Q1 2020 Earnings Call

May 7, 2020

[music].

Operator: Good morning. Welcome to Healthcare Realty Trust Q1 financial results. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Todd Meredith. Please go ahead.

Welcome to healthcare Realty trusts first quarter financial result.

All participants will be in listen only mode.

So the leasing millicom from specialist by pressing the star key followed by zero.

After today's presentation to be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.

Your question. Please press Star then please note. This event is being recorded I would now.

Like to turn the conference over to pod Meredith. Please go ahead.

Thank you Kate.

Todd Meredith: Thank you, Kate. Joining me on the call this morning are Carla Baca, Bethany Mancini, Rob Hull, and Kris Douglas. Ms. Baca, if you would read the disclaimer.

Joining me on the call. This morning, our Carla Baca, Bethany Mayer see any Rob pole and Chris Douglas.

This bucket if you would read the disclaimer.

Except for the historical information contained within the matters discussed on this call may contain forward looking statements that involve estimates assumptions risks and uncertainties.

Carla Baca: Except for the historical information contained within, the matters discussed on this call may contain forward-looking statements that involve estimates, assumptions, risks, and uncertainties. These risks are more specifically discussed in a Form 10-K filed with the SEC for the year ended 31 December 2019, and in subsequently filed Form 10-Q. These forward-looking statements represent the company's judgment as of the date of this call. The company disclaims any obligation to update this forward-looking material. The matters discussed in this call may also contain certain non-GAAP financial measures, such as funds from operations, FFO, normalized FFO, FFO per share, normalized FFO per share, funds available for distribution, FAD, net operating income, NOI, EBITDA, and adjusted EBITDA.

These risks or more specifically discuss in a form 10-K filed with the FCC for the year ended December 31st 2019.

Subsequently formed filed form 10-Q.

These forward looking statements represent the company's judgment as of today this call.

Somebody disclaims any obligation to update the forward looking material.

Matters discussed in this call May also contain certain non-GAAP financial measures such as funds from operation, So normalized FFO and AFFO per share normalized AFFO per share funds available for distribution sad that operating income and Hawaii, EBITDA and adjusted EBITDA.

Carla Baca: A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the Q1 ended 31 March 2020. The company's earnings press release, supplemental information, Forms 10-Q and 10-K are available on the company's website. Todd?

A reconciliation of these measures the most comparable GAAP financial measures maybe found in the Companys earnings press release for the first quarter ended March 31st 2020.

Today's earnings press release supplemental information forms 10-Q, and 10-K are available on the company's website <unk>.

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Thank you Carlos.

Todd Meredith: Thank you, Carla. Before jumping into business, we would first like to acknowledge those who face difficult times due to COVID-19 or maybe even lost someone to the disease. We offer our sincere gratitude to first responders and healthcare providers. I know many of you on the call this morning are in hot spots such as New York City, and we hope that you and your families are safe and doing well. On a brighter note, we're encouraged by what we've seen recently. Governors and mayors are prioritizing elective medical procedures in phase 1 of their reopening plans. Timing will vary. Elective procedures are already restarting in most markets. At Healthcare Realty, 88% of our properties are located on or adjacent to campus. During COVID-19, we've been working even more closely with our hospital partners to ensure protocols and facilities are safe for providers and patients.

Before jumping into business, we would first like to acknowledge those who face difficult times due to kind of at 19 or maybe even while someone to the disease.

And we offer our sincere gratitude to first responders and health care providers.

I know many of you on the call. This morning are in hot spots, such as New York City, and we hope that you and your families are safe and doing well.

On a brighter no. We're encouraged by what we've seen recently governors and mayors are prioritizing elected medical procedures in phase one of the reopening plants.

Tightening will vary but elective procedures are already restarting in most markets.

And healthcare Realty, 88% of our properties are located on or adjacent to campus.

During cobot 19, we've been working even more closely with our hospital partners to ensure protocols and facilities are safe for providers and patients.

Todd Meredith: As an example, we've helped hospitals create on campus, so building visitors can be screened for symptoms. We also have 15 COVID-19 testing sites at our properties. Here in Nashville, we're working with hospital administrators to transform our parking lot into a drive-thru site for patients to be tested before their scheduled procedures. It's worth noting that 100% of our properties have remained open throughout this crisis. 9 out of 10 of our tenants have continued to provide patients with essential care in their offices, despite significant declines in patient volume. Many tenants who closed temporarily have reopened or will in the coming weeks. About half of our space is leased to smaller independent physician practices, the lifeblood of our hospital partners.

As an example, we've helped hospitals creed.

On campus the building visitors can be screen for symptoms.

We also have 15 cobot 19 testing sites at our properties.

Here in Nashville, we're working with hospital administrators to transform our parking lots, which would drive through site for patients to be tested before their schedule procedures.

It's worth noting that 100% of our properties have remained open throughout this crisis.

Nine out of 10 of our tenants have continued to provide patients with essential air and their offices, despite significant declines of patient volume.

Many tenants close temporarily.

I have reopened or will in the coming weeks.

About half of our space is leased to smaller independent physician practices, the lifeblood of our hospital partners.

We took an early position to help these practices understand the availability of financial assistance programs from federal grants and loans to our own rent deferral program.

Todd Meredith: We took an early position to help these practices understand the availability of financial assistance programs from federal grants and loans to our own rent deferral program. We are reviewing and granting deferrals one month at a time, knowing that circumstances are changing rapidly. April rent collection was successful, with 89% collected, and we've been able to help over 400 smaller tenants with some form of deferral. So far, May collections look to be a bit stronger than April, although it's still too early to know the final outcome. We are confident our deferral program will help our smaller independent practices pull through this pandemic, recover more quickly, and be stronger in the long run. Many of these tenants are already ramping up routine care and procedures and plan to pay back deferred rent in the second half of the year as they address pent-up demand.

We are reviewing it granting deferrals one month at a time knowing that circumstances are changing rapidly.

April recollection was successful with 89% collected.

We've been able to help over 400 smaller tenants with some form of deferral.

So far may collections looked to be a bit stronger than April although it's still too early to know the final outcome.

We are confident our deferral program will help our smaller independent practices hold through this pandemic recover more quickly and be stronger in the long run.

Many of these tenants are already ramping up routine care and procedures and plan to payback deferred rent in the second half of the year as they address pent up demand.

Given the average physician generates $2.4 million an annual hospital revenue. This will greatly benefit our hospital partners, who make up the other half of our space.

Todd Meredith: Given the average physician generates $2.4 million in annual hospital revenue, this will greatly benefit our hospital partners, who make up the other half of our space. These are mostly large investment-grade health systems with deep financial footings and community ties. New leasing was inevitably slower in April, with prospect tours at half of our normal pace. We have been pleased to see tours begin to pick up in the last two weeks. We expect tenant retention to remain high, potentially higher than usual, as providers focus on rebuilding their patient volume. During this time of uncertainty, and even as the recovery begins, we're not asking tenants to make long-term leasing decisions. The intrinsic value of our real estate gives us confidence with short-term renewals. We are encouraged by the increased use and reimbursement of telemedicine during this pandemic, allowing providers to stay connected with their patients.

These are mostly large investment grade health systems with deep financial puddings community ties.

New leasing was inevitably slower in April with prospect tours at half of our normal pace.

We've been pleased to see tours begin to pick up in the last two weeks.

We expect tenant retention to remain high potentially higher than usual as providers focus on rebuilding their patient volume.

During this time of uncertainty and even as the recovery begins we're not asking tenants to make long term leasing decisions.

The intrinsic value of our real estate gives us confidence with short term renewals.

We are encouraged by the increased use and reimbursement of Tele medicine. During this pandemic, allowing providers to stay connected with their patients.

Todd Meredith: Going forward, we expect providers to incorporate telemedicine into their daily routines in their medical office space. Select providers can boost productivity and revenue by handling a higher portion of their low acuity care through telemedicine, and increasing their capacity for in-office higher acuity care. That equates to more revenue per square foot of office space. Looking ahead, outpatient facilities will become increasingly critical as patients and providers seek to shift more care to the safest and lowest cost setting. Even during the pandemic, many of our health system partners have continued to plan for outpatient expansion. Healthcare Realty is well positioned to take advantage of rising demand for outpatient facilities with a strong pipeline of acquisitions and developments. We look forward to sharing progress on this front and the resiliency and strength of our healthcare tenants as the recovery unfolds in the quarters ahead.

Going forward, we expect providers to incorporate telemedicine into their daily routines and their medical office space.

Select providers can boost productivity and revenue by handling a higher portion of their low acuity care through tele medicine, and increasing their capacity for in office higher acuity care.

That equates to more revenue per square foot office space.

Looking ahead outpatient facilities will become increasingly critical as patients and providers seek to shift more care to the safest and lowest cost setting.

Even during the pandemic many of our health <unk> Health system partners has continued to plan for outpatient expansion.

Healthcare Realty is well positioned to take advantage of rising demand for outpatient facilities with a strong pipeline of acquisitions and development.

We look forward to sharing progress on this front and the resiliency and strength of our health care tenants because the recovery unfolds in the quarters ahead.

[laughter] closing, we're deeply grateful for the doctors nurses hospitals and patience, we serve everyday in our facilities.

Todd Meredith: In closing, we're deeply grateful for the doctors, nurses, hospitals, and patients we serve every day in our facilities. Our property management team, and in particular, our 90 maintenance engineers, have been a daily presence, keeping our properties open, clean, and running smoothly throughout this pandemic. Now I'll turn it over to Ms. Mancini for some additional information on our COVID response and healthcare trends. Bethany?

Property management team and in particular are 90 maintenance engineers had been a daily presence keeping our properties open clean and running smoothly throughout the spend a minute.

Now I'll turn it over to mismatch Feeney for some additional information on our Coke in response and health care trends Bethany.

Thank you.

Bethany Mancini: Thank you. Healthcare Realty's long-standing health system relationships have proven invaluable during the COVID-19 pandemic. We have been able to support both hospital and physician tenants. From mid-March to April, our tenants were compelled to limit elective cases and office visits to allow for inpatient bed and ICU capacity. By mid-April, our property managers reported a trough in building foot traffic and maintenance orders, ranging from a third to half of normal activity levels. Signs of improvement, though, over the past few weeks. Nearly 90% of our tenants remained open across primary and specialty care, with their staff in place, and have been continuing to meet the essential needs of their patients. Where possible, providers have transitioned lower acuity clinical needs to telehealth and are maintaining communication with patients as they ramp up elective care and office visits.

Beth Mancini: Thank you. Healthcare Realty's long-standing health system relationships have proven invaluable during the COVID-19 pandemic. We have been able to support both hospital and physician tenants. From mid-March to April, our tenants were compelled to limit elective cases and office visits to allow for inpatient bed and ICU capacity. By mid-April, our property managers reported a trough in building foot traffic and maintenance orders, ranging from a third to half of normal activity levels. Signs of improvement, though, over the past few weeks. Nearly 90% of our tenants remained open across primary and specialty care, with their staff in place, and have been continuing to meet the essential needs of their patients. Where possible, providers have transitioned lower acuity clinical needs to telehealth and are maintaining communication with patients as they ramp up elective care and office visits.

Healthcare Realty's longstanding health system relationships have proven invaluable during the covert 19 pandemic, we have been able to support those hospital and physician tenants from mid March to April our tenants were compelled to limit elective cases and office visits to allow for inpatient bad.

I see you capacity.

By mid April our property managers reported a trough and building foot traffic and maintenance borders.

Ranging from a third to half normal activity levels.

Signs of improvement so over the past few weeks.

Nearly 90% of our tenants remained open across primary and specialty care with their staff in place and have been continuing to me the essential needs of their patient.

Where possible providers have transitioned lower acuity clinical needs to tell the health and are maintaining communication with patients as they ramp up elective care and office visits.

Ralph Giacobbe 19.

Bethany Mancini: Throughout COVID-19, HHS has issued regulatory updates in an effort to provide sweeping flexibility and support to the US healthcare system. They have lifted constraints and eased federal rules on a variety of Medicare policies affecting providers. HHS has offered assurance that any healthcare provider will be considered eligible for federal relief, who have cared for COVID patients or limited services for COVID capacity, making virtually every provider eligible for assistance. Our tenants began receiving federal relief funds under the CARES Act as early as 10 April. The CARES Act provides grants, loans, and higher Medicare rates to healthcare providers. In total, HHS has $175 billion in healthcare stimulus funding. The first $50 billion, slated for general hospital and physician relief, is estimated to equate to 1 to 2 months of lost cash flow from the impact of COVID-19 on the average provider.

Beth Mancini: Throughout COVID-19, HHS has issued regulatory updates in an effort to provide sweeping flexibility and support to the US healthcare system. They have lifted constraints and eased federal rules on a variety of Medicare policies affecting providers. HHS has offered assurance that any healthcare provider will be considered eligible for federal relief, who have cared for COVID patients or limited services for COVID capacity, making virtually every provider eligible for assistance. Our tenants began receiving federal relief funds under the CARES Act as early as 10 April. The CARES Act provides grants, loans, and higher Medicare rates to healthcare providers. In total, HHS has $175 billion in healthcare stimulus funding. The first $50 billion, slated for general hospital and physician relief, is estimated to equate to 1 to 2 months of lost cash flow from the impact of COVID-19 on the average provider.

HHS has issued regulatory updates in an effort to provide sweeping flexibility and support to the U.S. health care system.

They have lifted constraints and east federal rules on a variety of Medicare policies perfecting providers.

And HHS has offered assurance that any health care provider will be considered eligible for federal relief.

Lets cared for cobot patients or limited services for cobot capacity.

Taking virtually every provider eligible for assistance.

Our tenants began receiving federal really funds under the Cures Act as early as April 10th the.

The care docked provides grants loans and higher Medicare rate.

To health care providers.

In total HHS has $175 billion in health care stimulus funding.

The first $50 billion slated for general hospital and physician relief.

It is estimated to equate to one to two months of lost cash flow from the impact of Koby 19 on the average provider.

Another $50 billion will be distributed for cobot specific relief to hotspot rural areas and uninsured care.

Bethany Mancini: Another $50 billion will be distributed for COVID-specific relief to hotspots, rural areas, and uninsured care. The remaining $75 billion has yet to be allocated. HHS has distributed more than $100 billion in Medicare loans under the Expanded, Accelerated, and Advance Payments program. Analysts have estimated this equates to an additional 2 to 3 months of lost cash flow to be repaid by year-end at zero interest. Many of our non-hospital tenants, primarily small independent physician practices, have also qualified for PPP forgivable SBA loans, equivalent to generally 2 months of payroll, rent, and utilities. Hospitals critically depend on these physicians to generate revenue even more during this recovery phase. Our health system partners are actively engaged with our medical office tenants to ramp up elective outpatient care as quickly and safely as possible.

Beth Mancini: Another $50 billion will be distributed for COVID-specific relief to hotspots, rural areas, and uninsured care. The remaining $75 billion has yet to be allocated. HHS has distributed more than $100 billion in Medicare loans under the Expanded, Accelerated, and Advance Payments program. Analysts have estimated this equates to an additional 2 to 3 months of lost cash flow to be repaid by year-end at zero interest. Many of our non-hospital tenants, primarily small independent physician practices, have also qualified for PPP forgivable SBA loans, equivalent to generally 2 months of payroll, rent, and utilities. Hospitals critically depend on these physicians to generate revenue even more during this recovery phase. Our health system partners are actively engaged with our medical office tenants to ramp up elective outpatient care as quickly and safely as possible.

The remaining $75 billion has yet to be allocated.

HHS has distributed more than $100 billion in Medicare loans under the expanded accelerated in advance payments program.

Analysts have estimated this equates to an additional two to three months of lost cash flow to be repaid by year end at zero interest.

Many of our non hospital tenants, primarily small independent physician practices have also qualified for P. P. P. Forgivable sta loans equivalent to generally two months of payroll rent and utilities.

Hospitals critically depend on these physicians to generate revenue even more during this recovery phase.

Health system partners are actively engaged with our medical office tenants to ramp up elected outpatient care quickly and safely as possible.

Bethany Mancini: Elective procedures were closed on average 34 days in HR's top markets and began reopening by the end of April. Different from discretionary services, elective care is essential, just planned in advance. Over time, elective care becomes more urgent the longer the wait. Our tenants are preparing for an increased caseload from delayed elective care, and our property management teams are working with them to plan for potentially longer workday hours and safety precautions for their most vulnerable patients. The ability to recapture pent-up demand should bolster HR's tenants. In contrast to many non-healthcare businesses that may operate at a limited capacity for a prolonged time, HR's tenants comprise a greater proportion of essential and critical services, which are accelerating their return to more typical operations. Higher acuity outpatient services also require more in-office care. We do not anticipate telemedicine will displace elective or in-office visits and outpatient procedures.

Beth Mancini: Elective procedures were closed on average 34 days in HR's top markets and began reopening by the end of April. Different from discretionary services, elective care is essential, just planned in advance. Over time, elective care becomes more urgent the longer the wait. Our tenants are preparing for an increased caseload from delayed elective care, and our property management teams are working with them to plan for potentially longer workday hours and safety precautions for their most vulnerable patients. The ability to recapture pent-up demand should bolster HR's tenants. In contrast to many non-healthcare businesses that may operate at a limited capacity for a prolonged time, HR's tenants comprise a greater proportion of essential and critical services, which are accelerating their return to more typical operations. Higher acuity outpatient services also require more in-office care. We do not anticipate telemedicine will displace elective or in-office visits and outpatient procedures.

Elective procedures were closed on average 34 days in HR top markets and began reopening by the end of April.

[noise] different from discretionary services collective care is essential just planned in advance.

Overtime elective care becomes more urgent the longer the weight. Our tenants are preparing for an increased caseload from delayed elective care and our property management teams are working with them to plan for potentially longer workday hours and safety precautions for their most vulnerable patient.

The ability to recapture pent up demand should bolster HR tenants in contrast to many non health care businesses that they operate at a limited capacity for a prolonged time HR tenants comprise a greater proportion of essential and critical services.

We are accelerating their returned to more typical operations.

Higher acuity outpatient services also require more in office care, we do not anticipate telemedicine will displace elective or in office visits and outpatient procedures.

Telemedicine has advanced quickly over the past two month, improving it can play an increasingly profitable role for physicians and allowing more efficient time saving strategies to manage lower acuity services.

Bethany Mancini: Telemedicine has advanced quickly over the past two months and proven it can play an increasingly profitable role for physicians in allowing more efficient, time-saving strategies to manage lower acuity services. Providers now have the ability to schedule reimbursable telemed visits for follow-up to operative care, routine checks, prescription refills, delivering test results. Previously, these were often unreimbursed patient phone calls. We anticipate the cost savings and better revenue generated for lower acuity care to serve an additive role within the physician's office as providers meet greater healthcare demand from an aging population. Healthcare Realty is committed now more than ever to owning outpatient facilities that are integrated with the clinical missions of strong health systems, and we are honored to play a role in our communities as we work together to safely reopen needed healthcare services.

Beth Mancini: Telemedicine has advanced quickly over the past two months and proven it can play an increasingly profitable role for physicians in allowing more efficient, time-saving strategies to manage lower acuity services. Providers now have the ability to schedule reimbursable telemed visits for follow-up to operative care, routine checks, prescription refills, delivering test results. Previously, these were often unreimbursed patient phone calls. We anticipate the cost savings and better revenue generated for lower acuity care to serve an additive role within the physician's office as providers meet greater healthcare demand from an aging population. Healthcare Realty is committed now more than ever to owning outpatient facilities that are integrated with the clinical missions of strong health systems, and we are honored to play a role in our communities as we work together to safely reopen needed healthcare services.

Providers now have the ability to schedule Reimbursable telemed visits for follow up operative care routine checks prescription refills delivering test results. Previously these were often unreimbursed patient phone calls.

We anticipate the cost savings and better revenue generated for lower acuity care to serve an additive role within the physician's office at providers meet greater health care demand from an aging population.

Healthcare Realty is committed now more than ever to owning outpatient facilities that are integrated with the clinical missions, a strong health system and we're honored to play a role in our communities as we work together to safely reopened needed health care services.

Now I'll turn it over to Rob for a review of our investment activity Rob.

Bethany Mancini: Now I'll turn it over to Rob for a review of our investment activities. Rob?

Beth Mancini: Now I'll turn it over to Rob for a review of our investment activities. Rob?

Thank you Bethany.

Rob Hull: Thank you, Bethany. Healthcare Realty's investment activity in Q1 was strong. Although the transaction market has slowed as it digests COVID-19's impact, our team continues to cultivate a robust pipeline, positioning us for a return to investing as market conditions improve. In Q1, we purchased 7 buildings for $102 million at a blended cap rate of 5.8%. The properties are located in Los Angeles, Atlanta, Raleigh, Colorado Springs, and Denver. What I really like is that they are associated with leading health systems in dense, attractive growth markets, where we have been successfully investing for years. All of these properties were sourced and closed prior to the pandemic. More recently, a number of heavily brokered deals have been delayed indefinitely or pulled from the market.

Healthcare Realty's investment activity in the first quarter was strong.

Although the transaction market has slowed as a digest covered nineteens impact our team continues to cultivate a robust pipeline.

Positioning us for a return to investing as market conditions improve.

In the first quarter, we purchased seven buildings for $102 million at a blended cap rate of 5.8%.

The properties are located in Los Angeles, Atlanta, Raleigh, Colorado Springs, and Denver.

What I really like is that they are associated with leading health systems in dense attractive growth markets, where we have been successfully investing for years.

All of these properties were sourced enclosed prior to the pandemic.

More recently, a number of heavily broker deals have been delayed indefinitely or pulled from the market.

In contrast, we sourced most of our acquisitions through our internal process, which has created advantages for us as we navigate cobot 19.

Rob Hull: In contrast, we source most of our acquisitions through our internal process, which has created advantages for us as we navigate COVID-19. We are in direct contact with many sellers in our pipeline, which facilitates our ability to extend inspection periods and transaction timelines. This gives us the opportunity to monitor the operational and financial performance of the tenants over multiple rent cycles before proceeding. We have revised our acquisition guidance for the year to reflect not only the delay in timing, but also the potential of our pipeline when market conditions improve. At our two development projects underway, we have remained largely on schedule, even as hospital leadership has shifted its focus to the coronavirus during recent months. In Memphis, the redevelopment of a 111,000 square foot MOB is moving forward. Leasing continues to climb.

We are in direct contact with many sellers and our pipeline, which facilitates our ability to extend inspection periods and transaction timelines.

This gives us the opportunity to monitor the operational and financial performance of the tenants over multiple rent cycles before proceeding.

We've revised our acquisition guidance for the year to reflect not only the delay and timing, but also the potential of our pipeline when market conditions improve.

And our two development projects underway, we've remained largely on schedule.

Even as hospital leadership has shifted its focus to the Corona virus during recent months.

In Memphis, the redevelopment of a 111000 square foot Inmobi, it's moving forward.

Leasing continues to climb.

In April Baptist Memorial Hospital signed lease amendments for additional space in the building that increased to 90%.

Rob Hull: In April, Baptist Memorial Hospital signed lease amendments for additional space in the building that increased it to 90%, further commitments recently made by several other existing tenants should move leasing to over 95%. In Seattle, we completed our development on UW Medicine's Valley Medical Center campus. More importantly, on 1 February, a lease for a 30,000 square foot surgery center commenced, and on 1 May, the hospital's 61,000 square foot cancer center began paying rent. The hospital continues to evaluate its need for more space, and leasing discussions with a third-party women's group and a behavioral health provider are active. Several of our prospective developments remain active, such as Nashville, Charlotte, and Memphis. These projects, sourced from our embedded pipeline, are supported by expansion plans at hospitals that are part of strong health systems.

And further commitments recently made by several other existing tenants should move leasing to over 95%.

In Seattle, we completed our development of your W. Medicine Valley Medical development on GW Medicines Valley Medical Center campus.

More importantly on February 1st a lease for a 30000 square foot surgery Center commenced.

And on May 1st the hospital 61000 square foot cancer Center began paying rent.

The hospital continues to evaluate its need for more space and leasing discussions with a third party women's group and a behavioral health provider or active.

Several of our perspective developments remain active.

Such as Nashville, Charlotte and Memphis.

These projects sourced from our embedded pipeline are supported by expansion plans at hospitals that are part of strong health systems.

Recent discussions with our health system partners indicate that each opportunity remains an integral integral to their growth plans.

Rob Hull: Recent discussions with our health system partners indicate that each opportunity remains an integral, integral to their growth plans. Once we are on the other side of the pandemic, we believe these developments will move forward. I am pleased with our team's ability to maintain and expand a quality investment pipeline despite disruptions in the market. Our direct sourcing channels, along with our long-standing hospital relationships, have positioned us well to benefit from what we see as another push in demand for outpatient services. Now, I will turn it over to Kris to discuss financial and operational performance for the quarter.

And once we are on the other side of the pandemic. We believe these developments will move forward.

I am pleased with our team's ability to maintain and expand the quality investment pipeline despite disruptions in the market.

Our direct sourcing channels, along with our longstanding hospital relationships have positioned us well to benefit from what we see is another push in demand for outpatient services.

Now I will turn it over to Chris to discuss financial and operational performance for the quarter.

Thanks, Rob.

Kris Douglas: Thanks, Rob. Q1 results were positive, highlighted by strong FFO growth and improved liquidity. After briefly commenting on quarterly results, I will focus on COVID-19's impact on our portfolio and our subsequent response. Normalized FFO in Q1 was $54.5 million, up 12% over Q1 2019. FFO per share in the quarter was $0.41, increasing 4.4% over Q1 of last year. Trailing twelve-month NOI was consistent with expectations at 2.6% for multi-tenant and 2.4% for total same store. Multi-tenant results were curbed slightly by higher-than-average expense growth. This was partially driven by the difficult comparison to Q1 2019, when operating expense growth was less than 1%. In addition, Q1 was impacted by $600,000 of expense true-ups, primarily related to property taxes.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Thanks, Rob. Q1 results were positive, highlighted by strong FFO growth and improved liquidity. After briefly commenting on quarterly results, I will focus on COVID-19's impact on our portfolio and our subsequent response. Normalized FFO in Q1 was $54.5 million, up 12% over Q1 2019. FFO per share in the quarter was $0.41, increasing 4.4% over Q1 of last year. Trailing twelve-month NOI was consistent with expectations at 2.6% for multi-tenant and 2.4% for total same store. Multi-tenant results were curbed slightly by higher-than-average expense growth. This was partially driven by the difficult comparison to Q1 2019, when operating expense growth was less than 1%. In addition, Q1 was impacted by $600,000 of expense true-ups, primarily related to property taxes.

First quarter results were positive.

Highlighted by strong FFO growth and improved liquidity.

After briefly commenting on quarterly results I will focus on cobot, 19th impacts on our portfolio an hour subsequent response.

Normalized FFO in the first quarter was $54.5 million up 12% over the first quarter of 2019.

At the FFO per share in the quarter was 41 cents, increasing 4.4% over the first quarter of last year.

Trailing 12 month in Hawaii was consistent with expectations at 2.6% for multi tenant and 2.4% for total same store.

Multi tenant result work herb slightly by higher than average expense growth.

This was partially driven by the difficult comparison to first quarter 2019, when operating expense growth was less than 1%.

Addition, first quarter was impacted by $600000 of expense true ups, primarily related to property taxes.

Much of the expense true ups were recouped in operating expense reimbursements.

Kris Douglas: Much of the expense true-ups were recouped in operating expense reimbursements, evidenced by the 3.5% growth in revenue per occupied square foot in Q1. We expect operating expenses in Q2 to be more in line with our historical norms of 2% to 2.5%. Trailing 12 months multi-tenant revenue increased 2.6% or 2.8% per square foot, offsetting the above average expense growth. Solid leasing activity included tenant retention of 84% and average cash, cash leasing spreads of 4.4%. During the quarter, we took several steps to extend our debt maturity schedule and increase liquidity. On 4 March, we issued $300 million of unsecured bonds at a 2.4% coupon.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Much of the expense true-ups were recouped in operating expense reimbursements, evidenced by the 3.5% growth in revenue per occupied square foot in Q1. We expect operating expenses in Q2 to be more in line with our historical norms of 2% to 2.5%. Trailing 12 months multi-tenant revenue increased 2.6% or 2.8% per square foot, offsetting the above average expense growth. Solid leasing activity included tenant retention of 84% and average cash, cash leasing spreads of 4.4%. During the quarter, we took several steps to extend our debt maturity schedule and increase liquidity. On 4 March, we issued $300 million of unsecured bonds at a 2.4% coupon.

Evidenced by the 3.5% growth in revenue per occupied square foot in the first quarter.

We expect operating expenses in the second quarter to be more in line with our historical norms of 2% to 2.5%.

Trailing 12 month, multi tenant revenue increased 2.6% or 2.8% per square foot.

Offsetting the above average expense growth.

Solid leasing activity included tenant retention of 84% and average cash cash leasing spreads of 4.4%.

During the quarter, we took several steps to extend our debt maturity schedule and increase liquidity.

On March 4th we issued $300 million of unsecured bonds at a 2.4% coupon.

Kris Douglas: We also extended the delayed draw at the end of May for our $150 million, 2026 term loan. As a result, at 31 March, we had $738 million of liquidity, with less than $50 million of debt maturities through 2022. Shifting to COVID-specific issues. The response was swift and significant from Washington, with numerous programs to support the healthcare system. At the same time, we proactively worked with our tenants to ensure they would weather the impact of shelter-in-place orders and be in a position to thrive as restrictions lift. In March, we rolled out materials to educate our tenants on various COVID-19 financial resources. In particular, we highlighted the Paycheck Protection Program, given that we have over 2,000 small independent physician practice tenants.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: We also extended the delayed draw at the end of May for our $150 million, 2026 term loan. As a result, at 31 March, we had $738 million of liquidity, with less than $50 million of debt maturities through 2022. Shifting to COVID-specific issues. The response was swift and significant from Washington, with numerous programs to support the healthcare system. At the same time, we proactively worked with our tenants to ensure they would weather the impact of shelter-in-place orders and be in a position to thrive as restrictions lift. In March, we rolled out materials to educate our tenants on various COVID-19 financial resources. In particular, we highlighted the Paycheck Protection Program, given that we have over 2,000 small independent physician practice tenants.

We also extended the delayed draw at the end of May.

Our 150 million dollar 2026 term one.

As a result.

At March 30, Onest, we had $738 million of <unk> of liquidity with less than $50 million of debt maturities through 2022.

Shifting to cobot specific issues.

The response was swift and significant from Washington, with numerous programs to support the health care system.

At the same time, we proactively worked with our tenants to ensure they would whether the impact of shelter in place orders and be in a position to thrive as restrictions lift.

In March we rolled out materials to educate our tenants on various cobot 19 financial resources in particular, we highlighted the payroll protection program given that we have over 2000 small independent physician practice tenants.

Kris Douglas: The PPP loans through the SBA, SBA include forgiveness of funds used for payroll, as well as rent and utility expenses. In addition, we create a rent deferral and repayment application, reviewed on a case-by-case basis, with focus primarily on the small independent physician practices. We processed over 500 deferral requests for April and provided deferral agreements to over 400 tenants, representing 7% of total rent. Individual deferrals range from 50% to 100% of the tenant's April rent, with repayment and monthly installments in the second half of the year. The average deferral tenant size was 3,400 square feet, compared to the 4,400 square feet average for our portfolio, highlighting how most requests came from smaller independent groups. It's still early, but May deferral requests are running in line with what we saw for April at this point in the cycle.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: The PPP loans through the SBA, SBA include forgiveness of funds used for payroll, as well as rent and utility expenses. In addition, we create a rent deferral and repayment application, reviewed on a case-by-case basis, with focus primarily on the small independent physician practices. We processed over 500 deferral requests for April and provided deferral agreements to over 400 tenants, representing 7% of total rent. Individual deferrals range from 50% to 100% of the tenant's April rent, with repayment and monthly installments in the second half of the year. The average deferral tenant size was 3,400 square feet, compared to the 4,400 square feet average for our portfolio, highlighting how most requests came from smaller independent groups. It's still early, but May deferral requests are running in line with what we saw for April at this point in the cycle.

The PPP was through the SP SPJ include forgiveness of funds used for payroll as well as rent and utility expenses.

In addition, we create a rent deferral and repayment application reviewed on a case by case basis, we're focused primarily on the small independent physician practices.

We processed over 500 deferral requests for April and provided deferral agreements to over 400 tenants representing 7% of total rent.

Individual deferrals ranged from 50% to 100% of the tenants April rent with repayment and monthly installments in the second half of the year.

The average deferral tenant size was 3400 square feet compared to the 4400 square feet average for our portfolio.

Highlighting how most request came from smaller independent groups.

It's still early but made deferral requests are running in line with what we saw for April at this point in the cycle.

A critical number I know everyone is focused on this april rent collections of 89%.

Kris Douglas: A critical number I know everyone is focused on is April rent collections of 89%. This is better than what we projected in our 6 April business update. The 89%, combined with the 7% of deferral agreements, accounts for 96% of April rent. The remaining 4% in April is in April accounts receivable. For context, our historical current period AR has averaged 4% to 9%, which has typically been collected within the following 30 to 60 days. This strong collectibility is evidenced by our bad debt expense, which averaged less than $100,000 annually over the last two years. We analyzed our deferral request to determine if there were any consistent themes. We saw that deferrals were highly correlated to non-hospital tenancy, as well as specialties with more elective procedures, such as dentistry and plastic surgery.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: A critical number I know everyone is focused on is April rent collections of 89%. This is better than what we projected in our 6 April business update. The 89%, combined with the 7% of deferral agreements, accounts for 96% of April rent. The remaining 4% in April is in April accounts receivable. For context, our historical current period AR has averaged 4% to 9%, which has typically been collected within the following 30 to 60 days. This strong collectibility is evidenced by our bad debt expense, which averaged less than $100,000 annually over the last two years. We analyzed our deferral request to determine if there were any consistent themes. We saw that deferrals were highly correlated to non-hospital tenancy, as well as specialties with more elective procedures, such as dentistry and plastic surgery.

This is better than what we projected in our April six business business update.

The 89% combined with the 7% a deferral agreements accounts for 96% of April right.

The remaining 4%.

In April is is in April accounts receivable.

For context, our historical current period, they are has averaged 4% to 9%.

Which has typically been collected within the following 30 to 60 days.

The strong collectability is evidenced by our bad debt expense, which averaged less than $100000 annually over the last two years.

We analyzed our deferral requests to determine if there were any consistent themes.

We solve it deferrals were highly correlated to non hospital tenancy as well as specialties with more elective procedures, such as dentistry and plastic surgery.

After controlling for these two factors, we did not see meaningful correlation between on versus off campus buildings or geography.

Kris Douglas: After controlling for these 2 factors, we did not see meaningful correlation between on versus off-campus buildings or geography. I point you to pages 5 and 6 of our COVID-19 update for more detail on this analysis. Our portfolio, composed of a diversified mix of tenants, associated primarily with the country's highest credit-rated, not-for-profit health systems, is especially poised to perform well. The work we have done over the past 10 to 15 years to enhance the quality of our portfolio, combined with our ample liquidity, positions us well to overcome the challenges facing the broader economy and deliver safe and attractive risk-adjusted returns to our investors. Todd?

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: After controlling for these 2 factors, we did not see meaningful correlation between on versus off-campus buildings or geography. I point you to pages 5 and 6 of our COVID-19 update for more detail on this analysis. Our portfolio, composed of a diversified mix of tenants, associated primarily with the country's highest credit-rated, not-for-profit health systems, is especially poised to perform well. The work we have done over the past 10 to 15 years to enhance the quality of our portfolio, combined with our ample liquidity, positions us well to overcome the challenges facing the broader economy and deliver safe and attractive risk-adjusted returns to our investors. Todd?

I point, you to pages, five and six of our covert 19 update for more now for more detail on this analysis.

Our portfolio composed of a diversified mix of tenants associated primarily with the country's highest credit rated not for profit health systems is especially poised to perform well.

The work we have done over the past 10 to 15 years to enhance the quality of our portfolio combined with our ample liquidity.

Positions us well to overcome the challenges facing the broader economy and deliver safe and attractive risk adjusted returns to our investors.

Todd.

Thank you Chris before we go to questions I'll, just mention to everyone that were practicing social distancing here and we'll do our best and not interrupt each other.

Todd Meredith: Thank you, Kris. Before we go to questions, I'll just mention to everyone that we're practicing social distancing here, and we'll do our best to not interrupt each other. Operator, with that, we're prepared to begin the question-and-answer period.

Operator with that we're prepared to begin the question and answer period.

We will now begin the question and answer session to also question you. My Press Star then one on your Touchtone phone if you're using this speakerphone. Please pick up your handset before pressing the key to withdraw your question Press Star then too.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then two. At this time, we will momentarily pause to assemble our roster. Our first question is from Jordan Sadler, from KeyBanc Capital. Go ahead.

This time, we will momentarily pause to assemble a roster.

Our first question is from Jordan Sadler from Keybanc capital go ahead.

Thank you good morning, I hope, you're all doing well.

Jordan Sadler: Thank you. Good morning, and I hope you're all doing well. Kris, specifically in your prepared remarks, you touched on May rent. I think you said deferral requests were running in line. I wanted to just clarify and ask if collections were also running in line with April?

[music].

Chris specifically.

Her prepared remarks, you touched on.

They rent.

Thank you said thorough requests were running in line I wanted to just clarify skip collections for all so running in line with April.

Yeah actually collections are running slightly above what we saw in April so.

Kris Douglas: Yeah, actually, collections are running slightly above what we saw in April. We're doing a little bit better than we saw last month on collections. On deferrals, as you mentioned, you know, it's pretty close to what we were seeing in April. You know, it's still early in the cycle, encouraging signs nonetheless.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Yeah, actually, collections are running slightly above what we saw in April. We're doing a little bit better than we saw last month on collections. On deferrals, as you mentioned, you know, it's pretty close to what we were seeing in April. You know, it's still early in the cycle, encouraging signs nonetheless.

We're we're doing a little bit better than we saw last month on collections.

And then on deferrals as you mentioned.

It's pretty close to what we were seen in April.

It's still early in the cycle, but but encouraging signs nonetheless.

I suspect that maybe a function of some of the openings.

Jordan Sadler: I, I suspect that may be a function of, of some of the openings that are referenced in your slides. Can you speak to, maybe, maybe Todd, what you're sort of seeing, sort of early days in terms of maybe utilization, especially in, in the places that have, you know, been open already, you know, a week or two? You know, and how those facilities have come back online.

Just in your slides.

Can you speak to maybe be Todd.

What you're sort of seeing sort of early days in terms of maybe utilization, especially in the places that have been.

Been opened already a week or two.

You know and how those.

Deliveries have come back online.

Sure.

Todd Meredith: Sure. Jordan, you're right. A lot of, a lot of places, especially the elective procedures, you know, are beginning to ramp up. You're right. Really, we've been really dialoguing with all of our property management folks across the country and monitoring that weekly to sort of see what anecdotally or what they're observing in the buildings. Also we look at maintenance, maintenance orders. The number of maintenance orders relative to historical volumes is a pretty strong correlation. We saw probably in mid-April, volume on average, and this is just, you know, on average, but it sort of correlates with the maintenance orders, probably 60% to 70% reduction in, in activity in the buildings across the board. We began to see that lift almost two weeks ago now.

Jordan, you're right a lot of lot of places.

Especially the elective procedures are beginning to ramp up you're right and really so we've been really dialoguing with all of our property management folks across the country and monitoring that weekly just sort of see what.

Anecdotally or what their observing in the buildings and and also we look at <unk> maintenance orders. So the number of maintenance orders relative to historical volumes is a pretty strong correlation. So we saw probably in mid April volume on the average and this is just.

On average, but it's sort of correlates with the maintenance orders, probably 60% to 70% reduction in an activity in the buildings across the board and we began to see that lift almost two weeks ago. Now. So we definitely seen that uptick where you start to cross 50% in many cases or even even more.

Todd Meredith: We've definitely seen that uptick where you're starting to cross 50% in many cases, even, even more than that in some others. Then anecdotally, certainly, even locally, I know we, one of our, our directors of real estate was talking with some providers in the building, and, and they were excited, frankly, that they were back to 5 days a week in their work schedule. Definitely seeing a lot of that. As I mentioned, we're working with some hospitals to figure out the logistics, you know, of how we're going to not only screen folks, but move to the next recovery phase, which is, you know, how do we help them screen for procedures?

Than that in some others and then anecdotally certainly even locally I know, we one of our directors real estate is talking with some providers in the building and they were excited frankly that they were back to five days a week in their work schedule. So definitely seeing a lot of that as I mentioned, we're working with some hospice.

Sales to.

Figure out the logistics, how we're going to not only screen folks, but moved to the next recovery phase, which as you know how do we help them screen for procedures and how do we you know as as the buildings get more full how do we create the proper protocol social distancing cues just safety measures. So we're all of that is beginning to.

Todd Meredith: How do we, you know, as, as the buildings get more full, how do we create the proper protocols, social distancing queues, just safety measures? All of that is beginning to feel very real, and, and we're seeing it, as I said, in the maintenance orders. They're, they're definitely back up for sure.

Very real and we're seeing it as I said in the maintenance orders there they are definitely backup for sure.

And I'll just add to that Todd that just to clarify on utilization you know all of our buildings were open.

Kris Douglas: I'll just add to that, Todd, that just to clarify on utilization, you know, all of our buildings were open. You know, 9 out of 10, I think, or at least 9 out of our 10 tenants remain seeing patients inside of their suites, did not even temporarily shut their doors, but obviously, it reduced volumes. That's what was driving those work orders. We're starting to see those volumes start to ramp back up. All of our buildings did remain open, you know, a super majority of our tenants continued to use their space, but obviously just at a lower rate.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: I'll just add to that, Todd, that just to clarify on utilization, you know, all of our buildings were open. You know, 9 out of 10, I think, or at least 9 out of our 10 tenants remain seeing patients inside of their suites, did not even temporarily shut their doors, but obviously, it reduced volumes. That's what was driving those work orders. We're starting to see those volumes start to ramp back up. All of our buildings did remain open, you know, a super majority of our tenants continued to use their space, but obviously just at a lower rate.

And in nine out of Ken the girl or at least nine of our 10.

Tenets root cause remained seen patients inside of their suites did the did not even temporarily shut their doors, but obviously it reduced volumes and so that's what was driving those those work orders and so we're starting to see those volumes start to ramp back up but all of our buildings did remain open.

And you know Super majority of our tenants continue to two years their space, but obviously just at a.

Lower rate.

Hi, just come back to.

Jordan Sadler: Just come back to 1 of the comments there, on screening at your facilities. Is it your perception that each of your facilities are screening for COVID patients prior to letting folks into either doctor suites or, or offices?

One of the comments there.

On screening at your facilities is it your perception that.

Each of your facilities are screening for who would patients prior to letting folks.

In two.

Either dr. sweets or offices.

We're we're not necessarily taking a one size fits all approach to it so I can't say, it's 100%, it's really being driven largely by that heavy coordination with hospitals, but also just the tenants in the building. So a lot of tenants are proactively looking to do that whether its coordinated where it's sort of.

Todd Meredith: We're not necessarily taking a one-size-fits-all approach to it, so I can't say it's 100%. It's really being driven largely by that heavy coordination with hospitals, but also just the tenants in the building. A lot of tenants are proactively looking to do that. Whether it's coordinated, where it's sort of a central screening for every visitor in the building, or it's specific to a suite, we're allowing that to work case by case. It's definitely... You know, we're not trying to be healthcare providers, let's put it that way. We are trying to be facilitators of what our tenants wanna do.

Central screening for that for every visit or in the building, where it's specific to a sweet we're allowing that to work case by case. So it's it's definitely we're not trying to be health care providers, let's put it that way we are trying to be facilitators of what our tenants want to do so it's it's largely I would say driven by the hospitals that are.

Todd Meredith: It's largely, I would say, driven by the hospitals that are key tenants in our buildings, but also obviously half of our buildings are actually occupied by those hospital tenants. Then, you know, two-thirds to even over 80% are on or next to the campus, so we work with the hospital there.

Key tenants in our buildings, but also obviously were half of our buildings or or actually a.

Occupied by those that hospital tenants, but then you know two thirds to even over 80% or on our next to the campus. So we work with hospitals there.

And in Jordan, I would add to that that they're really when we yours or use the word screening. There's a continue on there as well all of our buildings have signed a job that if you have symptoms.

Kris Douglas: Jordan, I would add to that, that it really, when you also use the word screening, there's a continuum there as well. All of our buildings have signage up that if you have symptoms, fever, et cetera, that you are to contact your healthcare provider before entering the building. Some of the buildings we're also then going through screening to look for and ask about any symptoms you may have. It continues all the way on to actual testing. You may have testing that is going on in the building or potentially out in the parking lot before someone would be entering the building for a procedure.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Jordan, I would add to that, that it really, when you also use the word screening, there's a continuum there as well. All of our buildings have signage up that if you have symptoms, fever, et cetera, that you are to contact your healthcare provider before entering the building. Some of the buildings we're also then going through screening to look for and ask about any symptoms you may have. It continues all the way on to actual testing. You may have testing that is going on in the building or potentially out in the parking lot before someone would be entering the building for a procedure.

Fever et cetera that you are to contact your health care provider before entering the building.

Some of the buildings were also then going through screening to to look for and ask about any symptoms you may have.

And then it continues all the way on to actual testing.

So you may have testing that is going on in the building or potentially out in the and the parking lot.

Before someone would be entering the building for per procedure typically that testing is actually going to be done there too ahead.

Kris Douglas: Typically, that testing is actually gonna be done, you know, a day or two ahead, you know, depending on how rapidly they can get those tests back. We're, we are certainly putting in place protocols to make sure we are limiting exposure, but the extent of screening to testing, you know, kind of goes across a continuum, as I discussed.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Typically, that testing is actually gonna be done, you know, a day or two ahead, you know, depending on how rapidly they can get those tests back. We're, we are certainly putting in place protocols to make sure we are limiting exposure, but the extent of screening to testing, you know, kind of goes across a continuum, as I discussed.

Depending on how rapidly they can get those test back so.

Where we are certainly putting in place protocols to make sure we are limiting exposure.

But the extent of screening.

To testing.

You know kind of goes across the continuum is I discussed.

Okay. Thanks for all the detail.

Jordan Sadler: Okay, thanks for all the detail.

Thanks, Jordan Krish comments.

Todd Meredith: Thanks, Jordan. Appreciate your comments.

Operator: Our next question is from Nick Joseph, from Citi. Go ahead.

Our next question is some Nick Joseph from Citi well ahead.

Thank you.

Nick Joseph: Thank you. Hope you guys are doing well. How long do you expect it to take to work through the pent-up demand for these non-essential medical procedures to get back to more of a normal monthly run rate?

I Hope you guys are doing well how long do you expect it to take to work through the pent up demand for these non essential medical procedures to get back to more of a normal monthly run rate.

Obviously, Nick it is a little challenging to know that but I think as everybody would like to do we make our best educated guesses that bad and based on what we're hearing feedback we do get a lot of feedback as you can imagine to the deferral program, we're asking a lot of questions in those applications.

Todd Meredith: Obviously, Nick, it, it is a little challenging to know that, but I think as everybody would like to do, we, we make our best educated guesses at that. Based on what we're hearing, feedback, we do get a lot of feedback, as you can imagine, through the deferral program. We're asking a lot of questions in those applications, as well as just the conversations we're having with our local staff. Our view is generally that May is clearly going to be a month of transition. That's, you know, really ramping up, but probably not all the way back in a lot of cases. I think it's gonna take through June easily to really kind of get back to somewhat more normal levels.

As well as just the conversations we're having with our local staff and our view is generally that may is clearly going to be a month of transition that's really ramping up but probably not all the way back in a lot of cases, I think it's going to take.

Through June easily to really kind of get back to somewhat more normal levels, hopefully will roll into the beginning of the third quarter in July looking a lot more like normal obviously that remains to be seen so what we're looking at right. Now then is that based on the feedback and what we're hearing and seeing is that.

Todd Meredith: Hopefully, we'll roll into the beginning of Q3 in July, looking a lot more like normal. Obviously, that remains to be seen. What we're looking at right now then is that based on the feedback and what we're hearing and seeing, is that it should be a lot of pent-up demand being addressed in the second half of the year. Obviously, it's gonna vary a little bit by location, by specialty, and how different providers choose to ramp up and so forth. It's encouraging right now that it looks like it could be largely in the second half. You know, whether that really spills over into 2021 is hard to know at this point.

It should be a lot of pent up demand being addressed in the second half of the year, obviously, it's going to vary a little bit by by location by specialty and how different providers choose to to ramp up and so forth. So it's encouraging right now that it looks like it could be largely in the second half now whether that.

Really spills over into 21 is hard to know at this point. So it's it's kind of as we all know a month by month.

Todd Meredith: It's, it's kind of, as, as we all know, a month-by-month evaluation or even week by week, but so far it looks to be something like that for, for the majority, vast majority of our tenants.

Evaluation or even week by week, but so far it looks to be something like that for for majority vast majority of our tenants.

Thank you.

Nick Joseph: Thank you.

Thanks, Nick.

Todd Meredith: Thanks, Nick.

Our next question is from John Kim from the IMO capital.

Operator: Our next question is from John Kim, from BMO Capital. Go ahead.

Go ahead.

Thanks, Good morning.

Operator: Thanks. Good morning. Todd, in your prepared remarks, you mentioned the increased use of telehealth as one of the near-term impacts of COVID-19. I was wondering if there were any other ramifications that you foresee, whether it's increased demand, for instance, for off-campus MOBs, as some patients become more reluctant to go near a hospital?

Todd in your prepared remarks, you mentioned the increased use of Tele health.

As one of the in the near term impacts of covered 19 I.

I was wondering if there were any other ramifications that you foresee whether its increased demand for instance for off campus I'm going to be.

Some patients would become more reluctant to go in your hospital.

Yeah, we certainly don't expect that I think as you would imagine the the nature of our on campus Imobile tends to skew towards higher acuity specialist, which is less less optional if you will.

Todd Meredith: Yeah, we, we certainly don't expect that. I think, as you would imagine, the, the nature of our on-campus MOBs tends to skew towards higher acuity specialists, which is less, less optional, if you will. As Bethany described, I think we all think of elective as being optional, but it's really not. I think the key there is, you know, people, I think people ultimately trust their physician. They may, you know, as human behavior will dictate, you know, people can be hesitant around those things. I think when you have something serious, cancer, you know, cardiology, whatever that, that serious issue may be, I think people ultimately trust their physician, and if their physician recommends that, that it's safe and advises them, I think they will, will do that.

As Bethany described I think we all think of elected as being optional, but it's really not and I think the key there is people I think people ultimately trust their physician they may.

You know its human behavior will dictate people can be hesitant around those things, but I think when you have something serious.

Cancer cardiology, whatever that at serious issue may be I think people ultimately trust their physician and at their physician recommends that that it's safe and advises them I think they will we'll do that we just thinking about deferrals in the use of telemedicine, we have not seen a.

Todd Meredith: You know, just thinking about deferrals and the use of telemedicine, we have not seen a, a distinction between the physician aspect of that or component of it, on versus off. This has been sort of unfortunately, like, like the broader economy, economy, this has been, you know, an indiscriminate pandemic and disease and, and it's hitting everyone. Our view is telemedicine is a very useful tool, no matter-- almost no matter what specialty you're in, to do some of the things Bethany described, these, these more low acuity, sort of basic tasks, and hopefully, they get reimbursed. You know, that hopefully, that sticks and frankly, generates more revenue. We're not seeing or expecting material change in where telemedicine may help or hurt in terms of location.

Distinction between the physician aspect of that for component of it on versus off this has been sort of unfortunately like like the broader comedy economy at this has been.

And indiscriminate endemic and disease and it's hitting everyone. So our view is telemedicine is a very useful tool no matter almost no matter what specialty your end to do some of the things Bethany describes these these more low acuity sort of basic tas and hopefully they get reimbursed, but hopefully that sticks and frankly.

Generates more revenue, but we're not seeing are expecting material change in where telemedicine may help or hurt terms of location.

Okay and on the increase a use of short term renewals that you're anticipating or offering.

Operator: Okay. On the increased use of short-term renewals that you're anticipating or offering, can you provide some color on what the economics of this look like? The terms, are these more month to month or one year out? You know, flat rent to what they were paying before, and as far as any free rent period offered?

Can you provide some color on what the economics of this looks like or these more and the terms that he's more month to month or one year out.

And flat rents when they were paying before and as far as any free rent period offered.

Yeah on the on the renewals you know, we're just as Todd mentioned in prepared remarks, we're not asking people to make.

Kris Douglas: Yeah, on the, on the renewals, you know, we're just, as Todd mentioned in the prepared remarks, you know, we're not asking people to make, you know, long-term decisions while they're trying to handle, you know, short-term uncertainty. As we are looking at renewals, we are comfortable with, with doing, you know, 6 months or maybe even 1 year renewal, letting people see the rebound, get their feet under them, get comfortable in terms of making that, that longer term commitment. In terms of what the rent would be, our expectation is probably more in that 0% to 3% that we've updated in terms of our guidance on cash leasing spreads. Not looking to really do a big mark-to-market at that point.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Yeah, on the, on the renewals, you know, we're just, as Todd mentioned in the prepared remarks, you know, we're not asking people to make, you know, long-term decisions while they're trying to handle, you know, short-term uncertainty. As we are looking at renewals, we are comfortable with, with doing, you know, 6 months or maybe even 1 year renewal, letting people see the rebound, get their feet under them, get comfortable in terms of making that, that longer term commitment. In terms of what the rent would be, our expectation is probably more in that 0% to 3% that we've updated in terms of our guidance on cash leasing spreads. Not looking to really do a big mark-to-market at that point.

Long term decisions, while they're trying to handle.

Short term uncertainty.

So as we are looking at renewals, we are comfortable with with do and six month or maybe even a year renewal letting people.

See the the rebound get get their feet under him get comfortable.

In terms of making that that longer term commitment.

In terms of what the rents would be our expectation is probably more in that zero to 3% that weve updated in terms of our guidance on cash leasing spreads on not looking to to really do a big mark to market at that point, we'll just.

Kris Douglas: We'll just kind of take the, the current situation or the current growth that's e-embedded in the lease, and then get back to the, the longer-term discussion. One of the, the things that will, will be helpful in that, is that we don't anticipate spending any capital that would be associated with those, those short-term renewals. There will be some maintenance CapEx, second-gen TI leasing commission, improvement in associated with those, those shorter-term renewals, and that was also reflected in the updated guidance that we provided.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: We'll just kind of take the, the current situation or the current growth that's e-embedded in the lease, and then get back to the, the longer-term discussion. One of the, the things that will, will be helpful in that, is that we don't anticipate spending any capital that would be associated with those, those short-term renewals. There will be some maintenance CapEx, second-gen TI leasing commission, improvement in associated with those, those shorter-term renewals, and that was also reflected in the updated guidance that we provided.

Kind of take the current situation or the current growth that's embedded in the lease and then get back to the longer term discussion one of the things that will will be helpful. In that is that it does we don't anticipate.

Spending any capital that would be associated with us the short term renewals. So there will be some.

Maintenance Capex second Gen Ti leasing commission.

The improvement in associated with those shorter term renewals and that was also reflected and the updated guidance that we provided.

Do you think this will have a near term positive impact on same store growth or more of a neutral impact.

Operator: Do you think this will have a near-term positive impact on same-store growth or more of a neutral impact?

[music].

Kris Douglas: No, on, on same-store, our guidance, we assume that it, it would be down slightly, and that really has to do with the expectation for new leasing. You know, we don't know exactly what the impact will be. New leasing, there is a lag. It can be, you know, six months between when you start tours to when somebody actually starts commencing their lease. It will probably be later in the year, but we may, may start seeing a little bit of slowdown in terms of backfill of space. As a result of that, we're looking at occupancy that is flat to maybe slightly down. That could, as opposed to our previous expectation, which was flat to up in terms of occupancy.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: No, on, on same-store, our guidance, we assume that it, it would be down slightly, and that really has to do with the expectation for new leasing. You know, we don't know exactly what the impact will be. New leasing, there is a lag. It can be, you know, six months between when you start tours to when somebody actually starts commencing their lease. It will probably be later in the year, but we may, may start seeing a little bit of slowdown in terms of backfill of space. As a result of that, we're looking at occupancy that is flat to maybe slightly down. That could, as opposed to our previous expectation, which was flat to up in terms of occupancy.

No one on same store our guidance, we assume that it would would be down slightly and that really has to do with the expectation for new leasing.

We don't know exactly what the the impact will be new leasing there is a lag on it can be.

Six month between when you start to worse to win when somebody actually starts commencing there their lease so it will probably be later in the year, but we may may start seeing a little bit of slowdown in terms of backfill of of space.

And so as a result of that we're looking at occupancy that is flat to maybe slightly down.

And that could as opposed to our previous expectation, which was was flat to up in terms of occupancy.

Kris Douglas: As a result of that, you could see a bit of a slowdown on same store. We're still on multi-tenant, we're looking at, you know, a little over 2, kind of 2.4, 2.5 at the midpoint of our range. Still, you know, still, still growth, still, still strong growth. On single tenant, we don't, we don't anticipate, you know, really much, if any, impact there. We, we didn't, we didn't change our expectations on single tenant.

And so as a result of that you could see a.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: As a result of that, you could see a bit of a slowdown on same store. We're still on multi-tenant, we're looking at, you know, a little over 2, kind of 2.4, 2.5 at the midpoint of our range. Still, you know, still, still growth, still, still strong growth. On single tenant, we don't, we don't anticipate, you know, really much, if any, impact there. We, we didn't, we didn't change our expectations on single tenant.

A bit of a slowdown on on same store, but we're still on multi tenant we're looking at.

Little over two.

2.42, 0.5 at the midpoint of our range is still its still still grow still still strong growth and then on single tenant.

We don't we don't anticipate you know really much if any impact there. So we didnt, we didn't change our expectations.

On single tenant.

Great. Thanks, Chris.

Rich Anderson: Great. Thanks, Kris.

Thanks, John.

Operator: Thank you, John. Our next question is from Rich Anderson from SMBC. Go ahead.

Our next question is from Rich Anderson from S. M B C.

Go ahead.

Rich Anderson: Hey, thank you. Good morning, everyone. Hey, I hope obviously everyone is doing well, and sound, you sound healthy, I guess. Kris, to you, the 4% in AR that you went through, would that be correctly described as an abatement or forgiveness that you offered, or people that simply didn't sort of communicate an interest in a deferral plan, and you haven't been able to track down? I'm just curious, you know, if you can give the cadence of that 4% of the April bill.

Thank you and good morning, everyone, Hey, a and I hope obviously, everyone is doing well and sound you sound healthy I guess.

So Chris to you.

The 4% and they are a that you went through would that be correctly described as an abatement or forgiveness that you offered or is it or people that simply didn't sort of communicate.

An interest in a deferral plan and and you haven't been able track down I'm. Just curious you know if you can give the cadence of those of those that 4% of the Brazil.

Yeah, rich, it's not a bateman, it's more of just pieces that have been uncollected as of yet.

Kris Douglas: Yeah, Rich, it's, it's not abatement. It's, it's more of just pieces that have been uncollected as of yet. As we talked about, we, we, each, each month, each quarter, we're you're gonna have a piece of that for various reasons. A lot of it ends up being related to operating expense billings, maybe after-hour CAM billings, those types of things. So it may not even be the full rent. A large portion of this is just a, call it a kind of a short pay AR balance that's outstanding. As those are, are kind of cleared up over the next 30 to 60 days, they get, they get paid. That's been our historical experience, is that we do collect that over, over 30 to 60 days.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Yeah, Rich, it's, it's not abatement. It's, it's more of just pieces that have been uncollected as of yet. As we talked about, we, we, each, each month, each quarter, we're you're gonna have a piece of that for various reasons. A lot of it ends up being related to operating expense billings, maybe after-hour CAM billings, those types of things. So it may not even be the full rent. A large portion of this is just a, call it a kind of a short pay AR balance that's outstanding. As those are, are kind of cleared up over the next 30 to 60 days, they get, they get paid. That's been our historical experience, is that we do collect that over, over 30 to 60 days.

And as we talked about we each each month, each quarter, where you're going to have a piece of that.

For various reasons a lot of it ends up being related to.

Operating expense billings, maybe after our can billions of those types of things and so it may not even be the full rent a large portion of this is just a.

Call it a kind of a short pay.

HR balance that's that's outstanding and is those are are kinda cleared up over the next 30 to 60 days.

They get they get paid and that's been our historical experience is that we do collect that over over 30 to 60 days. So we think a lot of it is is it that camp we are.

Kris Douglas: We think a lot of it is in that camp. We are certainly reaching out to all of our tenants and trying to understand, hey, should we be looking for that payment coming in, or do we need to have a discussion related to a deferral? Nothing at this point that I would say is out of the ordinary, and we'll continue to monitor and work on those collections, as we would in the normal course.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: We think a lot of it is in that camp. We are certainly reaching out to all of our tenants and trying to understand, hey, should we be looking for that payment coming in, or do we need to have a discussion related to a deferral? Nothing at this point that I would say is out of the ordinary, and we'll continue to monitor and work on those collections, as we would in the normal course.

Certainly reaching out to and to all of our tenants and trying to understand Hayes.

Should we be looking for that that payment coming in or do we do we need to have a discussion related to related to a deferral.

So.

Nothing nothing at this point that I would say is out of the ordinary and we'll continue to monitor and work on on those collections.

As we as we would in the normal course, okay. So when was it 9%.

Rich Anderson: Okay. When, when was it 9%?

Oh I had to pull up the the.

Kris Douglas: I'd have to pull up the. We look back over, like, three to five years.

We look back over like three to five years and it's it bounces around I wouldn't say it's anything.

Rich Anderson: Okay

Kris Douglas: it, it, it bounces around. I wouldn't say it's anything, you know, in particular that we're able to say, "All right, it was exactly this." The average ended up, I think we pointed out, was about 5.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: it, it, it bounces around. I wouldn't say it's anything, you know, in particular that we're able to say, "All right, it was exactly this." The average ended up, I think we pointed out, was about 5.

In particular that we're able to say our it was exactly this the average ended up I think we pointed out was about five okay. I didn't know if there was any relevance that never okay. When you when you're kind of going through this and thinking about next quarter I wonder.

Rich Anderson: Okay. I didn't know if there, if there was any relevance to that number. Okay, when you, when you're, you know, kind of going through this and thinking about next quarter, I wonder, you know, how much of an effort now will be put into, you know, really digging in about, you know, sort of coming up with a bad debt reserve to the extent it's needed, whether or not you'll have to move to cash basis versus GAAP. I mean, are all these sort of the moving parts that you have left to work through as we go through this, or do you don't think that maybe there'll be much in the way of that kind of accounting process that will be necessary as, as these months go by?

How much of an effort now will be put into you know really digging in about you know I'm.

Sort of coming up with a bad debt reserve to you extends need it whether or not you'll have to move to cash basis versus gap. I mean are all these sort of the moving parts that you have left to work through as we go through this or do you don't think that maybe there will be much in a way of that kind of accounting process that will be necessary as these months go by.

Yeah, we're still working through determining exactly how we'll we'll do that obviously, we will be washing collectability as it relates to bad debt, but there is.

Kris Douglas: Yeah, we're still working through determining exactly how we'll do that. Obviously, we will be watching collectibility as it relates to bad debt. There is, you know, the FASB has provided some relief related to the lease accounting, the lease modifications in terms of how you account for these deferrals, which actually could create different methods of accounting for this across different companies, depending on which method that you choose to use, whether you take it more as AR, and you review your collectibility over time as those deferrals are scheduled to be repaid, or if you go, as you pointed out, more to a cash basis accounting. And we're analyzing, you know, both of those and trying to determine which direction.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Yeah, we're still working through determining exactly how we'll do that. Obviously, we will be watching collectibility as it relates to bad debt. There is, you know, the FASB has provided some relief related to the lease accounting, the lease modifications in terms of how you account for these deferrals, which actually could create different methods of accounting for this across different companies, depending on which method that you choose to use, whether you take it more as AR, and you review your collectibility over time as those deferrals are scheduled to be repaid, or if you go, as you pointed out, more to a cash basis accounting. And we're analyzing, you know, both of those and trying to determine which direction.

Yeah. The Fas, we has provided some relief related to the lease accounting lease modifications in terms of how you.

Account for these deferrals.

Which actually could create different.

Methods of accounting for this across different companies, depending on which method that you.

Choose to use whether you take it more as is a are and you you review your.

Your collectability over time as those deferrals are scheduled to be repaid or if you go as you pointed out more to a cash basis accounting on and we're we're analyzing.

Both of those and tried to determine which which direction, but ultimately at this point as we mentioned our expectation is that these.

Kris Douglas: Ultimately, at this point, as we've mentioned, our expectation is that these deferral amounts will be repaid and will be repaid by the end of the year. Regardless of which method that you use, on a full year basis, the results should be, should be pretty similar. You know, if things extended and you started looking at deferrals that started wrapping the year, then you could end up with, you know, potentially some differences in results over the years.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Ultimately, at this point, as we've mentioned, our expectation is that these deferral amounts will be repaid and will be repaid by the end of the year. Regardless of which method that you use, on a full year basis, the results should be, should be pretty similar. You know, if things extended and you started looking at deferrals that started wrapping the year, then you could end up with, you know, potentially some differences in results over the years.

These deferral amounts will be repaid and will be repaid by the end of the year, so regardless of which which method that you use.

On a full year basis, the results should be should be pretty similar.

If things extended and you started looking at deferrals that that started wrapping the year than you could end up with potentially some differences in results over a over the years.

Rich Anderson: Okay. Bethany went through some interesting stuff about all the different stimulus programs and how that equates to X number of months of, you know, of business activity, or, you know, or rent or whatever, the case may be. I'm curious if you have a sense of, you know, within your world, you know, let's call it within the, maybe the smaller physician practices groups that make up half of your business, you know, how much of they have received and what that equates to in terms of months? Have you done that math at all?

Bethany went through some interesting stuff, but all the different stimulus programs and how that equates to X number of months of.

Business activity.

Or or or rent or whatever.

The case may be I'm curious if you have a sense of you know within your world the sort of the average.

Lets call within the maybe the smaller physician practices group that make up half of your business you know how how much.

They have received and what that equates to in terms of months do you have you done that math at all.

We certainly have rich I would say that Oh, all providers for the most parts that receive Medicare receive some of this allocation and so I think that one.

Todd Meredith: We certainly have, Rich. I would say that all providers, for the most part, that receive Medicare, receive some of this allocation. I think that one to two months that Bethany referred to of that general relief allocation, really pertains to most providers, including physicians. The PPP would be the other piece that I think would apply to not all, but a good portion of our physician group or physician tenants. I would say a lot of that applies, and as Bethany described, that equates to about two months of payroll and rent and utilities as it's defined. You know, it's a little hard to put all that together perfectly, but I do think, as we generally described in our remarks, there's been a great amount of relief provided.

To two months that Bethany referred to have that general really allocation really pertains to most providers including divisions.

The PPP would be the other piece that I think would apply to not all but good portion of our physician group or physician tenants. So I would say a lot of that applies and its bethany describe that that equates to about two months of payroll and rent utilities as it's defined so.

It's it's a little hard to put all that together perfectly but I do think as we generally described in our remarks, there's been a great amount of release provided it's not certainly not business as usual and things can are tight for a lot of physicians clearly and our deferrals will help that but I do think theres a huge amount of helped it's been provide.

Todd Meredith: It's not, certainly not business as usual, and, and things can are tight for a lot of physicians, clearly, and, and our deferrals will help that. I do think there's a huge amount of help that's been provided. Obviously, now we'll begin all the lobbying to, you know, to, to provide more and forgive, you know, some of the and they've also, the accelerated payments was another piece that a lot of providers got. You know, who knows whether some of that gets forgiven. All in all, it's a little hard to quantify perfectly, but I think 1 to 2 months seems to be the prescribed design for a lot of the programs, and that seems to be fitting so far with the pattern, you know, with procedures down an average of 34 days and now starting to recover.

It and obviously now we'll begin all the lobbying to.

To provide more and forgive some of the and they also the accelerated payments with another piece that a lot of provider Scott and.

Who knows whether some of that gets forget and so all in all its a little hard to quantify perfectly, but I think to one to two month seems to be the prescribed design for a lot of the programs that seems to be sitting so far with the pattern.

Features down an average of 34 days and now starting to recover yeah, maybe there's another slug that will need to be allocated but generally one to two months. It's been it's been pretty helpful. Okay left for me and maybe to Rob.

Todd Meredith: You know, maybe there's another slug that will need to be allocated. Generally, one to two months has been pretty helpful.

Rich Anderson: Okay, last for me and maybe to Rob. It was mentioned about, you know, pent-up demand for elective surgeries and whatnot. I wonder how you're monitoring that as it relates to external growth and getting in front of it and perhaps getting assets or deals done, you know, pre that activity, and thereby sort of like a nice arbitrage type of scenario. Is it just too soon, and there's just not a market really to know if you could get yourself a decent deal at a higher cap rate than normal?

You mentioned about pent up demand for Oh.

Elective surgeries and whatnot.

I wonder, how you're monitoring that as it relates to external growth and getting in front of it and perhaps getting getting assets are deals done and you know three that activity.

And thereby sort of like a nice arbitrage type of scenario or is it just too soon and it's there's just not a market really to <unk>.

To know if you could get yourself, a a decent deal at a higher cap rate than normal.

Yeah, Rich I think it's it's too soon to know whether you're going to see any real impact on pricing I think.

Rob Hull: Yeah, Rich. I think it's too soon to know on whether you're gonna see any real impact on pricing. I think, you know, what we're doing is, you know, our pipeline, as I mentioned, is largely built through, you know, one and two building transactions, where we're in direct dialogue with building owners and principals. You know, that's offering us an opportunity to obtain extended inspection periods and closing timelines to allow us to monitor, you know, the tenants' operational and financial sort of, you know, health throughout the process. I think, you know, it's too early to tell. We'll, you know, take the time that we have to monitor that situation.

I think you know what we're doing as you know our pipeline as I mentioned this is largely built.

Through one and two building transactions, where we're in.

Rick dialogue with building owners and principles and.

That's that's offered us an opportunity to detain extended inspection periods and causing timelines.

To allow us to to monitor.

The the tenants operational and financial sort of.

Health and and throughout the throughout the process I think it's too early to tell will will.

Take the time that we have to monitor that situation and.

Rob Hull: You know, if we see some clarity on, on, on the, the, the net operating income at the, at the buildings, then we'll move forward. If we don't, then we'll have the opportunity not to move forward and, and wait. I think also as market conditions improve, and when they improve, that'll, that'll dictate some of the, the timing as well.

You know if we see.

Some clarity on on on the the net operating income at the at the buildings and then we'll look forward to them.

We don't then we'll have the opportunity not to move forward and weight.

I think also as market conditions improve and when they improve that'll that'll dictate some of the timing as well.

Rich Anderson: Great. Thanks very much, everybody.

Great. Thanks, very much a rich yes.

Todd Meredith: Rich?

Rich Anderson: Yep.

Todd Meredith: Rich. Thanks, Rich. I'll just add to Rob's comments that just some of the opportunity that comes about in times like this, may also be the very things you don't wanna get involved with. You know, our view is the stronger operators, the stronger assets in the better markets, generally are not gonna be distressed to a great degree. It could depend upon the circumstances of the owner. We have seen a couple scenarios where, you know, maybe some smaller private owners just feel that liquidity pinch, and this is somewhere where they can get more value relative to pre-crisis levels. They'll get that liquidity there if they need to.

Thanks, Rich I'll, just add to Rob's comments that just somebody opportunity that comes about in times like this may also be.

The very things you don't want to get involved with.

View is the stronger operators.

The stronger assets and the in the better markets generally are not going to be distressed to a great degree it could depend upon the circumstances of the owner we have seen a couple scenarios, where maybe some smaller private owners.

Just feel that liquidity pension this is somewhere where they can get more value relative to pre crisis levels.

So they'll get that liquidity there if they need to so we're having some of those conversations but also I would say you've seen a little bit of the distress things come to market or be talked about by brokers. Even some for profit hospital smaller hospital groups looking at Monetizations and you kind of go up that doesn't mean, we want it obviously, we'll see where cap rates going.

Todd Meredith: We're, we're having some of those conversations, but also I would say you've seen a little bit of the distress things come to market or be talked about by brokers, even some for-profit hospital, smaller hospital groups, looking at monetizations, and you kind of go, you know, that doesn't mean we want it. Obviously, we'll see where cap rates go on that. Frankly, our expectation is cap rates are, are pretty, gonna be pretty stable unless something dramatic changes. I mean, a lot of cost of capital has got a long way to go to kind of balance out, but we're not seeing a lot of reason for cap rates to change dramatically unless there's a distressed situation, which you've got to be careful about.

On that but frankly, our expectation is cap rates.

Are pretty good to be pretty stable unless something dramatic changes I mean, a lot of cost to capital got a long way to go to kind of balance out, but we're not seeing a lot of a reason for cap rates to change dramatic and lessors are distressed situation, which got to be careful about.

Rich Anderson: Right. Great. All right. Thanks very much, everybody.

Alright, thanks, very much everybody.

Todd Meredith: Thank you, Rich.

Thank you rich.

Our next question is from Daniel Bernstein from capital one.

Operator: Our next question is from Daniel Bernstein from Capital One.

Hey.

Daniel Bernstein: Hey, good morning. Thank you. Good morning again, reiterate what Rich said here, just to hope everybody's well. I really just have one question, and that's really more on the design of the facilities. Do you see any, and maybe this is a little bit early, but do you see any perhaps design changes or trends that might emerge post-COVID and anything that might be even near term, where you have to put CapEx into the facilities?

Good morning.

Thank you good morning, again reiterate what rich said here, just a hope everybody as well.

A relationship one question and that's really more on the design of the facilities.

Do you see any maybe this is a little bit early but you see any perhaps design changes or try and.

That might emerge post coded and anything that might be even.

Near term, where you have to put capex into the facilities.

Dan I think it is too early.

Todd Meredith: Dan, I think it is too early, but I, I certainly think you're right. People are gonna be thinking through that, whether it's tenants, as they're looking at planning new space or hospitals as they plan their, their future outpatient programs. We, we certainly have not seen, all of a sudden, a dramatic change other than these temporary measures, you know, for testing, as we described. We're certainly doing that, but that's all more temporary. The question, you know, we've been contemplating through talk, talks with providers, several of our board members who are health system leaders, consultants, and so forth. There may be some scenario where you see a little shift within the suites, as to providing more of this telemedicine capability within the suite.

But I certainly think you're right people are gonna be thinking through that whether its tenants is they're looking at planning new space or hospitals as they plan there you're feature outpatient programs, we certainly had not seen.

Ill decided no dramatic change other than these temporary measures for testing as we described we're certainly doing that but that's all more temporary. The question you know weve been contemplating through talk talks with providers. Several of our board members, who are health system leaders consultants and so forth there may be some scenario.

Where you see a little shift within the suites.

As to providing more of this tele medicine capability within the sweet the old days.

Todd Meredith: You know, the old days, in a doctor's office, all the doctors had nice, big private offices and were separated. I think more modern times, you've seen those come to be a little bit more like the rest of the world, where there's pods and hoteling going on. Well, that could, you know, shift a little bit to provide a little more back to private offices with this telemedicine capability. Little things like that certainly may happen. You know, we've even contemplated, do we wanna provide some kind of telemedicine capability within our building as an amenity? All that is early and remains to be seen. We're not seeing just overall a net, real significant impact, but certainly interesting things to keep our eye on.

In a doctor's office to all the doctors had nice big private offices, and and were separated and I think more modern times, you've seen those come to be a little bit more like the rest of the world, where theres pods and hoteling going on.

That could you know shift a little bit to provide a little more back to private offices with this telemedicine capabilities. So little things like that certainly may happen, we didn't contemplated that we want to provide some kind of tele medicine capability within our building as an amenity, but all that is early and remains to be seen we're not seeing just overall a net.

Real significant impact, but certainly interesting things to keep our eye on.

No no delays in the current development pipeline thinking about those kind of just design trends.

Daniel Bernstein: Okay. No, no, no delays in the current development pipeline, thinking about those kind of design trends? You know, it's something-

Sometimes for future developments that you haven't actually turned dirt on.

Todd Meredith: No.

Daniel Bernstein: For future developments that you haven't actually turned dirt on. Okay.

Todd Meredith: Correct.

Correct it hasn't shown not shown up yet that's right.

Daniel Bernstein: Um-

Todd Meredith: It, it hasn't shown up, shown up yet. That's right.

Daniel Bernstein: Okay. Then in terms of strategy, you know, just seeing what, seeing what you've seen in COVID so far with health, or there's no potential shift in strategy, more towards off-campus assets or non-affiliated assets. Just, you're just gonna continue to, to maintain the current strategy of, of, I guess, more on-campus affiliated?

Okay, and then in terms of strategy.

Just seem weve seen what you've seen in college, so far with.

Earlier, there's no.

Potential shift in strategy more towards off campus assets or non affiliated assets. Just you just going to continue to to maintain the current strategy is.

I guess more on campus.

Affiliated Yeah, I think sure I don't I don't think at all that we see anything here that tells us we need to be shifting.

Todd Meredith: Yeah, I think. Sure. I don't, I don't think at all that we see anything here that tells us we need to be shifting. You know, as Kris described in our deferral patterns, we did see more or, or I guess, a better outcome or less deferrals, if you will, on campus, but it's not because they were on campus. It was because we just have a higher mix of hospital tenancy within our MOBs on campus versus the ones that are adjacent or off. It's again, you know, we saw about the same rate of deferral among physicians, no matter the location. All that to say, there is some safety in these bigger, more well, financially, you know, backed entities, these not-for-profit investment-grade health systems. I mean, their rent is just a small piece.

Yeah, It's Chris described in our referral patterns, we did see more or I guess I'd better outcome or less deferrals. If you will on campus, but it's not because they were on campus. It was because we just have a higher mix of hospital tendency within our movies on campus versus the ones that are Jason are off so it.

It's again, we saw about the same rate of deferral among physicians well no matter the location.

But all that to say there is some safety in these bigger more well financially.

Backed entity these not for profit investment grade health systems and in their rent is just a small piece that I understand there often landlords. They have to think about that as well. So there is some safety in that and we don't see anything that suggest a big shift yeah. We're still interested in off campus. We're just very selective about it and so.

Todd Meredith: They understand, they're often landlords. They have to think about that as well. So there is some safety in that, we don't see anything that suggests a big shift. You know, we're, we're still interested in off-campus. We're just very selective about it. So you see our mix-

You see our mix.

Daniel Bernstein: Okay

Todd Meredith: ... of, you know, 80%, 90% on, and I don't see that changing dramatically.

Oh, Yes, 80, 90% on and I don't I don't see that changing dramatically.

Okay. That's all I had I appreciate his comments.

Daniel Bernstein: Okay. That's all I had. I appreciate the comments.

Todd Meredith: Thank you, Dan.

Thank you Dan.

Our next question if some connor.

Operator: Our next question is from Connor Siversky, from Berenberg. Go ahead.

Best ski from Baron Bear.

Go ahead.

Hi, everybody. Thanks for joining me on the call and appreciated the color you guys provided in the business update trees or that was all very helpful.

Connor Siversky: Hi, everybody. Thanks for having me on the call. Appreciated the color you guys provided in the business update, RIDEA. That was all very helpful. Quick 1 on lease expirations. Seems like you took out a pretty sizable chunk of 2020 maturities in Q1. I mean, just how are those conversations progressing for the remainder? I mean, is there any color you could provide on potential renewal spreads for the end of the year?

Quick one on lease expirations seems like you took out a pretty sizeable chunk of 2020 maturities in Q1, I mean, just how are those conversations progressing through the remainder and I mean is there any color you could provide on potential renewal spreads should be in India.

Yeah, you know we did make some good progress in the first quarter pre consistent across the year in terms of our expirations.

Kris Douglas: Yeah, you know, we did make some good progress in the Q1, you know, pretty consistent across the year in terms of our expirations. We expect to continue to be able to maintain the strong tenant retention that we've had. We did provide in our updated guidance on our components of expected FFO that cash leasing spreads we could see coming down some. As we are looking, you know, we may be doing more short-term renewals as opposed to our, you know, three, five-year, typical annual renewal. We've brought down our range more in that 0% to 3%. You know, the ultimate where we'll fall out on that probably depends on how long.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Yeah, you know, we did make some good progress in the Q1, you know, pretty consistent across the year in terms of our expirations. We expect to continue to be able to maintain the strong tenant retention that we've had. We did provide in our updated guidance on our components of expected FFO that cash leasing spreads we could see coming down some. As we are looking, you know, we may be doing more short-term renewals as opposed to our, you know, three, five-year, typical annual renewal. We've brought down our range more in that 0% to 3%. You know, the ultimate where we'll fall out on that probably depends on how long.

Expects to continue to be able to to maintain the strong.

Tenant retention that we've had we did provide in our updated guidance.

On our composed of expected FFO that cash leasing spreads we could see coming down. Some is we are looking we may be doing more short term renewals as opposed to our you know three five year typical annual renewal. So we've brought down our range or in that zero to 3%.

You know in the ultimate where we will fall out on that probably depends on how long you know if you're if you're talking a month or two you know maybe you're willing to go go flat, but if you're doing a one year than you would kind of look more to that 3%, which is in line with what our with what our bumps are inside the existing leases.

Kris Douglas: You know, if you're talking a month or two, you know, maybe you're willing to go flat, but if you're doing a 1 year, then you would kind of look more to that 3%, which is in line with what our bumps are inside the existing leases. A bit of an impact, but, you know, in the short term, but we're willing to do that because we feel good about the long-term intrinsic value of our buildings, and feel like that we'll be able to work out deals that will benefit us, as well as provide long-term certainty for our tenants, once everybody has more clarity, you know, when hopefully things get back closer to normal with volumes.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: You know, if you're talking a month or two, you know, maybe you're willing to go flat, but if you're doing a 1 year, then you would kind of look more to that 3%, which is in line with what our bumps are inside the existing leases. A bit of an impact, but, you know, in the short term, but we're willing to do that because we feel good about the long-term intrinsic value of our buildings, and feel like that we'll be able to work out deals that will benefit us, as well as provide long-term certainty for our tenants, once everybody has more clarity, you know, when hopefully things get back closer to normal with volumes.

So a bit of it impact but.

In the short term, but we're willing to do that because we feel good about the long term intrinsic value of our buildings.

And feel like that we'll be able to.

The workout deals that that will will benefit us as well as provide long term certainty for our tenants. Once once everybody has has more clarity.

When when hopefully things get back closer to normal with volumes.

Okay. That's that's helpful. Thanks for that and then a I saw that same store property expenses were up pretty meaningfully in Q1, I mean is that due to any measures related specifically to co bid or is there something else driving that occurs.

Connor Siversky: Okay. That's, that's helpful. Thanks for that. I saw that same store property expenses were up pretty meaningfully in Q1. I mean, is that due to any measures related specifically to COVID, or is there something else driving that increase?

Kris Douglas: Yeah. No, it, it, it was nothing related to COVID. You know, very, very minimal impact, if anything, in Q1 on the revenue or expense side, frankly, from COVID. The higher expense growth there was a couple of two main items. One is a difficult comp compared to Q1 2019, when our expense growth at that point was about 0. We, we anticipated that we were going to be, you know, in the upper, upper end, maybe even a little bit above our historical range, just because we're, we're coming off of that comp. We also had about $600,000 of expense true-ups that occurred in Q1. Those were primarily related to property taxes.

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: Yeah. No, it, it, it was nothing related to COVID. You know, very, very minimal impact, if anything, in Q1 on the revenue or expense side, frankly, from COVID. The higher expense growth there was a couple of two main items. One is a difficult comp compared to Q1 2019, when our expense growth at that point was about 0. We, we anticipated that we were going to be, you know, in the upper, upper end, maybe even a little bit above our historical range, just because we're, we're coming off of that comp. We also had about $600,000 of expense true-ups that occurred in Q1. Those were primarily related to property taxes.

Yeah, no. It was nothing related to coded I'm very very minimal impact if anything a in the first quarter on the revenue or expense side frankly from coded the higher expense growth. There was was a couple of the two main items one is a difficult comp compare.

The first quarter of 19, when our expense growth at that point was about zero on so we anticipated that we were going to be you know.

In the upper upper end, maybe even a little bit above our historical range, just because we were coming off of that comp. We also had about $600000 of extreme of expense true ups that occurred in the first quarter those were primarily related to to property taxes. So final bill comes in.

Kris Douglas: You know, final bill comes in in Q1, and, you know, we've been accruing a certain amount through 2019. The bill shows up Q1 2020, and, and we've got to, got to make up for that, given the fact of the, the, the final billing ended up being slightly different than what the, what the accruals had been estimated to be. That, that was primarily what drove that. We, we expect moving forward, that we'll get back

Kris Douglas [Technology Leader | Restaurant Tech. | Digital Enablement | M&A | Enterprise Platform Delivery | Agile Transformat: You know, final bill comes in in Q1, and, you know, we've been accruing a certain amount through 2019. The bill shows up Q1 2020, and, and we've got to, got to make up for that, given the fact of the, the, the final billing ended up being slightly different than what the, what the accruals had been estimated to be. That, that was primarily what drove that. We, we expect moving forward, that we'll get back

And in the first quarter and we've been accruing a certain amount through 2019.

Bill shows up first quarter 2020, and we've got to.

Got it make up for that given the fact of the they the final bill ended up being slightly different than what the what the accruals had been estimated to be but that was primarily what what drove that we expect moving forward that we'll get back.

Rob Hull: you know, closer to, to our historical norms.

Closer to to our historical norms.

Okay. Thanks for that that's all for me.

[Analyst] (Aiera): Okay, thanks for that. That's all from me.

Our next question is from Lukas Hartwich from Green Street Advisors.

Operator: Our next question is from Lukas Hartwich, from Green Street Advisors. Go ahead.

Go ahead, hey.

Lukas Hartwich: Hey, thank you. The, the occupancy on the LA acquisition seems a little bit on the low side. I'm just curious if there's any leasing upside there?

Thank you the occupancy on the L.A. acquisition seems a little bit below side I'm, just curious if there's any leasing upside there.

Yeah. There's you know that those properties were for that property was purchased and there is some some leasing opportunity there there's an active.

Rob Hull: Yeah, there's, you know, those properties were, or that property was purchased, and there is some leasing opportunity there. There's an active, some active dialogue going on with some tenant, tenants right now, potential tenants right now. We think that there's a little bit of upside there.

I'm active dialogue going on with some student attendance tenants right now potential tenants right now and so we think that there is little bit upside there.

Is that factored into the cap rate the factory cap rates or is that would that be incremental battery.

Lukas Hartwich: Is that factored into the cap rate, the 5.2 cap rate, or would that be incremental to the 5.3?

Rob Hull: That would be incremental, over above.

Would be incremental.

Great and then I know, it's hard to know what exactly happened asset values is still pretty early but I'm. Just curious if you. If you all were underwriting acquisitions today or how would you adjust your return expectations, given what you know the environment where it.

Lukas Hartwich: Great. Then I know it's hard to know what exactly has happened to asset values, because it's still pretty early, but I'm just curious, if you all were underwriting acquisitions today, how would you adjust your return expectations, given what, you know, the environment we're in?

You know I think our sense is that we're not.

Rob Hull: Yeah, you know, I think our sense is, is that we're not seeing at this point a change in, in, in cap rates. I think what we're, what we're doing on the underwriting side is, you know, we're seeking and obtaining longer inspection periods and closing timelines that allows us to monitor the health of the tenants operationally and financially over multiple rent cycles, so that we can see just whether that, that, NOI is holding up or not. I think as we go through that, we'll determine at that point in time whether we think there needs to be an adjustment in the price.

Seen at this point, a change and cap rates I think what we're we're doing on the underwriting side as you know were.

Seeking and painting a longer inspection periods and closing timelines that allows us to to monitor a the health of the tenants operationally and financially over multiple rent cycles.

So that we can see just whether that that to analyze holding up or not and I think as we go through that will determine at that point in time, whether we think there needs to be adjustment in the price.

And I would add Lucas that I would say, there's been quite a lot of private capital.

Todd Meredith: I would add, Lukas, that I, I, I would say there's been quite a lot of private capital built up over time that wants to... Before this pandemic, that wanted to get into MOB. They've always struggled, you know, how to get in there, how to access it, rather than just, you know, small deals at a time, trying to, whether it's partnering up with people or, or developing their own platform. You know, just some minim- you know, a few conversations we've had, we've certainly heard that some private capital, funds and so forth, are looking at this as an opportunity to, to move in. I really don't see that unless, as Rob said, there's some fundamental issue with a property that requires a change, but that may not even improve the cap rate.

It's up overtime that wants to two before this pandemic they wanted to get into them Ob and they've always struggled how to get in there what how to access it rather than just small deals at a time trying to whether its partnering up with people or we're developing there and platform and just some minimal few conversations we've had we've certain.

Only heard the two private capital a fun and so forth are looking at this is an opportunity to move in so I really don't see that and less as Rob said, there's some fundamental issue with the property that requires a change that may not even improve the cap rate. It just made lower the price relative to the lower end wise so.

Todd Meredith: It just may lower the price relative to the lower NOI. There, there's a lot of forces, I think, that suggest it's not a big move up at this point. Again, it's too early to know, and obviously, the longer timeframe we look at, our cost of capital will play into that. For now, we're not seeing anything that, that suggests that it's, it's going up on cap rates.

Theres a lot of course is I think that suggest it's not a big move up at this point again, it's too early to know and obviously the longer timeframe. We look at our cost of capital will play into that but for now we're not seeing anything that that suggest that it's it's going up on cap rates.

Great. Thank you.

Lukas Hartwich: Great. Thank you.

Our next question is from tie you, Okay. Tanya from Mizuho go ahead.

Operator: Our next question is from Tayo Okasanya, from Mizuho. Go ahead.

Oh, yes, good afternoon, Oh, So let me add my thanks to all the additional disclosure on information.

[Analyst] (Aiera): Yes, good afternoon. Also, let me add my thanks to all the additional disclosure and information. As we start to think 3 to 6 months out, could you just talk a little bit about how you think about, you know, hospital profitability, just kind of given the high unemployment rates we're likely to face, what the implications of that could be for demand of MOBs or even for the ability to kind of pay rent?

I think we just six months out could you just talk a little bit about how you think about.

You know hospital profitability, just kind of given the high unemployment rates were likely to see.

What the implications of that can be a fourth demand and movies or even called the ability it's kind of pay rent.

Sure.

Todd Meredith: Sure. Certainly, our history does not suggest, and even the month of April does not suggest that, that rent payment, through all kinds of issues, the great financial crisis, the Affordable Care Act, you know, on back-

Certainly our history does not suggest and even the month of April does not suggest that the rent payment through all kinds of issues that the great financial crisis, the affordable Care Act.

On back.

I think we've made a loss tied to the.

Rob Hull: I think we've, we may have lost Todd's sound there. Oh, I think he's coming back. Todd, you're back.

Sound there.

Oh I use coming back.

And you back.

There can you hear me Yep Yep Okay.

Todd Meredith: There. Can you hear me?

Rob Hull: Yep.

[Analyst] (Aiera): Yeah.

Todd Meredith: Okay. I'm, I'm sorry. I was on a roll. Sorry, Tayo. Yeah, I guess where I was going with that was that we have not seen historically through a lot of prior cycles, you know, whether it was great financial crisis, the Affordable Care Act, or September 11th or on before that, we've not seen issues with hospital collections through some pretty tough times in the past. I certainly don't think we expect that to be a problem with rent collection. Now, to your point, certainly there's going to be an impact on hospitals in general. There will be more uninsured patients, as you suggest, with all the unemployment. There, there's going to be an effect.

Sorry, I was on a role.

[laughter].

Sorry to <unk>, Yeah, I guess, we're going with that was that we've not seen historically through a lot of prior cycles, whether it was great financial crisis, the affordable Care Act.

Or September 11th are on before that we've not seen issues with hospital collections through some pretty tough times and so I certainly don't think we expect that to be a problem with rent collection now to your point certainly there's going to be an impact on on hospitals in general there will be more uninsured patients as you sit.

Just a with all the unemployment so there's going to be an effect and if you think about.

Todd Meredith: If you think about a typical health system, certainly, the investment grade tranche, if you will, you know, runs EBITDA margins around 8%. You know, certainly, you could see that come down a bit over the next six months to a year or however long it might be. Certainly, you know, they're gonna be thinking about that and expense savings and things like that. I think the one thing that's clear is, outpatient is certainly where things have moved. You've seen that trend over a long timeframe. It's lower cost, it's lower capital costs for them, it's more profitable.

A typical health system certainly the investment grade tranche. If you will runs EBITDA margins around 8% certainly you could see that come down a bit over over the next six months to a year or however, long it might be and certainly they're gonna be thinking about that and expense savings and things like that but.

I think the one thing that's clear is outpatient is certainly where things have moved you've seen that trend over a long time frame, it's lower cost, it's lower capital costs for them to more profitable and so I think really what we expect is that and it's playing out in a lot of the conversations that Rob alluded to and I alluded to we're still seeing.

Todd Meredith: I think really what we expect is that, and it's playing out in a lot of the conversations that Rob alluded to and I alluded to, we're still seeing a lot of health systems that we're working with, looking at expansion plans. It got a little quiet, you know, in the first part, you know, later March, first part of April. Frankly, in the last couple of weeks, we've seen some of those conversations perk back up already. I'm talking about future development and expansion. I think to us, that's very encouraging. I think outpatient becomes really, as I mentioned, a really bright spot within the healthcare space, notwithstanding, they're gonna feel some margin pressure.

A lot of health system that we're working with looking at expansion plans and it got a little quiet in the first part later March 1st part of April, but frankly in the last couple of weeks, we've seen some of those conversations pick back up already.

And I'm talking about future development and expansion. So thanks to us that's very encouraging I think outpatient becomes really as I mentioned that really.

Bright spot within the health care space, notwithstanding they're going to feel some margin pressure.

But oh, so far this at this point.

[Analyst] (Aiera): Gotcha. Fred, just at this point, when you just kind of think out, what, what are you kind of most worried about as it pertains to your business? Is it just the second wave of the pandemic? Is it... I'm just kind of curious, like, what, you know, when you kind of think about the business, what, what kind of concerns you, or what would you be most worried about at this point?

It's kind of think out what does it kinda moves worried about it doesnt 13 fewer business is it just depend as effect on a wave of the pandemic because it I'm just kind of kit.

When you kind of think about the business what kinda concerns you know what would you be most worried about at this point.

Certainly I think that's true I mean, I think that's the big unknown that we're all dealing with is none of US as has been through the exact thing before.

Todd Meredith: Certainly, I think that's true. I mean, I think that's the big unknown that we're all dealing with, is, you know, none of us has, has been through this exact thing before. It, it's just, it's unprecedented. It looks fairly favorable right now, and I think we're all aware that, yes, it could be a real issue if we all start getting back too quickly or, or not taking the appropriate precautions and so forth. Clearly, there's some, some good chance that we take 2 steps forward and have to take 1 step back. You know, just that tempo is gonna be important and pacing, as you said. That certainly weighs on everybody's minds, including ours. I, I think the good news is, you know, healthcare is fundamental, it's need driven.

It's just it's unprecedented so it looks fairly favorable right now and I think we're all aware that yes. It could be real issue. If we all start getting back to quickly or or not taking the appropriate precautions and so forth. So clearly there are some some good chance that we take two steps forward and have to take a step backs.

So just that tempo is going to be important then pacing as you said that certainly weighs on everybody's mind, including ours I think the good news is healthcare is fundamental its need driven.

Todd Meredith: It's gonna happen, it's just, you know, our providers still have felt that pressure, those doctors, especially. The good news is, I think people have realized, authorities, whether it's mayors, governors, public health officials, probably realized that shutting down all the elective procedures was a little bit more than necessary because it was really all about trying to preserve resources, you know, to, to deal with the surge on the inpatient side. That obviously did play out, you know, pretty close in New York and some other hotspots. For the most part, we didn't see that across the country. I do think that's a positive, that even if we have a second surge, I don't see elective procedures going to 0 as much as maybe reducing that level. That weighs on us.

It's kind of happen. It's just you know our provider steel have felt that pressure those doctors, especially the good news is I think people have realized authorities, whether its mayors governors public health officials, probably realize that shutting down all the elective procedures with a little bit more than necessary because it was really all about trying to preserve.

Resources.

You know to deal with surge on the inpatient side and that obviously it play out in a pretty close in New York and some other hot spots, but for the most part we didnt see that across the country. So I do think that's a positive but even if we have a second Serge I don't see elective procedures going to zero as much as maybe reducing that level.

So that weighs on US clearly you also have just a broader picture of the ability to proceed with external growth. That's something we saw a play out public versus private valuations 17 was more public companies 18 was more of the private companies and 19 was back to public so it's kind of alternated and.

Todd Meredith: Clearly, you also have just the broader picture of ability to proceed with external growth. That's, you know, something we saw play out, public versus private valuations. You know, 2017 was more public companies, 2018 was more of the private companies, and 2019, you know, was back to public. It's kind of alternated, and I think, you know, that's something that as all REITs have to deal with, is, you know, when can you get back to some external growth? You know, the good news is for us, liquidity, I think is very strong, and we're not as concerned about that. It's more about just how does this unfold and move back to normal, how quickly?

And I think that's something that is always have to deal with is when can you get back to some external growth.

The good news is for US liquidity I think is it's very strong and were not as concerned about that it's it's more about just how does this unfold and and move back to normal how quickly.

So I laugh when they could indulge me just that dividend policy going forward. How does one think about that especially if you kind of have you know a decent amount of rent thorough back to temper that does some variety in passing up Oh.

[Analyst] (Aiera): Gotcha. Then last one, if you would indulge me, just the dividend policy going forward, how does one think about that, especially if you kind of have, you know, a decent amount of rent deferrals that does temporarily impact the FFO?

Sure I think that's another.

Todd Meredith: Sure. I, I think, you know, that's another good thing for us that even though these deferrals, you know, as Kris articulated those, you know, we started early on that in April, and, you know, we think May is looking similar. I think the good news is, it's really helping, and we hope that helps our tenants recover faster. We don't see anything at this point that would really cause us to certainly think about our dividend other any other way than maintaining it. You know, growth is obviously not something that anybody would probably think about at this point. You know, that certainly would get pushed out. I think our view is there's some offset.

Good thing for us that even though these deferrals as Chris articulated those.

Yeah. We started early on that in April and we think Mays looking similar and I think the good news is it's really helping and we hope that helps our tenants recover faster we don't see anything at this point that would really caused us to certainly think about our dividend.

Any other way than maintaining it growth is obviously not something that anybody would probably think about at this point that that certainly would get pushed out but I think our view is there some off so even though growth maybe a little slower I think our cash flow in our coverage of the dividend we expect to be very solid this year and I think Chris disk.

Todd Meredith: Even though growth may be a little slower, I think our cash flow and our coverage of the dividend, we expect to be very solid this year. I think Kris described that, you know, we may see some capital spend come down a little bit with a little bit lower leasing. All in all, we don't see any concern with rent coverage, I'm sorry, dividend coverage for 2020.

Tried that we may see some capital spend come down a little bit with the a little bit lower leasing. So all in all we don't see any concern with rent coverage I'm, sorry dividend coverage for a for 2020.

[Analyst] (Aiera): Great. Thank you.

Great. Thank you.

Todd Meredith: Thanks, Sayal.

This time.

And I last question is from Mike Mueller from JP Morgan.

Operator: Our last question is from Mike Mueller from J.P. Morgan. Go ahead.

Go ahead.

Oh.

Lukas Hartwich: Oh, realized I was in the queue again, so I, I don't have a question.

Realized you again, so I don't quite [laughter]. Thanks, though.

Todd Meredith: Thanks, though. Good to hear from you, Mike. Take care.

Good to hear from you might take care.

Lukas Hartwich: Hey, same to you. Bye.

Thank you.

Todd Meredith: Bye-bye.

Okay.

This concludes our question and answer.

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

Session I would now like to turn the conference back over to Todd marriages for closing remarks.

Thank you Kate and thank you everybody for listening. This morning, we hope everybody stays a safe and hopefully can start to.

Todd Meredith: Thank you, Kate. Thank you, everybody, for listening this morning. We hope everybody stays safe and hopefully can start to do a few more normal things very carefully and social distancing and so forth. We thank everybody for joining us today, and we will be around if you have any additional questions. Have a great day. Thank you.

To a few more normal things very carefully and social distancing and so forth, but we thank everybody for joining us today and we will be around if you have any additional questions have a great. Thank you.

The conference has now concluded. Thank you for attending todays presentation you may now disconnect.

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

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