already, and we certainly, that's where we shine, as you know, like we have done with CommonSpirit and Northside and other health care systems over the years, and think we'll have great opportunities going forward to do that.

Jeff Theiler: And then the other question I had is in terms of leases. I mean, retention rates are higher. We're hearing of early renewals. I think you made some comments about that earlier in the earnings call here. Are you seeing any change in the terms of the leases in terms of the length of the lease or requirements on TI or rate? Just trying to understand if there's some early signs there on pressure on rate and maybe term.

Daniel Bernstein: And then the other question I had is in terms of leases. I mean, retention rates are higher. We're hearing of early renewals. I think you made some comments about that earlier in the earnings call here. Are you seeing any change in the terms of the leases in terms of the length of the lease or requirements on TI or rate? Just trying to understand if there's some early signs there on pressure on rate and maybe term.

John Thomas: Yeah, I wouldn't say anything unique. I mean, one thing we've seen, again, which is probably just temporary but may turn into long term is, you know, hospitals looking for really every square foot of space they can, you know, in the near term if they need to spread, you know, both their employees out and their patients out during this period of time. But I think really more importantly to your question is, you know, I think what we're seeing is kind of routine leasing. There's been, you know, obviously a slowdown because of, I kind of hate to say, you use the word speculative, but where you're trying to, you know, recruit new tenants to a building and you can't, you know, rotate them through or show the space, you know, currently.

good job market think that

I think that's on that's all I have. I'll hop off. Thank you.

Our next question is from Jordan sander from keybanc Capital markets, please. We'll see what your question.

Thanks. Good morning guys, and of course, hope you're doing well. So my question relates to you know, a couple of points that were dancing around here a little bit seems to be two opposing forces in terms of where patient care is administered in the near-term at least and you know first there's a notion that patients would rather not go to hospitals, uh for fear being uh fear of contagion, but but maybe even the same for doctors offices and that's kind of balanced by month.

John Thomas: But the health system, where we're directly engaged, we've had some really nice extensions, renewals at kind of normal renewal rates and, you know, adding some term. I, you know, we'll see how the second quarter ends, but we could, we could have more space leased by the end of the second quarter than we've ever had. And we have the most space leased of any MOB portfolio. So do you not mark anything to add?

But the health system, where we're directly engaged, we've had some really nice extensions, renewals at kind of normal renewal rates and, you know, adding some term. I, you know, we'll see how the second quarter ends, but we could, we could have more space leased by the end of the second quarter than we've ever had. And we have the most space leased of any MOB portfolio. So do you not mark anything to add?

You know the political support.

That you've been discussing, um, you know, which is bipartisan for hospitals. Right? So so the liquidity the capital seems to be there a politically dead. So my question for you is I guess first on the doctors offices. What are you guys doing or what are your parents doing at the facility level to make patients feel more comfortable.

Jeff Theiler: I think that's fine. That's all I have. I'll hop off. Thank you.

Daniel Bernstein: I think that's fine. That's all I have. I'll hop off. Thank you.

John Thomas: Thanks, Dan.

Operator: Our next question is from Jordan Sadler from KeyBanc Capital Markets. Please proceed with your question.

Jeff Theiler: Thanks.

Jordan Sadler: Thanks. Good morning, guys, and of course, hope you're doing well. So my question relates to a couple of points that we're dancing around here a little bit. There seems to be two opposing forces in terms of where patient care is administered in the near term, at least. And first, there's a notion that patients would rather not go to hospitals for fear of contagion, but maybe even the same for doctor's offices. And that's kind of balanced by the political support that you've been discussing, which is bipartisan for hospitals. Right. So the liquidity, the capital seems to be there politically. So my question for you is, I guess, first on the doctor's offices, what. Are you guys doing? Or what are your tenants doing at the facility level to make patients feel more comfortable coming to the office or coming to their facilities?

Operator: Good morning, guys, and of course, hope you're doing well. So my question relates to a couple of points that we're dancing around here a little bit. There seems to be two opposing forces in terms of where patient care is administered in the near term, at least. And first, there's a notion that patients would rather not go to hospitals for fear of contagion, but maybe even the same for doctor's offices. And that's kind of balanced by the political support that you've been discussing, which is bipartisan for hospitals. Right. So the liquidity, the capital seems to be there politically. So my question for you is, I guess, first on the doctor's offices, what.

Coming to the office or coming to their facilities.

Good morning, Jordan. This is Mark. So from an operational standpoint in our facilities as I mentioned in our prepared remarks, we establish a task force to review all of our building operations policies and we're doing a lot of things on social distancing signage collaborating closely with our Hospital Partners about hours of operations, um, extending building our thoughts opening on Saturdays to spread outpatient visits doing uh, obviously extensive cleaning and increasing the the scheduling of reporters within the buildings and and adjusting engineering hours things like that that that we think will help.

John Thomas: Are you guys doing?

Operator: Or what are your tenants doing at the facility level to make patients feel more comfortable coming to the office or coming to their facilities?

With the operations of the building and and ultimately allow our patients and our physicians to get back to operations quickly.

Is there any specific? Oh, sorry, go ahead. I was just going to that which is 93% of our spaces have remained open. My name is continuously now obviously hours have been adjusted and things like that and the surgery Center's have um, you know, they've been temporarily um closed or you know, dramatically reduced hours, but operationally I stayed open and and again, it's been a learning process and best practices, you know, all along some Health Systems, you know done it a little bit differently and than others. But again, it's all in a collaborative way. So again trying to make the money the facilities is inviting and as you know, signage and communication and and you know and sanitized I mean all things that you can do to try to you know, make it comfortable and then you know, there's a there's screening and then there's testing and so screening is is about communicating, you know, if you if you have these symptoms, you know where to go and then you know, usually that is dead.

Jeff Theiler: Sure.

Mark Theine: Sure. Good morning, Jordan. This is Mark. So from an operations standpoint in our facilities, as I mentioned in our prepared remarks, we established a task force to review all of our building operations policies. We're doing a lot of things on social distancing, signage, and collaborating closely with our hospital partners about hours of operations, extending building hours, opening on Saturdays to spread out patient visits, doing obviously extensive cleaning, and increasing the scheduling of our day porters within the buildings and adjusting engineering hours, things like that that we think will help with the operations of the building and ultimately allow our patients and our physicians to get back to operations quickly.

John Thomas: Good morning, Jordan.

Mark Theine: This is Mark. So from an operations standpoint in our facilities, as I mentioned in our prepared remarks, we established a task force to review all of our building operations policies. We're doing a lot of things on social distancing, signage, and collaborating closely with our hospital partners about hours of operations, extending building hours, opening on Saturdays to spread out patient visits, doing obviously extensive cleaning, and increasing the scheduling of our day porters within the buildings and adjusting engineering hours, things like that that we think will help with the operations of the building and ultimately allow our patients and our physicians to get back to operations quickly.

John Thomas: Is there any specific?

Operator: Oh, sorry. Go ahead, John.

Jordan Sadler: Oh, sorry. Go ahead, John.

The way to go is to the testing location which is you know, in another part of if it's on campus the campus or if it's not on campus another place, we heard one of the surgery Center's it's a month just opened up, you know this week if the car is loving the person coming in for the surgery literally gets screened in their car and our temperature check and you know kind of those kind of things again, that's the health care provider for doing that. So it's it's it's a very collaborative approach is really the providers who set the standard and you know in our cancer facilities, you know, celebrating providing kind of different areas for entry for the cancer patients coming in, you know, limiting the amount of visitors and it's a you know, 266 buildings. We've learned a lot and again almost all of them stayed open the whole time and accommodating that you know that question but you know again it's it's going to take time and as we all know and

John Thomas: Okay, J.T., I was just going to add to that exactly that which has been 93% of our spaces have remained open more or less continuously now. Obviously, hours have been adjusted and things like that. The surgery centers have, you know, been temporarily closed or, you know, dramatically reduced hours, but operationally they've stayed open. Again, it's been a learning process and best practices, you know, all along. Some health systems, you know, done it a little bit differently than others, but again, it's all in a collaborative way. So again, trying to make the facilities as inviting and as with signage and communication and hand sanitizer, I mean, all things that you can do to try to make it comfortable. Then there's screening and then there's testing. So screening is about communicating, if you have these symptoms, where to go.

John Thomas: And then usually that is the where to go is to the testing location, which is in another part of if it's on campus, the campus or if it's not on campus. Another place we heard one of the surgery centers that's just opened up this week, the cars, I mean, the person coming in for the surgery literally gets screened in their car on a temperature check and kind of those kind of things. Again, that's the healthcare provider for doing that. So it's a very collaborative approach. It's really the providers who set the standard and in our cancer facilities, segregating, providing kind of different areas for entry for the cancer patients coming in, you know, limiting the amount of visitors. I mean, it's a, you know, 266 buildings.

And then usually that is the where to go is to the testing location, which is in another part of if it's on campus, the campus or if it's not on campus. Another place we heard one of the surgery centers that's just opened up this week, the cars, I mean, the person coming in for the surgery literally gets screened in their car on a temperature check and kind of those kind of things. Again, that's the healthcare provider for doing that. So it's a very collaborative approach. It's really the providers who set the standard and in our cancer facilities, segregating, providing kind of different areas for entry for the cancer patients coming in, you know, limiting the amount of visitors. I mean, it's a, you know, 266 buildings.

And hopefully we can be as inviting as possible in the Carol get provided.

But he just gets you've had a you know, a view into it across some of your markets as you've highlighted the slides. Can you please speak to what you've seen specifically in the market that are currently open are those at you know, a hundred percent plus utilization?

Yeah, so yeah, I'll give you an example of in the Texas Market, you know one facility did 35% $35 surgical cases the first 3 and 1/2 weeks of April. They're doing seventy-five a week. I'm right now so that's and you know again just catching up and you know kind of their normal caseload is is 50 to 60, you know song cases we can decide day. So in Texas, you know, one of the things that you know, the kind of the restrictions that are there that's um, you know, I think pretty probably post a million younger and Thursday through each stage got a little bit different, you know kind of parameters around, you know, how to open up in Texas. You've got to kind of set aside 25% of the facility, you know for the potential of a Covent and you know again, that's where the the Surgical Hospitals and larger surgery centers that have again just a little bit bigger physical capacity can actually accommodate more patients more quickly. So that's good anecdotal piece.

John Thomas: We've learned a lot, and again, almost all of them have stayed open the whole time and accommodating, you know, that question. But, you know, again, it's going to take time, as we all know, and hopefully we can be as inviting as possible in the care will get provided.

We've learned a lot, and again, almost all of them have stayed open the whole time and accommodating, you know, that question. But, you know, again, it's going to take time, as we all know, and hopefully we can be as inviting as possible in the care will get provided.

Operator: And coming back to the restart of elective procedures because you've had a, you know, a view into it across some of your markets. As you've highlighted in the slides, can you speak to what you've seen specifically in the markets that are currently open? Are those at 100%+ utilization?

Jordan Sadler: And coming back to the restart of elective procedures because you've had a, you know, a view into it across some of your markets. As you've highlighted in the slides, can you speak to what you've seen specifically in the markets that are currently open? Are those at 100%+ utilization?

You know one Surgery Center there, we have a lot of facilities with um, I think they were you know had you know, very limited percentage in April and they they've commented publicly that the wage to 50% and you know looked to catch up pretty quickly to to wrap it up to a hundred plus percent of their normal, you know volume as they catch up on delay procedures.

John Thomas: Yeah. I'll give you an example. In the Texas market, 1 facility did 35 surgical cases the first 3.5 weeks of April. They're doing 75 a week right now. So that's, and you know, again, just catching up and you know, kind of their normal caseload is 50 to 60, you know, surgical cases a week in a 5-day period. So in Texas, you know, one of the things that, you know, the kind of the restrictions that are there, that's, you know, I think pretty probably close the same. Again, we're in 32 states, so each state's got a little bit different, you know, kind of parameters around how to open up. In Texas, you've got to kind of set aside 25% of the facility, you know, for the potential of a COVID patient.

Thank you for the time. Thank you Jordan.

And our next question is from Michael Gorman from the btig. Please proceed with your question. Yeah, thanks. Good morning. Everybody JT. I was just wondering if you could talk a little bit bigger picture as you guys look at the health care landscape and that was interested in in one of your comments at the at the outset about pushing additional care outpatient, obviously in reserve or the hospitals. This is obviously a trend that's been going on in US healthcare for a while. But now we you know, is there any pushback or any sense that we've overdone the drawdown in inpatient capacity in the country and and any discussions on how to make that profitable when there isn't a pandemic but also have that capability with the health care operators when it becomes necessary. I'm just trying to think about how that could potentially shift provisions of care if we have to keep the inpatient facilities around when there isn't something for them to do but we wage.

John Thomas: You know, again, that's where the surgical hospitals and larger surgery centers that have again, just a little bit bigger physical capacity can actually accommodate more patients more quickly. That's good anecdotal piece. You know, one surgery center where we have a lot of facilities with, I think they were, you know, had, you know, very limited percentage in April, and they've commented publicly that they're back to 50%, and you know, look to catch up pretty quickly to ramp it up to 100+% of their normal, you know, volume as they catch up on delayed procedures.

You know, again, that's where the surgical hospitals and larger surgery centers that have again, just a little bit bigger physical capacity can actually accommodate more patients more quickly. That's good anecdotal piece. You know, one surgery center where we have a lot of facilities with, I think they were, you know, had, you know, very limited percentage in April, and they've commented publicly that they're back to 50%, and you know, look to catch up pretty quickly to ramp it up to 100+% of their normal, you know, volume as they catch up on delayed procedures.

and and coming back to the restart of like

Operator: Thank you for the time.

Jordan Sadler: Thank you for the time.

John Thomas: Thank you, Jordan.

From there when there is a crisis. Yeah might gets great question. And you know, I've always loved opthamologists and and based on your influence. But the mileage is they had to close first off. Yes, we did in this situation, you know, obviously lots of discussion about you know, both the both the physical plant Health Care system and the payment system in our payment system is is has been Geared for years around procedures and not medicine and has consented. You know, this is you know, it's proven out over the last six weeks really intended to you know, thousands of cases to the lowest cost setting, you know, unfortunately didn't have the TV to do that and and you know over the last couple of months so, you know, I mean, I think there's a lot of commentary and you know a lot of legislative debate in in a life in academic debate about that. If you talk to you Michael darling at northwell was listening to him speak ten days ago. So and and he was he was coming about this page.

Operator: Our next question is from Michael Gorman from BTIG. Please proceed with your question.

Jeff Theiler: Yeah, thanks.

Michael Gorman: Yeah, thanks. Good morning, everybody. Hi, J.T. I was just wondering if you could kind of talk a little bit bigger picture as you guys look at the healthcare landscape. I was interested in one of your comments at the outset about pushing additional care outpatient, obviously, and reserving the hospitals. This is obviously a trend that's been going on in US healthcare for a while.

Michael Gorman: Good morning, everybody.

John Thomas: Hi, J.T.

Michael Gorman: I was just wondering if you could kind of talk a little bit bigger picture as you guys look at the healthcare landscape. I was interested in one of your comments at the outset about pushing additional care outpatient, obviously, and reserving the hospitals. This is obviously a trend that's been going on in US healthcare for a while. But now is there any pushback or any sense that we've overdone the drawdown in inpatient capacity in the country and any discussions on how to make that profitable when there isn't a pandemic, but also have that capability with the healthcare operators when it becomes necessary? I'm just trying to think about how that could potentially shift provisions of care if we have to keep the inpatient facilities around when there isn't something for them to do, but we want them there when there is a crisis.

But now is there any pushback or any sense that we've overdone the drawdown in inpatient capacity in the country and any discussions on how to make that profitable when there isn't a pandemic, but also have that capability with the healthcare operators when it becomes necessary? I'm just trying to think about how that could potentially shift provisions of care if we have to keep the inpatient facilities around when there isn't something for them to do, but we want them there when there is a crisis.

I think we have to have more rights to use and more, you know inpatient beds for situation like this, but our surgeons are all sitting at home doing nothing because they can't come to the facility and so it seems kind of that bounce of

John Thomas: Yeah, Mike, that's a great question. And you know, I've always loved ophthalmologists and based on your influence, but their ophthalmologists had to close first.

You know kind of a redesign of both the payment system and the infrastructure and you know as Mark mentioned, you know RL tax which is you know struggled for years because it's been kind of a stepchild of the inpatient facilities, you know, they are by definition ventilator hospitals and you know are are thriving right now in in this environment. So I think going to be a whole redesign of the the system preserving inpatient capacity that maybe enhancing the physical design of in page capacity and you know Shifty character, you know more appropriate setting and a payment systems going to have to adapt to that as well and off and you know, we've seen a lot of changes in, you know, a lot of emergency changes to the payment system like in the situation to address the situation and you know, I think that'll you know, beginning a process of you know, redesigning the system and I wouldn't say this as medicare-for-all. I'm just saying it total redesign of the system over time.

Michael Gorman: Yes, they did.

John Thomas: In this situation, you know, obviously lots of discussion about, you know, both the physical plan healthcare system and the payment system. Our payment system has been geared for years around procedures and not medicine and has proven out over the last 6 weeks really incented to, you know, move cases to the lowest cost setting. You know, unfortunately we didn't have the PPE to do that and you know, over the last couple of months. So, you know, I mean, I think there's a lot of commentary and, you know, a lot of legislative debate and intellectual and academic debate about that. If you talk to Michael Dowling at Northwell, was listening to him speak 10 days ago or so and he was commenting about this exact thing.

John Thomas: He says we have to have more ICUs and more inpatient beds for a situation like this, but our surgeons are all sitting at home doing nothing because they can't come to the facility. And so it's kind of that balance of kind of a redesign of both the payment system and the infrastructure. And as Mark mentioned, you know, our LTCHs, which have struggled for years because they've been kind of the stepchild of the inpatient facilities, you know, they are by definition ventilator hospitals and, you know, are thriving right now in this environment. So I think it's going to be a whole redesign of the system, preserving inpatient capacity, maybe enhancing the physical design of inpatient capacity, and, you know, shifting care in a more appropriate setting. And the payment system is going to have to adapt to that as well.

He says we have to have more ICUs and more inpatient beds for a situation like this, but our surgeons are all sitting at home doing nothing because they can't come to the facility. And so it's kind of that balance of kind of a redesign of both the payment system and the infrastructure. And as Mark mentioned, you know, our LTCHs, which have struggled for years because they've been kind of the stepchild of the inpatient facilities, you know, they are by definition ventilator hospitals and, you know, are thriving right now in this environment. So I think it's going to be a whole redesign of the system, preserving inpatient capacity, maybe enhancing the physical design of inpatient capacity, and, you know, shifting care in a more appropriate setting. And the payment system is going to have to adapt to that as well.

Right and I I guess my question is if you also have you heard from any of your health care System tenants and it's probably too early. They're still putting out fires. But some I towards whether it's off or on campus having their outpatient facilities better equipped as Flex space for future crises or future pandemics where they can where they can Flex capacity if if they need to ask ya know where it is starting to hear that and the you know, the the architects who are you don't have high volume Healthcare work or already putting out, you know, not only white papers but you know kind of early and uh, you know, thoughts around the redesign of again, both inpatient and outpatient facilities, you know from Lessons Learned From This, you know, when I had the terrorist events and and after September,

John Thomas: And we've seen a lot of changes and a lot of emergency changes to the payment system, like in the LTCH situation, to address the situation. And I think that'll begin the process of redesigning the system. And I wouldn't say this is Medicare for all, I'm just saying a total redesign of the system over time.

And we've seen a lot of changes and a lot of emergency changes to the payment system, like in the LTCH situation, to address the situation. And I think that'll begin the process of redesigning the system. And I wouldn't say this is Medicare for all, I'm just saying a total redesign of the system over time.

In two thousand one, you know, the big issues. We didn't have, you know, the ERS didn't work weren't set up for, you know patients coming in within with a biological attack. And so the ER has got, you know got adapted to, you know, and became a requirement to have, you know, kind of space set aside for that. That's a microcosm of I think what you know, we'll see here and off. The other thing is medical office buildings and Outpatient Care buildings have been built in the last ten years have had very little, you know, just general office space provided for positions. It's, you know, kind of been calling about procedure rooms and exam rooms, and, you know, the position sees you there and brings in a computer on wheels or an iPad to to do the to record all that, you know, there's no there's no place for a position to do Telehealth in these buildings. And so we think there would be a redesign around, you know, the expansion and cuz Telehealth here to stay. It's just a matter of you know, where where will be conducted. I don't think it'll be Telehealth phone number.

Michael Gorman: Right. I guess my question is, have you also, have you heard from any of your healthcare system tenants? It's probably too early. They're still putting out fires. But some eye towards whether it's off campus or on campus having their outpatient facilities better equipped as flex space for future crisis or future pandemics, where they can flex capacity if they need to.

John Thomas: Yeah, we're already starting to hear that. And there's, you know, the architects who have high volume health care work are already putting out not only white papers, but kind of early thoughts around the redesign of again, both inpatient and outpatient facilities, from lessons learned from this. When we had the terrorist events after September in 2001, the big issue is we didn't have. The ERs weren't set up for, you know, patients coming in with a biological attack. And so the ERs got adapted to, you know, and became a requirement to have, you know, kind of space set aside for that. That's a microcosm of, I think, what, you know, we'll see here.

I'm going to be Telehealth from the medical office building. But you know, we we think there'll be a redesign of you know, our buildings and changes to our buildings and future buildings in the Outpatient Care setting to you know, facilitate hipaa-compliant pehle help encounters. And we think that's a good thing, you know an efficiency of the system that you know, this crisis has shown can work very well.

Thanks. I appreciate your thoughts. I hope you all stay well.

John Thomas: You know, the other thing is medical office buildings and outpatient care buildings that have been built in the last 10 years have had very little, you know, just general office space provided for physicians. It's, you know, kind of been. It's all been about procedure rooms, exam rooms, and the physician sees you there and brings in a computer on wheels or an iPad to do the, to record all that. There's no place for a physician to do telehealth in these buildings. So we think there'll be a redesign around the expansion because telehealth's here to stay. It's just a matter of where it will be conducted. I don't think it'll be telehealth from home. I don't think it'd be telehealth from the medical office building.

You know, the other thing is medical office buildings and outpatient care buildings that have been built in the last 10 years have had very little, you know, just general office space provided for physicians. It's, you know, kind of been. It's all been about procedure rooms, exam rooms, and the physician sees you there and brings in a computer on wheels or an iPad to do the, to record all that. There's no place for a physician to do telehealth in these buildings. So we think there'll be a redesign around the expansion because telehealth's here to stay. It's just a matter of where it will be conducted. I don't think it'll be telehealth from home. I don't think it'd be telehealth from the medical office building.

We have reached the end of the question and answer session and I will now turn the call over to John Thomas for closing remarks.

Thank you again for joining us today. We do hope that all of your families and colleagues are are safe and well, and we look forward to speaking with you soon. Thank you.

And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

John Thomas: But, you know, we think there'll be a redesign of, you know, our buildings and changes to our buildings and future buildings in the outpatient care setting to, you know, facilitate HIPAA-compliant telehealth encounters. And we think that's a good thing and, you know, an efficiency of the system that, you know, this crisis has shown can work very well.

But, you know, we think there'll be a redesign of, you know, our buildings and changes to our buildings and future buildings in the outpatient care setting to, you know, facilitate HIPAA-compliant telehealth encounters. And we think that's a good thing and, you know, an efficiency of the system that, you know, this crisis has shown can work very well.

Michael Gorman: Thanks. I appreciate your thoughts. I hope you all stay well.

John Thomas: Thanks.

Operator: We have reached the end of the question and answer session. I will now turn the call over to John Thomas for closing remarks.

John Thomas: Thank you again for joining us today. We do hope that all of your families and colleagues are safe and well, and we look forward to speaking with you soon. Thank you.

Operator: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

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