Q4 2020 Healthpeak Properties Inc Earnings Call
Good day and welcome to the Health peak properties incorporated fourth quarter Conference call all participants will be in a 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 and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference.
So Andrew Johns Vice President corporate Finance and Investor Relations. Please go ahead Sir.
Thank you and welcome to help feed sports quarter in full year 'twenty.
Results Conference call today's conference call will contain certain forward looking statements. Although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions. Our forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations.
A discussion of risks and risk factors included in our press release and detailed in our filings with the SEC do not undertake a duty to update any forward looking statements.
Certain non-GAAP financial measures will be discussed on this call and exhibit at the 8-K, we filed the FCC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.
But it is also available on our website at Www Dot Housekeep Dot com.
I will now turn the call over to our Chief Executive Officer, Tom Herzog.
Thank you Andrew and good morning, everyone.
With me today are Scott Brinker, our President and Chief Investment Officer, and Pete Scott, Our Chief Financial Officer.
Also here and available for the Q&A portion of our call are Tom <unk>, Our chief development, and operating officer and Tremor Camry.
Our chief legal officer and General Counsel.
But the vaccination gaining more traction everyday it seems we can finally see the light at the end of the tunnel.
Yet our intense effort executing through Covid will most certainly continue for a while yet.
Despite the enormous challenges of 2020 for health peak I believe we will exit the pandemic in a stronger place from where we started.
More on that shortly but first let me temporarily digress.
Right a year ago. The first confirmed case of COVID-19 was identified in the United States, and then spread insidiously across the country.
Like so many companies at the time, our executive team and board, we're busy determining how best to navigate the imminent crisis with consideration to extend on certain penetration in duration.
And human beings and on the market.
At the time, we identified five priorities.
First to protect the health of our teammates residents and tenants without overwriting consideration to expense.
Second to guard, our balance sheet liquidity and credit rating to ensure we remained rock solid on the other side of the crisis.
Third to communicate frequently and openly with our investors analysts and rating agencies and as best we could but the facts we have at the time.
Fourth in a post Covid world, we considered key societal and market trends and determined that all of our classes of real estate would remain vital after the pandemic was resolved.
And fifth we aimed to take advantage of any opportunities that might result from disruptions caused by the pandemic.
Initially we thought a possible there may arise distressed buying opportunities, but that never did transpire in our desired asset classes of anchored M obese and purpose built life science.
And in fact, we saw cap rates compress rather than rise.
Fortunately that positively impacted our gross asset value is for these portfolios.
Execution on these five priorities turned out to be critical in guiding our path through the fog.
And relative to our priority of identifying opportunities created by the crisis, we decided to test the market to determine if it might be feasible to lighten up or even exit a rental senior housing business without undue incremental dilution.
That was a half a year ago.
So after six months of hard work on this plan yesterday, we announced that during the fourth quarter and year to date 2021.
We closed on $2 $5 billion of shop, and Triple net sales with the remaining $1 5 billion under binding and non binding contracts.
In aggregate this $4 billion of rental senior housing sales is right on top of the estimate we provided in our Q3 earnings call.
We're not very far along for a full exit of rental senior housing with some work left to do.
Accordingly, we will soon be able to focus our team entirely on growing and operating our biotech centric life science and are primarily on campus MLB portfolios, which together will soon represent 85% of our company and.
And Additionally, we continue to hold a relatively smaller portfolio of high quality and high yielding.
TCR Ts.
Importantly in front of me a fundamental tenet to our strategy. We believe all three of these businesses represent irreplaceable high barrier to entry portfolios that are impossible to replicate and provide a strong growth trajectory based on demographic tailwind.
Additionally, our land bank and Densification opportunities aggregate to 7 billion, plus which should keep us busy for around a decade without the need to purchase any additional land.
But inevitably I'm sure we will do that too.
And our purpose built life science business available land and the three hotbed markets is scarce and competition from office conversions is typically cost prohibitive.
And even if such conversions are completed they do not provide the same heavy lab use ability as purpose built life science.
In addition to our 10 million square feet of operating life Science properties, we have another five plus million square feet available through our land bank and Densification pipeline.
Which represents 6 billion plus of embedded accretive development spend.
The majority of debt consists of low rise properties in the heart of some of the strongest life science locations in San Francisco and San Diego.
Some of these assets were developed 25 plus years ago by our pioneering predecessor flower states.
Current market conditions and land use regulations allow for much higher <unk>.
This represents an enormous gem within our portfolio and we will unlock this value over time.
And our on campus and affiliated MLP business, we currently own and operate 23 million square feet.
And future growth typically requires invitations from hospitals and health systems.
Fortunately, we have a number of strong and time tested relationships that will allow continued future development and acquisition growth plus we have a number of land bank opportunities.
And in <unk>, we have 15 communities each with an average of 500 units located on 50 acre parcels of infill land.
Such campuses have high barriers to entry given the typical 8% to 10 year development concept, the stabilization period and heavy infrastructure required to operate.
And of course, we do like the high yield produced by this asset class, which I think is quite attractive given the quality of the cash flows.
Our 15 campuses also provide future densification opportunities aggregating to more than a half a billion dollars.
Additionally from time to time certain not for profit owners, sometimes capital constrained may choose to exit and we will be natural buyers if the properties meet our criteria.
With consideration to all of this is an important important to note that we believe rental senior housing will continue to be a vital and growing business that serves an important need within the health care continuum.
But we concluded that for health peak, our more focused portfolio mix will create a strong and unique investment opportunity and one that cannot be synthetically replicated through investment and pure play REIT alternatives, given our platform irreplaceable portfolios and embedded growth opportunities.
Moving on to our dividend.
Yesterday, we announced that we have adjusted our dividend in Q1 to <unk> 30 per share or $1 20 per share annualized.
Our full year 2020 dividend payout ratio came in at 102% and in Q4 was 106% but.
But we held off adjusting in prior quarters to wait for sufficient visibility into our future portfolio mix and related cash flows.
We estimate the dollars 20 per share annualized dividend will represent in 2021 payout ratio in the high Eighty's to low Ninety's, but result in a stabilized payout ratio of around 80%, which will be our target going forward.
Stabilized earnings will follow the completion of our shop and Triple net sales ultimate reinvestment of our sales proceeds in core life Science, and then will be assets and reaching the COVID-19 inflection point for our <unk> operations.
A 30 cent quarterly dividend currently represents an approximate 4% yield on our share price.
And on a stabilized basis will provide incremental positive cash flow of around $150 million per year from reinvestment into our accretive development and densification activities.
Finally, before turning the call over to Scott I would like to inform you that bar Bad Rogers will be leaving health peak in late February from Investor Relations leadership role with a mixed use REIT in Maryland, which is closer to our extended family on the East coast.
Our bad debt.
Contributions have been immense and your hard work dedication and great attitude will be missed by the entire team.
EMEA in particular.
Andrew Johns who most of you know well will have his responsibilities expanded to include leadership of our Investor Relations Department. In addition to his continued strategic contributions to our <unk> team.
With that let me turn it over to Scott.
Thank you Tom I'll begin with a life science leadership update followed by operating results for each business segment and close with transactions.
Pleased to announce that Scott bone in my doors have been named co heads of life Science continuing to report up to me.
They have been on the ground in San Francisco, and San Diego, respectively for the past decade for healthy.
They will now take on broader responsibilities, including expanded roles in our development and acquisition strategy P&L responsibility.
Staying with life Science, we reported same store cash NOI growth of seven eight per cent for the fourth quarter.
Outstanding result, driven by strong leasing mark to market on renewals and rent collections at 99 per cent.
Sector fundamentals are strong and we're capturing more than our fair share of the day math.
Our full year cash NOI growth was six 2% exceeding the high end of our pre COVID-19 outlook by 120 basis points driven by the same factors as a boss.
We executed 300000 square feet of leases in the fourth quarter, including renewals that day.
13% cash mark to market for.
For the full year, we executed one 6 million square feet, which was 180% of our pre COVID-19 expectations.
Leasing was particularly strong on early renewals and our development pipeline.
We continue to excel by growing with our existing biotech heavy tenant base.
So far in 2021, we signed 115000 square feet of leases.
And the pipeline is significant with an additional 360000 square feet under letters of intent.
There is strong demand in all three of our core markets.
Turning to medical office, we reported same store cash NOI growth of one 2% and $2 one per cent for the fourth quarter and full year respectively.
Performance was driven by contractual rent escalators, and five 1% cash mark to market on renewals, partially offset by COVID-19 related reductions in parking income.
Also the addition of our small hospital portfolio to the pool, which Pete will discuss reduced same store results in the fourth quarter by 40 basis points.
Fourth quarter and full year rent collections exceeded 99%.
During the course of 2020, we commenced leases on approximately 3 million square feet slightly above our pre COVID-19 expectations.
We ended the year with 94% occupancy down 30 basis points from the prior quarter.
Decline was driven by moving recently completed development and redevelopment projects into the operating portfolio.
In addition, we signed nearly 700000 square feet of leases that will commence in 2021.
And our leasing pipeline is solid with 560000 square feet under letters of intent.
Turning to <unk> did they continue to outperform rental senior housing occupancy.
Occupancy declined 100 basis points from September to December.
The occupancy decline was a bit below our outlook driven by the intensity of the third wave of the virus.
<unk> performance did improve throughout the quarter.
With occupancy being flat in December.
And the momentum carried through to January with occupancy up 20 basis points over the prior months.
Notably new entrance fee contracts in the fourth quarter increased nearly 100% comparisons to the low point in the second quarter.
New entrance fees are still 30% below the prior year, but clearly heading in a positive direction.
We're also pleased to report that all of our CCR sees have received orben scheduled for the first dose of the vaccine.
And are open to in person tours and move ins in visits with them.
Moving to the shop portfolio all of which is held for sale occupancy was down 170 basis points from September to December toward the low end of our outlook range shop.
Shop occupancy you saw an additional 230 basis points in January driven by the third wave of the virus.
Turning to our development pipeline in the fourth quarter, we signed leases totaling 175000 square feet at the shore expanding our relationship with two existing tenants.
Phases, two and three at the shore are now 91% pre leased with occupancy expected in <unk> 'twenty, one and <unk> 22, respectively.
The economics on the new leases were above our underwriting as life science rents in the Bay area remained strong.
Growing with our existing biotech heavy tenant base as a competitive advantage for owners, who lack the scale to accommodate the growth of their tenants. As an example, 75 per cent of the leases we signed at the Cove in the shore or $1 1 million square feet of space, we signed with existing healthy tenants, who were looking to grow.
During the fourth quarter, we delivered 173000 square feet of life Science development, including the final building at Phase one of the shore and the final building at the Richardson campus in San Diego, both developments, we're 100% leased upon delivery.
In medical office, we continue to execute on our proprietary H day development program, delivering a 42000 <unk>.
Square foot building in the fourth quarter. The project is located on the campus of the Oak Hill Hospital in Florida, and was 65 per cent leased to HCA upon delivery in total our $1 billion active development pipeline was 68 per cent pre leased at year end.
Upon delivery and stabilization these projects will generate significant earnings and NAV accretion.
Moving to transactions were finding strategic ways to recycle capital into our core segments through both acquisitions and new development in December we closed on the previously announced off market, Cambridge Discovery Park acquisition for $664 million at a 5% stabilized cash yield and six 5% John.
Yep.
The 600000 square foot campus enhances our number one market share in a dynamic and growing west, Cambridge, Submarket, which is highly convenient to Ala Wai station route to and the Minutemen bikeway.
The campus also provides a future densification opportunity.
Also in December we acquired an off market 5.4 acre land parcel on her medical city Dallas campus.
$33 $5 million.
The land currently houses a behavioral facility that is leased to HCA.
Moving to next few years, we expect the parcel to be developed into an inpatient and outpatient tower to accommodate hca's growth.
On this world class campus.
In early February we acquired an off market 13 million dollar mob on the campus of Hca's Centennial Medical Center, a leading hospital in Nashville.
<unk> cash yield is 6%.
We already own more than 600000 square feet of highly successful Mlps on campus plus a large new development that delivers in <unk> 'twenty one.
This campus is one of the trophies in our mob portfolio.
In senior housing we've made tremendous progress on the previously announced sale of approximately $4 billion of shop and Triple net assets.
We have now closed on 12 separate transactions generating gross proceeds of approximately $2 $5 billion.
It was wide variance by portfolio and price per unit and cap rate given the highly disparate asset quality importantly, overall pricing is in line with previous disclosures.
The larger shop sales include a 32 properties Sunrise portfolio.
12 properties atria portfolio and a 16 property portfolio operated primarily by Atria and capital senior living.
If we look at the entire portfolio of shop sales, both completed and under contract the cap rate on annualized fourth quarter NOI is roughly 3% excluding cares Act revenue.
The blended cap rate on pre Covid NOI is approximately 6%.
The larger Triple net sales include the 10 properties aegis portfolio eight property H or a portfolio and the 24 properties brookdale portfolio in which we were relieved of funding a $30 million remaining capex obligation.
Lending cap rate on the aggregate Triple net portfolio Inc.
<unk> assets currently under contract is approximately 8% on rent and in the low 5% range on property level trailing three months EBITDAR, Excluding cares Act revenue.
In the aggregate, we have provided $620 million in first mortgage seller financing to date.
With approximately $250 million of that amount expected to be repaid in the next few weeks.
Seller financing is in the 65% moving to value range.
With terms ranging from one year to three years and escalating rates to encourage early repayment.
We signed purchase agreements or letters of intent on all of our remaining shop and triple net properties, representing an additional $1 $5 billion in gross proceeds.
Remaining asset sales do not include any material amounts of seller financing upon completion of the sales are only remaining exposure to rental senior housing b, our sovereign wealth joint venture a small handful of legacy loans in the short term seller financing.
With the significant asset sale proceeds were in great shape to continue executing on our pipeline of strategic acquisitions and new development as.
As an example, we are essentially out of space in South San Francisco and San Diego. So we're looking closely at our land bank and Densification opportunities and we're seeing opportunities in medical office, we expect to share more news on these activities shortly and now over to Pete.
Thanks Scott.
I'll start today with a review of our financial results provide an update on our recent balance sheet activity and finish with 'twenty 'twenty one guidance.
Starting with our financial results from the fourth quarter, we reported <unk> as adjusted of <unk> 41 per share and blended same store growth of four 2%.
For the full year, we reported <unk> as adjusted of $1 64 per share and blended same store growth of three 8%.
Our earnings and same store growth numbers continue to be fueled by an irreplaceable life science portfolio.
Located in the three hotbed markets of San Francisco, San Diego and Boston Edison.
Ed is in the midst of a virtuous cycle and shows no signs of abating.
A differentiated medical office portfolio added <unk> 84 per cent on campus 97 per cent affiliated and continues to outperform producing consistent and reliable results.
We've experienced headwinds in our <unk> portfolio, but we are encouraged by the successful rollout of the Covid vaccine, which should be a catalyst for improving results in the near term.
There are a few reporting items I would like to mention first during the fourth quarter, all remaining triple net and shop at that were sold were classified as held for sale.
As a result in accordance with GAAP. These segments are not characterized as discontinued operations.
Pages 37 to 39 of the supplemental we have provided detailed operating results for our discontinued operations.
A reconciliation that tied back to our income statement.
Second we moved the sovereign wealth shop joint venture, which we expect to have approximately $10 million to $20 million of pro rata annual NOI 'twenty 'twenty one into the other non reportable segment.
Third we moved our small hospital portfolio into the medical office segment.
As a reminder, once our near term hospital purchase options are exercised we have only $15 million of total annual NOI.
All of these changes are effective for the fourth quarter.
In our supplemental on page 40, we have included a pro forma table showing what our same store results would have been before the aforementioned changes.
For the full year, our pro forma blended same store growth was positive 1%.
Turning to our balance sheet.
When we announced our intention to exit the shop and Triple net segment, we outlined a clear plan what we intended to do in the near term with the $4 billion of expected proceeds.
At a high level that plan included.
Approximately $1 billion of identified acquisition, including Cambridge discovery part.
Midwest MLB portfolio.
And the South San Francisco land acquisition.
We discussed some amount of short term seller financing to expedite sales.
We now expect total seller financing of approximately $300 million to $400 million after incorporating an approximate $250 million repayment, we expect shortly.
And the balance of the proceeds would be utilized for the repayment of near term debt and an identified acquisition.
We are able to match funds.
Accordingly in January we announced the repurchase of $145 billion of bonds maturing in 2023 and 2024.
In late January through a tender offering we closed on the repurchase of $782 million at these bonds.
In late February we will repurchase the remaining $668 million balance.
With additional senior housing proceeds expected on the horizon.
During the first quarter, we will likely repay another $400 million to $500 million above.
Pro forma all of our anticipated debt repayment activity.
Net debt to EBITDA is expected to temporarily drop to approximately 5.0 times.
This use of proceeds plan provides us with significant benefits, including first it is our intent to not sit on debt cash since it would be significantly dilutive to.
The debt repayment allowed us to put cash to work immediately.
Second the debt repayment materially enhances our already strong credit profile by improving our weighted average tenor to approximately seven five years and eliminating bond maturities until 2025.
Third it provides our investments team with the time necessary to reinvest the proceeds into accretive portfolio enhancing acquisitions funded with new long term debt, bringing our leverage to approximately five five times.
Turning to our 'twenty 'twenty one guidance.
As a result of our portfolio mix stands today.
We're in a position to provide earnings guidance for 2021.
Before I get into the details I did want to spend a moment level setting our approach to guidance this year.
And near term outlook for life Science, and medical office, which equals 85% of our portfolio NOI.
As robust as it has ever been.
We are seeing increased leasing demand positive mark to markets.
Continued lease up of our development and redevelopment projects.
The other 15% of our portfolio NOI.
Primarily our <unk>.
Remains challenged but with positive trends starting to take hold with the rollout of the Covid vaccine.
Second there are several important variables that are extremely difficult to predict which is why we are guiding to a wider earnings range.
These variables include.
Timing of our senior housing sale.
The reinvestment of sale proceeds into acquisitions.
And the inflection point on <unk> and our shop JV.
Third we have made the important decision to operate going forward with less leverage than we have in the past our target net debt to EBITDA is now five five time compared to the near six times, we've consistently operated at pre Covid.
The impact of debt is moderately reduced earnings relative to what maybe in your models.
So with that as the backdrop for 2021 guidance is as follows.
So I thought it was adjusted ranging from $1 50 per share to $1 60 per share.
Blended same store NOI, ranging from one 5% to 3%.
Components of blended same store NOI growth, our life science, which is 50% of the pool ranging from 4% to 5%.
Medical office, which is 47 per cent of the pool, ranging from one and a half to two five per cent.
CCR seats, which is only 3% of the pool ranging from minus 15 to minus 30% in.
In 2021, our full year same store pool for CCR seeds consists of just two sunrise assets.
Furthermore, a large negative decline is primarily from the significant rolled out of cares Act grant.
13 property Lcs portfolio will enter our quarterly pool, starting in the second quarter and enter our full year pool in 2022.
Let me provide more color on the range of potential guidance outcomes. Please.
Please refer to page 41 of the supplemental if you would like to follow along.
The low end of guidance assumes a more prolonged impact from COVID-19, resulting in an inflection point in <unk> during the third quarter and no additional acquisitions beyond what we have already announced.
The high end of guidance assumes an accelerated COVID-19 recovery, resulting in an inflection point in <unk> during the second quarter Ed.
And Ah full redeployment of one 5 billion of senior housing proceeds into accretive acquisitions.
The major earnings variances from the low end to high end of guidance include cash.
$10 million of earnings or approximately two pennies a share from our same store portfolio.
$35 million of earnings or approximately six to seven pennies a share from our Lcs ccr's debt portfolio and our sovereign wealth shop JV.
And $10 million of earnings or approximately two pennies a share from the timing of accretive acquisition.
Our assumption on the high Ed as we invest over $1 billion into unidentified acquisitions in the second half of the year at a 5% cash yield funded entirely with debt, taking our net debt to EBITDA back to target.
In closing our 2021 guidance is on our best information and estimates as of today I would caution against drawing too many conclusions from the midpoint of our range. As there are many puts and takes that caused us to tighten increase or reduce the range as circumstances dictate during the course of the.
Year.
With that operator, please open the line for any questions.
Thank you we will now begin the question and answer session.
I ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two so that everyone may have a chance to participate we ask that participants limit their questions to one and one related follow up.
If you have additional questions. Please re queue at this time, we'll pause momentarily to assemble our roster.
[laughter].
And the first question will come from Nick <unk> with Scotiabank. Please go ahead.
Thanks, John I guess, just first question on on the acquisitions.
Maybe you can just talk a little bit more about what youre seeing in the market right now and and I guess as well what why you know.
Why you think it's more of a back half of the year our story in terms of getting acquisitions done.
Yeah.
Hey, Nick.
Got speaking here I'll take that one Tom may have something to add.
Over the last quarter, we closed about $1 billion of really strategic acquisitions in both life science and medical office virtually all of it off market.
Added to two of our most successful medical office campuses.
With medical city, Dallas as well as Centennial.
In Nashville, and then of course, the Big acquisition in West, Cambridge to solidify our number one market share and then we took down some land in south San Francisco to really position us as the market leader in that important sub market really had definitely.
So we're being pretty selective about what we're acquiring even though we do have a significant amount of proceeds from these asset sales and more coming and we are seeing attractive opportunities.
With our focus of course on medical office and life Science, We may find one or two <unk> as Tom mentioned in this.
Repaired remarks.
But by paying down the debt, we really got flexibility.
And make sure that we find something that's particularly attractive.
The team has been pretty focused on executing these senior housing sales.
Queen what's closed and what's in process, it's almost 30 separate transactions I mean, it's Ed.
<unk> number.
Virtually all of that done internally without relying on third party advisers. So the team's been running pretty hard on the dispositions, but I will say that the.
The pipeline is significant and it is attractive and its strategic.
There is some development, including activating land bank opportunities that we're looking closely at.
But we do expect there will be some acquisitions.
But we usually prefer to wait until those are closed before we actually talk about them in detail comment anything you'd add to that.
One thing I would add is Nick as we look at the sale transactions for 1 billion and a half that we have lined out true.
Buying in a non binding contracts. We also do have some acquisitions debt.
Could be back to back with that so that may be something you see announcements on as we go forward, but well wait until we get little bit closer until.
We closed those to make a final announcement.
Okay. Thanks, and just just to follow up on on the development spend that you have in the guidance. This year. It looks like that's actually more than what's left on in terms of cost to complete the projects. So are you are you starting new projects and Oh range I'm going to be in your lab pipeline.
For development or redevelopment.
Yeah, I'll start with that one and then brinker can add.
Nick the answer is absolutely, yes, we have some opportunities in San.
San Francisco and San Diego that we do see some near term potential so I think you'll probably hear.
Some something from us in the fairly near term on some opportunities that will come forward with.
Yeah.
Correct observation on your point on the in those comments.
Okay, Alright, thanks, guys. Thanks, Dan.
The next question will come from one Santa Maria with BMO capital markets. Please go ahead.
Hi, Yeah. Thanks for the time guys and good morning.
Just curious on the acquisition pipeline it.
Seems like you guys don't want to get ahead of yourself, which is understandable, but if you could just give us a flavor for the makeup of that split between life science, and Mlps, which seems to be the focus from.
Tom I believe you commented on some cap rate compression.
If you can just give us a sense of where cap rates are today across those two asset classes for the quality of products Youre looking for.
Yes, Scott wanted to go out and start on that one.
Yeah, I'd say cap rates for medical office has stayed in the five to five 5% range for quality.
Product.
We've been able to find some more one off one at a time acquisitions that are a bit better than that but.
Any reasonably sized portfolio was probably going to be in that five to five 5% range.
Life Science.
And on the sub market of course, but there have been some pretty sizable portfolio trades in the core markets that are more in the mid force for good quality product of course, those are big portfolios.
That maybe trade a bit better than an individual asset, but certainly theres a lot of interest.
In that sector, so cap rates, certainly havent gone up over the past 12 months that would probably come down a little bit, which obviously benefits the incumbent players with big portfolios.
In terms of the mix of the acquisition pipeline you know it really is a combination of one off acquisitions.
Like the ones, we announced that with medical city, Dallas, and Centennial, where we know an existing submarket or campus extremely well and maybe there's one or two buildings that we don't own and we're proactive in trying to capture that last Romanian asset on a particular campus.
And then there are some portfolios that we're looking at but I don't want to say more than that and in terms of the mix between the two business segments until we actually get them done.
Okay and then just my follow up just with regards to the land banking Densification, which you guys tried to highlight I think is an attractive growth opportunity just a sensor.
How much you guys to put to work in.
What you're thinking of in terms of returns for that capital is to to help us kind of benchmark or per guideposts around what you could do.
For the next couple of years.
You know one fair question, because we've talked about a very large number of.
7 billion plus of embedded opportunities.
And as we look at it this is a decade long pursuit or maybe even longer.
And so what we do over the next couple of years, I think you're definitely going to see some activity.
Both in execution of land bank opportunities and in some densification opportunities will be coming forward with more of that information soon but we're going to hold off for just a bit until we complete the analysis bring it through our board and then make announcements perhaps at some of the upcoming couple.
Conferences that we have coming.
Fair enough. Thanks, guys. Thank you Juan.
The next question will come from Nick Joseph with Citi. Please go ahead.
Hopefully, we'll get that for our conference in a few weeks just.
Just on the short term seller financing for the $300 million to $400 million till after the near term repayment could you give us some more details.
On the rate I guess expected timing of repayment with cash or crude and then just comments on the credit of the borrowers.
Yes.
Interest rate.
On average Nic is around 4% somewhere a bit higher some are a bit lower.
The ltvs tend to be in the 60 to 65 per cent range, which we thought was a reasonable amount of equity.
Standing behind the alone obviously, we're getting a first mortgage.
To secure the loans the term tends to be in the one to three year range.
And we did have to rates escalate over time to encourage repayment. So we've put out about $620 million to date on $2 $5 billion of sales.
We do think about $250 million that gets paid back in the next few weeks.
Leaving us with plus or minus three to 400 million remaining and of the 1 billion five of asset sales that are left and under contract, there's really not any material amount of seller financing there'll be a bit.
But nothing significant so actually at the end of the day.
The net amount of seller financing that we're providing is a lot less than what we thought we might have to.
And we really did.
Provided so that we could get to a commitment and a closing sooner than later because some of the portfolios are just more challenging to finance them.
We're pretty pleased with how it came out.
That's really helpful. And then is it just secured by the properties or are there any guarantees from the bars.
Just the typical recourse carve out guarantees.
Alright, thank you.
Thanks, Nick.
The next question will come from Rich Anderson with S. M. B C. Please go ahead.
Pardon me Mr. Anderson Your line is open.
The next question will come from Jordan Saddler with Keybanc capital markets. Please go ahead.
Thanks Scott.
Just keying in on the on the remaining asset sales, if you would maybe a little bit more color on sort of the timing.
And and the pricing.
Yeah, Hey, Jordan, it's Scott I'll take that off the 1 billion five mm. The vast majority of it that's remaining is shop most of our big Triple net said now been sold with Brookdale HOA in Asia. So there is really just a small handful of triple net.
Last we are under contract either finding or non binding with every asset that range in the portfolio that's pretty astounding.
More than half of that is a PSA and debt.
Balances and offer letter.
And the makeup of the buyer pool, it's diverse because its more than 15 separate transactions, but few are bigger a couple of hundred million plus and then a bunch of smaller transactions. So it's a pretty diversified pool.
That debt.
Buyer pool is naturally diverse but you know there are two common characteristics. One is it's a counterparty that we know pretty well. So it's a lot of repeat buyers, which gives us a good confidence and then the other category is very well capitalized buyers Hussein, particularly motivated to get into the sector and obviously playing there.
Five to seven year, IRR turnaround opportunity and that's a good fit for the private equity groups that had been the predominant buyers.
So you know we're far down the path, we're making good progress if everything went well I think we could close all of it by the end of the second quarter, but you know transactions are always somewhat uncertain, even in a great environment and still pretty.
A pretty choppy environment for senior housing so anything could happen, but we certainly feel good about the progress made to date and the quality of the buyer pool.
Yes.
When you when you sort of think about that when we think about the pricing obviously, there's been you know pretty.
Meaningful degradation in cash flow sequentially right on the shop side.
So are we looking at cap rates continuing to fall versus what was quoted on the land sale.
Or just sort of holding the line.
Yeah when we.
Announced the likely pricing on the portfolio sales at the last earnings call.
The pricing is really remains consistent with that so.
So it's about a blended 3% cap rate on run rate NOI per shop at around 8%.
A cap rate on the rent for triple net.
And there's really no change so.
The portfolios that have closed to date and shop, they had a touch higher cap rate than what remains but the blended pricing is pretty much right in line with what we talked about three months ago and you know over the last three months you had some really good news with multiple vaccines that seem to be highly effective and then you had a pretty brutal third.
Wave, so I guess that to sort of offset one another in the transaction market that we didn't have any really certainly no material changes in pricing.
Okay. That's helpful. Just on the seller financing what did you guys say, what the rates were or maybe what the total interest income expectation is from seller financing is baked into guidance.
The blended interest rate in year, one is about 4% that's paid in cash some are a bit higher some are a bit lower and then we have rates that escalate every six to 12 months, usually by 25 or 50 basis points.
And then Jordan, it's Pete here.
Other items section within our guidance page. We do include interest income and so that.
That has had the interest income from the seller financing embedded within the guidance.
Okay. So that is that all 100% at 20 $28 million that's all from the.
Correct, Yes 300 million.
It didn't tie it back I was I was unsure like it's up 300 million of seller financing $28 million.
That rate was a little bit high but maybe maybe.
Yeah, Jordan, there's a couple of other legacy loans in there it's not entirely seller financing that makes up that full amount.
There's a couple of other it's about $100 million other financing that are not part of net seller financing that are in place. So it's the combination of those two that makes up debt before interest income.
Thanks, guys.
Excellent.
The next question will come from Rich Anderson with S. M. D. C. Please go ahead Sir.
Sorry about that a little ticked glitch, putting a sell rating on this phone I think.
So I was wondering you know when I think about the long term of the portfolio you know primarily life science and medical office, if you've done any sort of work to see how they kind of behave together in other words like you know you're getting married life science and medical office as a as an asset class and maybe there is some crossover interaction between the two but.
How do they behave like from a standard deviation of growth perspective, you would think medical office being sort of the counter to life science, which probably has a higher degree of volatility in earnings have you given a look back to that to see how you might behave as a as this new organization going forward from that standpoint like on the album algorithmic like type of approach.
You know the algorithmic part we haven't.
We haven't done that type of a calculation.
But rich I would say this <unk> for the last decade, plus have produced in the on campus affiliated type products have produced 2% to 3% same store growth literally every year. So it's a very very stable product.
Somewhat immune to new supply because it requires that invitation from hospitals and health institutions in order in order to be able to grow those portfolios and then with the specialists that reside in those properties. It produces a very consistent result.
Life Science has been.
It's subject to some more cycles, but biology based drugs have become.
So explosive in recent years for the whole variety of reasons that we all know that the demand has been very strong and.
They're not producing any more new land in these hotbeds markets. So it does feel to us like there is going to be a nice runway of continued.
Strong demand without a lot of new supply. So we feel that there's going to be strong returns on that front, but of course that is more volatile than mlps. We like the fact that that produces some diversification between those two asset classes.
And of course, <unk>, which is only about 10% of our business is very different producers of high yield high barrier to entry irreplaceable product eight to 10 year development period for new product.
And then the interest fee concept creates a very different in the aisle environment produces a very different type of portfolio to match off against the other two businesses. So we like the way the three come together, but as far as running algorithmic math I'm not even sure would be all that useful.
Paul because the biotech business has.
Growing so rapidly over the last.
Eight to 10 years debt it seems that some of the longer historic password probably ended up in a distorted result, okay fair enough and then just a quick follow up ccr's, he's not not really at all a rounding error when when you think about the.
Portfolio in the next few years at least a 10 or 15% of the of the of the entirety.
Have you given any look at the housing market, obviously that has taken off in a lot of markets and if you're seeing any early signs of people you know are monetizing and finding their way into these facilities is it is it starting to crawl a little bit in that direction or just not not it's just too soon.
Well, we haven't we had.
Our strong fourth quarter.
Excuse me a strong December and then and then going into January.
Obviously, you have got housing prices that have increased dramatically low interest rates.
Some pent up demand and this is an IL based product with a younger senior group.
So it does seem like we have some positive momentum come in at the same time, we have some choppy results remaining from Covid, but we're optimistic at this point in the back the vaccine as Scott had mentioned.
Ben either completed.
Or at least the first the first shot or scheduled in each of our different communities Scott anything that you would add to that.
Yeah, I would maybe just add that.
Two thirds of our CCR CS are actually located in Florida, where the demographics seem to be particularly attractive for a number of reasons. So that was one of the things that.
Attracted us to the <unk> portfolio in the first place we did have a pretty.
Strong fourth quarter as Tom mentioned in the <unk>.
Volume of leads and tours et cetera seem to be picking up so things look good and our entry fee price is at a pretty big discount to the local home values. So that feels good to that there's it's not really.
You know a luxury product theyre, certainly very nice, but it's not like we're trying to attract a price point that's stretching.
The average consumer in those local markets.
Okay, great. Thanks for the color guys. Thanks rich.
The next question will come from Steven Valiquette with Barclays. Please go ahead.
Hello, everyone and thanks for taking the questions.
So the first one here just the same store cash NOI growth from life Sciences was obviously pretty strong exiting 'twenty, one 7.8 that number in the fourth quarter.
And the 'twenty 'twenty one guidance you are incorporating a 4% to 5% growth of that same metric for life Sciences. I may have just missed the comment on the delta between those two numbers is it just due to a different set of assets included in the same store pool. This year versus last year or were there. Some other drivers in there that are worth calling out.
Thanks.
Yeah, the pool isn't changing that much I guess, one of the challenges with printing such a strong resolve in 2000 twenty's. It just creates a more challenging base to grow off of but at the beginning of 2020, our guidance from 45 per cent and we ended up for the full year at $6 two per cent.
Guidance again this year is in the four to five per cent range, we'll see hopefully there's some conservatism in that number.
We did have a significant number of mark to market renewals this year, which really helped.
We just don't have as many in 2021, we have very few maturities.
And among those that we do some of the projects are redeveloped and so.
So we probably won't have as much of a mark to market upside in 2021, we also had incredible rent collections. So congrats to the team in 2020, we had virtually no bad debt and of course, we do have some bad debt baked into our guidance for 2021 that you know it could be a source of upside as well as <unk>.
Successful.
Actions this year.
Okay, Great and then one real quick one here just the $9 million in Cares Act Grant that's included in the 20 <unk>.
'twenty one guidance.
Does that include everything that's been applied for and is there any chance for additional relief dollars above the $9 million that could stem from additional relief packages. This year under the administration. Just curious are there can be something above the $9 million as things progress here. Thanks.
Yeah, Hey, Steve It's Pete.
Everything we've applied for in fact, we've actually.
Seed a portion of that around $3 million already and hopefully we received the balance in the next couple of weeks Scott.
Theres anything above and beyond what we've applied for perhaps there could be some upside to that but that is not baked within our guidance.
Perfect. Okay, alright, great. Thanks. Thanks.
Thanks, Steve.
The next question will come from Amanda Sweitzer with Baird. Please go ahead.
Great. Thanks, Good morning, everyone I wanted to dig into your medical office same store growth guidance of debt, it's kind of allow that stabilized cheat a 3% growth you'd expect them, how impactful as hospitals and the addition of a full year range and then are you assuming any occupancy increase in your guidance.
Yeah. This is Tom Clarets How're you doing.
The.
The range is a little lower than the normal 2% to 3%, we usually quote that's primarily due to the overhang of the parking degradation, we're still seeing it.
With Covid is still with us there's a lot of limitations on visitations that a lot of our campuses. So that that's really the biggest item that's driving that growth down we continues to see good mark to markets and escalators in the portfolio that's.
Driving about two 7%.
Hum.
Occupancy will be up a little towards the end of the year and we actually had a pretty good start to the year. So that's positive also but really it's the parking revenue that's causing that.
Okay. That's helpful. And then as you do shift more of the survey tell life science are there any other markets that look like interesting investment opportunities that have those high barrier to entry is where he could increase scale and I know at least one of your development partners with extended from New York recently.
Amanda.
That's something we spend a lot of time thinking about we would never rule it out.
There are other opportunities out there, but one of the things that we've used is a central tenet of our investment.
Investment approach is that we believe strongly in high barrier to entry.
Portfolios and within the clusters that we operate in San Francisco, San Diego and Boston.
It's very difficult for new participants to come in and compete effectively because biotechs really rely on that cluster concept, where all that talent resides and they can grow with our landlord rip up one lease.
To form a larger lease and our sister property within our campus. So because we have that huge competitive benefit we have been more inclined to stay clear.
Day within the three markets that we have this.
This huge competitive advantage and we will keep an eye on the other markets, but for now we're happy with the three markets that were.
Focused in.
Makes sense. Thank you for the time.
Amanda.
The next question will come from Michael Carroll with RBC capital markets. Please go ahead.
Yeah. Thanks, Tom you talked a lot about on this quarter on the strength within the life science space in the amount of Densification opportunities do you have I mean is it reasonable to expect that your development activity can accelerate over the next few years compared to the past few years, just due to the the uptick we're seeing in life Science day.
John.
Michael.
Very good question, it's something that we've talked a lot about as an executive team and as a board.
If you look back at where we were 4567 years ago. Our development pipeline was much much smaller and we've expanded it to capture these opportunities and there's demand and take advantage of our land bank.
What the Densification opportunities added to that with a lot of 25 plus year old product built on low rise properties and some of the best markets from San Francisco and San Diego.
It definitely provides some highly accretive.
In redevelopment possibilities for us so you could certainly see us grow that well always take into account how much drag we want to add at any point in time.
I'm, a big believer in the rollover effect, taking place from making sure that we've got very clear funding for whatever it is that we that we add to our portfolio and and and.
And also look a lot of pre leasing and we will take all of those things into account, but we have enough opportunity, where I think you could see us expand that over the next several years.
And I know a lot of your densification opportunities in San Francisco, I mean would you be willing to pursue multiple projects at the same time I mean, obviously, the Houston had really good success at the shore.
No you don't really have much space available, but you'd be willing to break ground on multiple projects at the same time in the same market.
You got it Scott.
Yeah, Michael I think it really depends on what the competitive supply outlook is like as well as the demand I mean, as we look forward over the next two years.
Core markets I mean in San Francisco, there's plus or minus 3 million square feet underway.
But it's 80% pre leased and that's going out 24 months.
We can see from pretty high confidence that anyone in the life science sector opening of building over the next 24 months is likely going to have a huge amount of success.
San Diego has similar dynamics, it's a bit smaller in terms of the development pipeline, it's just a smaller market, but similar pre leasing and Boston.
Is it similar to San Francisco as well a little bit lower now as you look out to 2023 and beyond it's hard to say, there's a huge potential pipeline, but it's unclear how many of those projects would proceed when they would proceed one day would open and trying to time your project so that it matches up well.
With the competitive supply that's coming is critically important so any time, we pull the trigger on a development, there's a pretty intense deep dive done on the local supply and demand dynamics as well as timing submarket location. So.
So that we feel really good about the next two years.
Beyond that we just have to continue to assess I mean, it could go up it could go down it just depends on what the dynamics look like at the time.
Yeah.
Okay, great. Thank you.
Thanks, Michael.
The next question will come from Daniel Bernstein with capital one. Please go ahead.
Hi.
Just wanted to follow up on the <unk> since that's a large kind of variance in your 'twenty one guidance.
So wanted to understand.
Is there any discounting going on in terms of entrance fees and maybe if you could talk a little bit more about some of the leading indicators.
At CCR, she's whether thats tours inquiries et cetera.
Yeah, Hey, Dan its Scott Theres, no discounting going on any change in revpar quarter to quarter is impacted as much by the service mix as anything because there is the full continuum of care, obviously, so a change in independent living versus a change in skilled nursing has a pretty dramatic difference on the rest.
Core, but we're not discounting the monthly rate or the entry fee.
We're seeing continued strength there in terms of forward looking indicators.
We've grown pretty significantly off of the base into Q entrance fees in the fourth quarter were up 100% versus to Q.
And up about 30% versus the third quarter. So theres good momentum and now that all of our <unk> has received.
<unk> received orphan scheduled for the first dose of the vaccine that's obviously a good sign.
Today were entirely open to move ins, two words and family visitation, but with limits. So it still doesn't feel like the operating environment that would have existed 12 months ago I think over the next two to three months.
Increasingly return to business as normal as the as the portfolio is fully vaccinated. So.
So we are starting to see a pick up.
Coincides with of course with the phased reopening of their properties and we expect that to continue once the vaccine is fully.
Completed at the properties.
Okay, and then just a quick follow up on the CCR shoes as well.
That's part of the occupancy loss.
It was on the skilled nursing side, so has there been.
Any stabilization, there or any signs that skilled nursing.
Occupancy was in the CCR sheets can pick up or recover or kind of how you're thinking about that recovery.
Yeah.
Right. Yeah. If you look at the independent assisted portion of the CCR sees the occupancy was down less than 500 basis points between COVID-19 to pretty dramatically.
Better outcome than say rental senior housing, which was down more than a 1000 basis points.
Driven obviously by the length of stay skilled nursing was down more than 2000 basis points. So pretty significant decline. There's obviously a lot of short term rehab business running through the communities in that business Scott decimated early in the pandemic, even today, our skilled nursing units and keep in mind, it's only 15% of the total units.
He's building so it's not hugely material, but it does move the needle.
We're in the mid sixties has an occupancy percentage with the historical run rate is more in the mid eighties.
So we're we're comfortably above where we were in April and may, but still significantly below a stabilized level and it bounces around we had started to come back over the summer and then we sell back when the virus took off again we.
Came back again in October and November and then in December we started again as the virus picked up and of course once again now in January and February it's picking up again. So it really does follow the trend of the virus, which hopefully is a good sign given that the numbers nationally are coming down pretty significantly in the vaccine rollout seems to be picking up.
Some significant momentum.
Yeah, that's great color I appreciate it I'll hop off thank you.
Thanks, Dan.
The next question will come from Matteo Okusanya with Mizuho. Please go ahead.
Hi, Yes, good afternoon, everyone again, congrats on the progress with the portfolio transformation.
No. The thing on this call again, a lot of questions around the U R E.
It's going to be three per cent of your book, where you going forward I know you guys. That's all from the last earnings call about strategically why you decided to hold onto it but anything kind of changed your mind up to the success you've had with that sit in senior housing around how you think about the things that are holding onto it becomes too much of a.
Distraction.
Given.
Strong pivot towards life science of it and would be going forward.
Okay.
Yeah. That's another conversation that we had extensively as an executive came in as a board.
And Youre right. It only represents 10% of our company.
And it is a very different business from life science and MLB silica.
Fair question.
But.
It also is a great note that these portfolios produced a very strong yield.
Which given that the quality of the cash flows.
And the baby Boomer growth tailwind, we feel quite positive about.
Again, I'm repeating myself, but they are impossible to replace these portfolios.
New supply is almost nonexistent due to the eight to 10 year development period.
And we've got this enormous embedded densification opportunities within our our campuses and you almost have to see these two fully appreciate.
What a high quality ccr's it looks like with 500 units sitting on 50 acres of infill land.
It has a very different look and feel than what you would expect if you havent toured them.
So it's so hard to replace.
The yields are so high and we have a strong infrastructure in place.
Our view there for 10% of our company at this type of a yield.
That it produces another element of nice diversification and one that we think we can build slowly over time, but every time, we add one it's going to be at a very nice yield. So we've continued to conclude that.
It is a business that we would like to own and maybe grow slowly it's not going to be a huge part of our company in the future, but one that we think is additive.
Gotcha and then one other quick question, so kind of post the scale the portfolio makes sense.
Life Sciences, 47 of them would be penny per cent CCR S. T. A.
By the end of this year, giving development deliveries assuming you do your $1 5 billion of acquisitions could you talk about at the end of the year, what that mix could look like on a longer term basis, what the product mix.
Yeah. So the numbers you just cited Taylor exactly correct, 50% life science in 47 per cent, Mlps and 3% <unk>, but keep in mind that that is just the same store pool as it currently stands because.
There are only two of our did the old the older existing sunrise assets that sit in our <unk> portfolio, where pool for 'twenty 'twenty, one but of course from 2022 of the whole Lcs portfolio will come in so that mix will look differently. Pete do you have those numbers handy that you could speak to them.
Florida, It looks like 'twenty, two and going forward.
Yes.
Yeah.
It'll be a little bit more weighted as Tom said toward TCR Ts and we can follow up with some more specifics with you tayo offline some of it too will depend on.
Debt investments come together, as well and where it tracks towards when you look at 2022 and 2023 so.
You have to factor in the TCR T.
Still see life sciences to be our largest segment, where <unk> falls out within that will as I said it depends largely on the acquisition debt are forthcoming.
Sounds good thank you.
Thank you.
The next question will come from Lukas Heart, which with Green Street. Please go ahead.
Thanks Edward.
Regards to the sovereign wealth shop, JV did the plants change on keeping that and if so I was just hoping you could provide some color around that decision.
Yeah.
Yeah, so our thinking on that Lucas is.
We have a we have an important partner who also has a.
Interest in things that they're thinking about Ed.
And so we're going to work with them over the coming few months to see what makes sense for both parties and then we'll either move forward with that.
And retain it or will will will choose to do something different.
But stay tuned on that one.
Lucas he's still there.
Oh, yes, sorry items on mute thank you.
Okay.
The next question will come from Joshua dinner line with Bank of America. Please go ahead.
Yeah. Thanks for the question guys just wanted to thinks it's for Pete you.
You mentioned youre going to have a lower leverage target going forward I believe you said five five or six before.
What's driving that decision I would have assumed kind of getting rid of the senior housing from your portfolio.
Less cyclicality involved so maybe it would have been easier to keep that higher leverage but just curious in your book.
Yeah.
It's a really good question, Josh you know as we look at our <unk>.
Leverage.
We want to be firmly in that triple B, plus b double ups.
One.
Metrics with the rating agencies.
As we were consistently being at the call. It high fives around stacks. It puts a lot of pressure on capital raising and then you also take into account we've talked a lot about development and densification opportunities on this call as we factored that as a major piece of our.
Portfolio and allocation of capital we felt like it was appropriate to take our leverage down. So we had additional cushion and I think we learned some lessons with COVID-19 as well as to what can happen pretty quickly.
In the overall macro environment.
All those factors combined we just felt like operating.
Half a turn last made sense for our portfolio and by the way we want to run the company going forward.
Tom anything you want to add.
Yeah, I mean, let me just add a couple of things Josh when we look at play we're positioning.
Going forward.
What we deem to be a very high quality portfolio.
We've got a strong development of Densification pipeline and we want this to be supported by what we think of as a fortress balance sheet. So it just simply plays into the strategy and what we want our REIT to look like.
As we go forward.
Our new strategic approach, so it's really that simple.
Okay got it thanks, Scott I appreciate it.
Thank you.
The next question will come from Todd Stender with Wells Fargo. Please go ahead.
Hi, Thanks, and probably for Tom just because you're on the board as well, but maybe you could just share some thoughts on how the board was evaluating the dividend.
Sure they factored in management's recommendation regarding timing of asset sales and redeployment of proceeds, but maybe just some color there.
Well really.
Yeah of course, the board takes into account managements recommendations you are completely right.
And from the board perspective, we simply looked at it debt we wanted to have.
Stabilized target payout ratio of 80%.
And we thought that that made sense, given our life science and MLB centric portfolio mix, along with the substantial development pipeline and landbank Densification opportunity that we had in front of US we looked at the current dividend yield of 4% and felt that to be a very strong and sufficient yield.
And we wanted the $150 million or so stabilized retained earnings.
As we went forward for reinvestment into our accretive development and Densification opportunities. So those were all the different things that debt, we discussed at length over a period of about three quarters as we came to the decision of $1 20 per share.
Yeah.
Alright, that's helpful and then maybe for Pete do.
Do you have a capex budget for 2021, you could share just on the existing portfolio.
Yeah. So if you look we did include a capex budget on page 42 of our.
Supplemental work.
With regards to development and redevelopment spend $700 million revenue enhancing capex of $115 million to $140 million and that our first Gen T I's and some initial capital expenditures 85 to 110, I will point out that some of the revenue enhancing its up a little bit this year.
Relative to last year, there are two actually important items, one we're actually doing more spend in mlps.
John.
Green and issue debt, so there'll be a nice return on that and then two we did slow down a little debt.
As well last year, just given the fact that COVID-19 made it difficult to do some revenue enhancing capex that are <unk>. So we're projecting net debt picks up again in 2021 and then we also do get some recurring capex above on page 42, I won't go through all of those but it's all lined out in there.
Got it thank you Peter.
Thanks, John.
The next question will come from Mike Mueller with JP Morgan. Please go ahead.
Yeah, Hi, I just have a quick one I think you mentioned lifetime spreads were about 13% from fourth quarter can you, let us know what they were on the 2021 leases that you've done so far and what's underway.
Are those numbers comparable.
Yeah, and most of the leasing to date, it's 115000 square feet in January as is new we seen so there isn't a great sample size, so far, but our mark to market across the portfolio.
<unk> is in line with with what we achieved in the fourth quarter. So it's in that 10 to 15 per cent range. It does vary by tenant by lease by year. So it's going to bounce around a little bit but it's in that range. If you look at the entire portfolio at the same time market rents continue to grow in the five per cent range may be better.
And our contractual escalator is more in the three to $3 one per cent range. So if that day.
Continues obviously will continue to have even stronger mark to markets.
Got it okay.
Yes.
Thanks.
This concludes our question and answer session I would like to turn the conference back over to Tom Herzog for any closing remarks. Please go ahead.
Yes, Thank you operator, and thanks for everybody for joining our call today and your continued interest in health peak and I Hope you all stay safe and we'll talk to you soon thanks, so much bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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Yeah.
Yes.
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