Q1 2024 Healthpeak Properties Inc Earnings Call

Okay.

Eric: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Healthpeak Properties to report first quarter 2024 financial results and host a conference call and webcast. All lines have been placed on mute to prevent any background noise.

Eric: Thank you for standing by my name is Eric and I'll be your conference operator today.

Eric: At this time I would like to welcome everyone to the L. Pic properties to report first quarter 2024 financial results.

<unk> conference call and webcast.

Eric: All lines have been placed on mute to prevent any background noise.

Eric: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I'd now like to turn the call over to Andrew Johns, Senior Vice President, Investor Relations. Please go ahead.

Eric: After the Speakers' remarks, there will be a question and answer session.

Eric: I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

She would like to withdraw your question Press Star one again.

Eric: <unk>.

Eric: Now I'd like to turn the call over to Andrew Johns Senior Vice President Investor Relations. Please go ahead.

Andrew Johns: Welcome to Healthpeak's First Quarter 2024 Finance Results Conference Call. This conference call contains 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 is included in our press release and in detail in our filings with the SEC. We do not undertake a duty to update any forward-looking statements.

Andrew Johns: Welcome to help fix first quarter 2024 financial results Conference 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 expectations for discussion of risks and risks.

Andrew Johns: Factors is included in our presentation detailing our filings with the SEC.

Undertakes no duty to update any forward looking statements.

Alexander McCaul: Certain non-GAAP financial measures will be discussed on this call. In an exhibit to the AKA we furnished to the SEC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. The exhibit is also available on our website at healthpeak.com. My name is Alexander McCaul. I work for our President and Chief Executive Officer, Scott Brinker.

Andrew Johns: Certain non-GAAP financial measures will be discussed on this call and exhibit to the AK, we furnished to the SEC yesterday, we have reconciled all non-GAAP financial measures most directly comparable GAAP measures in accordance with Reg G requirements. If it is also available on our website at <unk> Dot com.

Andrew Johns: I'll now turn a I'll call it hurts, our president and Chief Executive Officer, Scott, Okay. Thanks, Andrew.

Scott M. Brinker: Good morning, and welcome to Healthpeak's first quarter earnings call. Joining me today for prepared remarks is Pete Scott, our CFO, and the senior team is available for Q&A. We are extremely pleased with our first quarter results, and our momentum is positive on every key message. We increased our 2024 earnings guidance by two pennies at the midpoint, driven by same-store results, outperformance on merger synergies, and an accretive stock buyback. The merger is proving to be a meaningful, positive catalyst for the company, and the integration is exceeding our expectations. Many public company mergers are done through auctions, which delays the ability to integrate the two companies. Our transaction was completely different.

Scott: Good morning, and welcome to help fix first quarter earnings call. Joining me today for prepared remarks, as Pete Scott, our CFO and the senior team is available for Q&A.

Scott: We are extremely pleased with our first quarter results and our momentum is positive on every key metric.

Scott: We increased our 2024 earnings guidance by <unk> at the midpoint driven by our same store results outperformance on merger synergies and accretive stock buybacks.

Scott: The merger has proven to be a meaningful positive catalyst for the company and the integration has exceeded our expectations.

Scott: Any public company mergers are done through auctions, which delays the ability to integrate the two companies are transaction is completely different.

Scott M. Brinker: Neither company would have proceeded with the merger without high confidence in our ability to put the teams and platforms together in a way that one plus one could be. That meant having extensive conversations about people, process, systems, and capabilities before we agreed to. Our integration planning was underway before we even announced the transaction, and in the six months since that announcement, our combined team has done an exceptional job integrating every aspect of our business. Continuity and buy-in from JT and the senior team who joined Healthpeak have been critical to the integration, including key health system relationships.

Scott: Neither company would have proceeded with the merger without high confidence in our ability to put the teams and platforms together in a way.

Scott: One plus one can equal three.

Scott: <unk> been having extensive conversations on people process systems and capabilities before we agreed to proceed.

Scott: Our integration planning was underway before we even announced the transaction and the six months since that announcement, our combined team has done an exceptional job integrating every aspect of our business.

Continuity and buying from J T and the senior team, who joined healthy has been critical to the integration, including key health system relationships.

Scott M. Brinker: Property Management Internalization has been a huge success to date and is a good example of the merger enhancing our platform. Strategically, it was important to me that our own employees were interacting with our tenants every day. And financially, we're now capturing additional profit that flows through property-level analysts. To date, we've internalized 10 markets covering 17 million square feet. We chose to accelerate the rollout given our success to date, and we expect to internalize an additional 4 million square feet by year end.

Scott: Property management internalization has been a huge success to date and there is a good example of the merger augmenting our platform <unk>.

Scott: Strategically it was important to me that our own employees are interacting with our tenants every day and financially. We are now capturing additional profit that flows through property level NOI.

Scott: To date, we've internalized 10 markets covering 17 million square feet.

Scott: We chose to accelerate the rollout given our success to date and we expect to internalize, an additional 4 million square feet by year end.

Scott M. Brinker: Significant upside remains to be captured. We're evaluating 10 plus million square feet for internalization in 2025 and 26, which in aggregate would allow us to internalize more than 70% of our total footprint. The positive feedback from property managers on the ground and our tenants further validates the strategic decision to intern.

Scott: Significant upside remains to be captured.

Scott: We are evaluating 10 plus million square feet for internalization in 2025, and 26, which in aggregate will allow us to internalize more than 70% of our total footprint.

Scott: Positive feedback from the property managers on the ground.

Scott: And our tenants further validates the strategic decision to internalize.

Scott M. Brinker: Let me take a minute on the value proposition in our stock today, which we think is compelling. The baseline is a strong balance sheet, a high-quality portfolio with 3-5% same-store growth, and a mid-fixes dividend yield with a conservative payout ratio. Beyond that baseline, we've identified $80 million of NOI upside potential, none of which is included in our 2024 guidance, from additional merger synergies and leasing up our active life science dev REIT pipeline.

Speaker Change: Let me take a minute on the value proposition that our stock today, which we think is compelling the baseline has a strong balance sheet high quality portfolio of 3% to 5% same store growth and a mid 6% dividend yield with a conservative payout ratio.

Speaker Change: Beyond that baseline, we've identified $80 million of NOI upside potential none of which is included in our 2024 guidance from additional merger synergies and leasing up our active life science gas pipeline.

Scott M. Brinker: We also see 30% upside by recapturing our discount to consensus NAV, which we expect to do through consistent earnings growth and smart capital allocation. Industry headlines notwithstanding, over the past two years, we grew FFO per share by 13%, and we expect to continue growing earnings moving forward. We do our outpatient business. Fundamentals have never been stronger.

Speaker Change: We also see 30% upside by recapturing our discount to consensus NAV.

Speaker Change: Which we expect to use a consistent earnings growth and smart capital allocation.

Speaker Change: Industry headlines notwithstanding over the past two years, we grew <unk> per share by 13%.

Speaker Change: And we expect to continue growing earnings moving forward.

Speaker Change: Moving to our outpatient business.

Speaker Change: The fundamentals have never been stronger patient volumes are increasing absorption is accelerating and new development remains low.

Scott M. Brinker: Patient volumes are increasing, absorption is accelerating, and new development remains low. That's driving strong revenue spreads, retention, and NOI risk. In addition, progressive health systems have a strategic focus to grow their outpatient revenue. It's less expensive for payers, more convenient for consumers, and more profitable for the provider. We have the premier platform and relationships to capture this outpatient revenue. Whether on campus or off campus, both locations are necessary to capture

Speaker Change: That's driving strong re leasing spreads retention and NOI growth.

Speaker Change: In addition, progressive health systems have a strategic focus to grow their outpatient revenue, it's less expensive for payers more convenient for consumers and more profitable set of providers, we have the premier platform and relationships to capture this outpatient growth whether on campus or off campus at both locations.

Speaker Change: Our necessary to capture demand.

Scott M. Brinker: We expect new supply to remain low given the cost of construction. Today, our triple net equivalent rents are in the low 20s, while most new developments are $35 to $40 per month. Turning to our life science business, IPO and venture capital funding have improved recently, which is driving demand for space. Our leasing pipeline today is up 80% from last quarter. We're increasingly optimistic the pipeline will generate lease executions for the balance of 2024 and into 2025.

Speaker Change: We expect new supply to remain low given the cost of construction.

Speaker Change: Today, our triple net equivalent rents are in the low twenties, while most new developments are $35 to $40 per foot.

Turning to our life science business IPO and venture capital funding have improved recently, which is driving demand for space. Our leasing pipeline today is up 80% from last quarter were increasingly optimistic that pipeline will generate lease executions for the balance of 2024 and into 2025.

Scott M. Brinker: Roughly 70% of our pipeline is existing tenants, many of which are deals that don't go to the broader market, again, providing us a big advantage versus new entrants who can't tap into an existing portfolio. We're also seeing a massive reduction in new construction starts that should extend for multiple years, creating a far more favorable leasing environment for Let me close with capital allocation. The strategic merger with Physicians Realty closed on March 1 and is accreted to our earnings balance sheet and platform.

Speaker Change: Roughly 70% of our pipeline as existing tenants.

Speaker Change: Many of which are deals that don't come to the broader market again, providing us a big advantage versus the new entrants, who can't tap into an existing portfolio growing tenants.

Speaker Change: We're also seeing a massive reduction in new construction starts that should extend for multiple years, creating a far more favorable leasing environment for landlords.

Speaker Change: Let me close with capital allocation the strategic merger with physicians Realty. It closed on March one and is accretive to our earnings balance sheet and platform.

Scott M. Brinker: Year-to-date, we've sold $363 million of fully stabilized assets at a 5.8% cap rate, plus $69 million of loan repayment. The most recent sale was an R&D flex office portfolio in Poway, east of San Diego, that we sold to an affiliate of the tenant in an all cash deal for $180 million, which was a 6% cap rate. We have additional asset sales in various stages of negotiation and execution, but given the environment, we'll provide details if and when they close.

Speaker Change: Year to date, we sold $363 million of fully stabilized assets at a five 8% cap rate plus $69 million of loan repayments.

Speaker Change: <unk> recent sale was an R&D flex office portfolio in power East of San Diego that we sold to an affiliate of the tenant in an all cash deal for $180 million.

Speaker Change: It was a 6% cap rate.

Speaker Change: We have additional asset sales in various stages of negotiation and execution, but given the environment will provide details if and when they close.

Scott M. Brinker: We took advantage of the disconnect in our stock price and repurchased $100 million of stock at an average price just above $17 per share, which represents an implied cap rate of 8%. The year-to-date asset sales are more than 200 basis points inside that level, delivering immediate value to shareholders. Our remaining authorization today is roughly $350 million, and we'll continue to pursue buybacks as priority number one on capital allocation, obviously depending on our stock price and the arbitrage opportunity.

We took advantage of the disconnect in our stock price and repurchased $100 million of stock at an average price just above $17 per share which.

Speaker Change: Which represents an implied cap rate of 8%.

Speaker Change: The year to date asset sales or more than 200 basis points inside that level delivering immediate value to shareholders.

Speaker Change: Our remaining authorization today is roughly $350 million and we'll continue to pursue buybacks is priority number one on capital allocation, obviously, depending on our stock price and the arbitrage opportunity from asset sales.

Scott M. Brinker: Priority two for capital is new outpatient medical development with key health system partners, provided there's strong pre-leasing and a positive spread to our asset sales. This capital recycling would be accretive to asset quality and stabilize during. We do have an attractive pipeline of such projects today in the $200-plus million range. Priority three is distressed opportunities in life science, which we are starting to see, especially development projects lacking capital and or leasing traffic.

Speaker Change: Priority for capital is new outpatient medical development with key health system partners provided they are strong pre leasing at a positive spread to our asset sales.

Speaker Change: This capital recycling would be accretive to asset quality and stabilized earnings.

Speaker Change: We do have an attractive pipeline of such projects today in the 200 plus million dollars range.

Speaker Change: Priority three is distressed opportunities in life science, which we are starting to see especially development projects lacking capital annual leasing traction.

Scott M. Brinker: These would be purely opportunistic and could be done on the balance sheet or via joint ventures. Most of the distress won't be interesting to us, as we'll focus on our own core sub-markets where we can use our scale and relationships to drive out competitors. Alternative Peak for Financial Results and Guidance. Thanks, Scott.

Speaker Change: These will be purely opportunistic and it could be done on balance sheet or via joint ventures.

Speaker Change: Most of the distress would be interesting to us as we'll focus on our own core Submarkets, where we can use our scale and relationships to drive outperformance.

Speaker Change: I'll turn it to eight for financial results and guidance.

Unknown Executive: Thanks, Scott. 2024 is off to a great start.

Eight: Thanks, Scott 'twenty 'twenty four is off to a great start for the first quarter, we reported <unk> as adjusted of <unk> 45 per share <unk> 41 per share and total portfolio same store growth of four 5%.

Peter A. Scott: For the first quarter, we reported FFOs adjusted at $0.45 per share, AFFO of $0.41 per share, and total portfolio same store growth of $4.5. Let me briefly touch on segment performance, starting with outpatient medical.

Scott: Let me briefly touch on segment performance.

Scott: Starting with outpatient medical.

Peter A. Scott: We reported same-store growth of 2.6%, driven by a positive 3.4% rent mark-to-market and an 84% retention rate. Our strong leasing activity continues. During the quarter, we signed nearly 1.5 million square feet of leases, and we have a backlog of 2.5 million square feet in active discussions, including 700,000 square feet under LOI. Importantly, we expect outpatient medical same-store growth to increase as the year progresses due to accelerating internalization and an increase in occupancy from continued... Turning to lab, we reported same-store growth of 2.7%, driven by 3% plus contractual rent escalators and a 2.6% positive rent mark-to-market, partially offset by an anticipated tick-down in occupancy.

Scott: We reported same store growth of two 6% driven by a positive three 4% rent mark to market and an 84% retention rate.

Scott: Our strong leasing activity continued during the quarter, we signed nearly one 5 million square feet of leases and we have a backlog of $2 5 million square feet in active discussion, including 700000 square feet under LOI.

Scott: Importantly, we expect outpatient medical same store growth to increase as the year progresses due to accelerating internalization and an increase in occupancy from continued leasing.

Scott: Turning to lab, we reported same store growth of two 7% driven by 3% plus contractual rent escalators and a two 6% positive rent mark to market, partially offset by an anticipated kicked out and occupancy.

Peter A. Scott: During the quarter, we signed approximately 150,000 square feet of leases, and we have a robust leasing pipeline of nearly 2 million square feet. We have 455,000 square feet under LOI, positioning the second quarter to be one of our best lab leasing quarters in recent years. In addition, we also expect Lab Same Store growth to accelerate for the balance of the year as free rent from some large lease commencements burns off. Finishing with CCRCs, we reported same-store growth of positive 27%, driven by increased occupancy and rate growth. Occupancy in our CCRC portfolio ended the quarter at 85.2%, and we expect continued positive growth. Now, moving to the ballot sheet.

Scott: During the quarter, we signed approximately 150000 square feet of leases and we have a robust leasing pipeline of nearly 2 million square feet.

We have 455000 square feet under LOI positioning the second quarter to be one of our best lab leasing quarters in recent years in.

Scott: In addition, we also expect lab same store growth to accelerate for the balance of the year as free rent from some large lease commencement burns off.

Scott: Finishing with <unk>, we reported same store growth of positive, 27% driven by increased occupancy and rate growth.

Scott: Occupancy in our <unk> portfolio ended the quarter at 85, 2% and we expect continued positive performance.

Scott: Shifting to the balance sheet.

Peter A. Scott: We had a very active quarter. We successfully completed the assumption of $1.9 billion of debt with a weighted average interest rate of 4%. We closed on our newly originated five-year $750 million term loan, which we swapped to a fixed rate of 4.5% prior to the recent spike in interest. And, as Scott mentioned, we opportunistically repurchased $100 million of stock. Subsequent to quarter end, we fully repaid our commercial paper with proceeds from the Powwow sale.

Scott: We had a very active quarter, we successfully completed the assumption of one $9 billion of debt with a weighted average interest rate of 4%. We closed on our newly originated five year $750 million term loan, which we swapped to a fixed rate of four 5% prior.

Scott: The recent spike in interest rates.

Scott: And as Scott mentioned, we opportunistically repurchased $100 million of stock.

Scott: Subsequent to quarter end, we fully repaid our commercial paper with proceeds from the pyrites out.

Peter A. Scott: Pro forma for this transaction, our net debt to EBITDA is 5.2 times, and we have $3.1 billion of liquidity. No floating rate debt, an AFSO payout ratio of approximately 75%, and nearly $350 million of authorization left on our stock buyback program. Finishing now with guidance, we are increasing our FFO's adjusted guidance range by two pennies and tightening the range to $1.76 to $1.80. We are increasing our AFSO guidance range by two pennies and tightening the range to between $1.53 and $1.57.

Scott: Pro forma this transaction our net debt to EBITDA is five two times, we have $3 $1 billion of liquidity no floating rate debt and <unk> payout ratio of approximately 75% and nearly $350 million of authorization left on our stock buyback program.

Scott: Finishing now at guidance, we are increasing our <unk> as adjusted guidance range by two pennies and tightening the range to $1 76 to $1 80.

Scott: We are increasing our <unk> guidance range by two pennies and tightening the range to $1 53 to $1 57 or.

Peter A. Scott: Our increase in earnings guidance is driven by three items. First, we increased same-store guidance by 25 basis points to 2.5% to 4%. Second, merger synergies continue to exceed expectations and are now forecast to be $45 million in 2024. Third, we have bought back $100 million worth of stock at an FFO yield in excess of 10%.

Scott: Our increase in earnings guidance is driven by three items first we increased same store guidance by 25 basis points to two 5% to 4%.

Scott: Second merger synergies continue to exceed expectation and are now forecast to be $45 million in.

In 2024 third we have bought back $100 million worth of stock at an <unk> yield in excess of 10%.

Peter A. Scott: One last note for Q&A. We published a revamped supplemental alongside our earnings release. You may have noticed that we streamlined the document and modified it to more closely align with how we view the business. We also added an NAV input page to assist with modeling, which we felt was important for our stakeholders. With that, Operator, let's open the line for Q&A.

Speaker Change: One last note before Q&A.

Speaker Change: Published a revamped supplemental alongside our earnings release, you may have noticed that we streamline the document and modified it to more closely align with how we view the business.

Speaker Change: We also added an NAV input page to assist with modeling, which we felt was important for our stakeholders with that operator, let's open the line for Q&A.

Eric: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Josh Dennerlein with Bank of America. Please go ahead.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker Change: Your first question comes from the line of Jos <unk> with Bank of America.

Jos: Go ahead.

Joshua Dennerlein: Hey everyone, thanks for the time. I just wanted to follow up on your comment that 2Q should be one of the best quarters for lab leasing. I guess my first question on that is just how are rents trending on what you're signing versus maybe a few quarters ago, and then just what about DI's and concessions?

Jos: Hey, everyone. Thanks for the time just wanted to follow up on your comment that two <unk> should be one of the best quarters for what we've seen.

Speaker Change: I guess.

First question on that.

Jos: Rents trending on what you're signing versus maybe a few quarters ago, and then what about <unk>.

Jos: <unk>.

Unknown Executive: Yeah, Josh, I can start with that. I think rents and TIs, as we look across our portfolio, have been pretty steady for the last six months or so. As we look at market rents today, they're probably in that 5% to 10% premium when you compare them to our in-place rent across the portfolio, which is around $60 per square foot. You know, on new lease deals, tenants are certainly seeking more turnkey space, which has increased the overall TI packages, but as I said, that's been much more steady the last six months or so.

Speaker Change: Yeah, Hey, Josh I can start with that.

Speaker Change: Yes.

Josh: So I think rent and Ti as we look across our portfolio <unk> been pretty steady for the last.

Josh: Six months or so.

Speaker Change: We look at market rents today, it's probably in that 5% to 10% premium when you compare it to our in place rents across the portfolio, which is around $60 per square foot.

Speaker Change: New lease deals tenants are certainly seeking more turnkey space, which is increase the overall ti packages, but as I said thats been much more steady the last six months or so and I think from a lease term perspective.

Unknown Executive: And I think from a lease term perspective... You know, on renewal deals, we're probably seeing more three to five-year terms. And then on new leasing deals, we're seeing more seven to 10 years there. And then obviously, the last piece I'll just say fundamentally is, you know, lease deals just take a little bit longer, especially as you price out the TI packages. So a lease deal took two to three months to get done.

Speaker Change: On renewable deals, we're probably seeing more three to five year.

Speaker Change: In term.

Speaker Change: And then on new leasing deals, we're seeing more seven to 10 years, there and then obviously the last piece I'll, just say fundamentally it lease deals just take a little bit longer, especially as you price out the ti packages. So if a lease deal so two to three months to get done.

Unknown Executive: A couple of years ago, it's probably closer to six months. But we're certainly highly motivated to get our lab leasing pipeline, which has increased a lot over the last year or so, converted from a pipeline into a lease transaction.

Speaker Change: Couple of years ago, it's probably closer to six months.

Speaker Change: But we're certainly highly motivated to get our.

Speaker Change: <unk> leasing pipeline, which has increased a lot over the last.

Speaker Change: Year, or so converted from pipeline into lease transactions.

Unknown Executive: [inaudible]

Speaker Change: Josh I'd, just add our leasing costs have been really pretty modest if you just look in the supplemental for renewal leases, our ti and LC has been 5% or less of the rental rates and even some new leases. It's in the 10% range I mean, it's really pretty modest and very low street.

Unknown Executive: Yeah, Josh, as you said, our leasing costs have been really pretty modest. If you just look in the supplemental for renewal leases, our TI NLC has been 5% or less of the rental rate, and even for new leases, it's in the 10% range. I mean, it's really pretty modest and very low free rent as well. So I think we've held in exceptionally well, just given the quality of the portfolio and

Speaker Change: As well so I think we've held in exceptional wells just given the quality of the portfolio and the submarkets and the relationships.

Joshua Dennerlein: Thanks guys, I appreciate that caller. And Scott, one follow-up for you.

Speaker Change: Thanks, guys I appreciate that color.

Speaker Change: Scott one follow up for you you mentioned you expect about 70% of the Mlps will eventually be internal internalized.

Scott M. Brinker: You mentioned you expect about 70% of the MOBs will eventually be internalized. How do you think about that 30% that you won't be able to internalize? Is that stuff you would eventually want to sell or maybe add scale on the market to get to a point where internalization makes sense?

Scott: Think about that 30% that you will be able to internalize.

Scott: They want to sell or maybe at scale in a market to get to a point, where internalization makes sense.

Scott M. Brinker: Yeah, I wouldn't say it's assets we want to sell. It's more markets where we don't have a significant scale. And then there are some markets where we have a big health system relationship where they prefer to use their own in-house property management firm, and Atlanta is a good example of that. The fact that the health system wants to use its own people, you know, we can live with that.

Scott: Yes, I Wouldnt say its assets, we want to sell it.

Scott: It's more in markets, where we don't have significant scale.

Scott: And then there are some markets, where we have a big health system relationship where they prefer to use their own in house property management firm in Atlanta is a good example of the asset.

Scott: Ted market. The fact that health system wants to use their own people, we can live with that.

Austin Todd Wurschmidt: Oh, okay. I didn't recognize that. Thanks.

Speaker Change: Okay. Thanks.

Speaker Change: Thanks.

Speaker Change: Okay.

Austin Todd Wurschmidt: Your next question comes from the line of Austin Wurschmidt with KeyBank Capital Markets. Please go ahead.

Speaker Change: Your next question comes from the line of Austin, <unk> with Keybanc capital markets. Please go ahead.

Unknown Executive: Thanks, good morning everybody. Could you guys provide a breakdown of what's driving the increase in same-store cash and OI growth by segment?

Austin: Thanks, Good morning, everybody.

Austin: Can you provide a breakdown of what's driving the increase in same store cash NOI growth by segment.

Unknown Executive: We provided a breakdown, but I can tell you that all three segments are trending at or above the midpoint of the initial guidance, so we've got good traction across the board. Obviously, in this particular quarter, CCRC was above. I expect that growth rate to normalize for the balance of the year, and then in lab and outpatient medical, I think all three quarters from here should be above what we reported in YQ, but there's volatility quarter to quarter.

Austin: We provided.

Austin: A breakdown, but I can tell you that all three segments are trending at or above the midpoint of the initial guidance that we've got good traction across the board. Obviously, this particular quarter CRC was above.

Austin: I expect that growth rate to normalize.

Austin: For the balance of the year, and then flat in outpatient medical I think all three quarters from here should be above what we reported in <unk>, but there is volatility quarter to quarter.

Unknown Executive: Yeah, I mean, just specific to the cash, same Sternoi lab guidance, I think it was one and a half to three percent. You know, Pete, you referenced there's acceleration through the balance of the year, which is three rent burns off, I think, related to the RevMed and Voyager deals you've highlighted. So I guess, can you give us a sense of what the magnitude of the upside is, you know, there? And then, you know, also maybe what the risks are that's holding you back from going ahead and raising that at this point in the year?

Speaker Change: Yes, I mean, I guess just specific to the cash same store NOI lab guidance I think it was one 5% to 3% Pete you referenced there's acceleration through the balance of the year as free rent Burns off I think related to the Rev. Maiden voyage in deals you've highlighted so I guess can you give us a sense of what the magnitude of upside is there.

Speaker Change: And then also just maybe what the risks are that's holding you back from going ahead and.

Speaker Change: And raising that at this point in the air.

Unknown Executive: Yeah, well, I would say that the, you know, 25 basis point raise... that we did this quarter on the Aggregate Same-Score Guidance certainly reflects the improved performance in lab, you know, on the lab side in particular. We've been pretty consistent in saying this that at the beginning of the year, we will have a little bit of Bad Dad Cushion incorporated into the guide that we put out.

Speaker Change: Yes, well I would say that.

Speaker Change: 25 basis point raise that.

That we did this quarter on the aggregate same store guidance certainly reflects the improved performance in lab on the lab side in particular.

Speaker Change: We've been pretty consistent in saying that that at the beginning of the year, we will have a little bit of bad debt cushion incorporated into the guide that we've put out.

Unknown Executive: And as we look at where we are today and look at all the capital raising that's gotten done, we feel like we probably had too much of a cushion at the beginning of the year, released a little bit of that, and then we are getting internalization benefits as well. So we're probably trending towards the higher end of that initial 1.5 to 3% guide number. The biggest headwind, and this is something that we've talked about, is just the fact that we did have an occupancy decline as we look towards full year 2023, compared to where we expect that to be in full year 2024. We do think we'll see an occupancy increase as the year progresses in our operating portfolio, but we're comparing that to the full year number last year.

Speaker Change: And as we look at where we are today and look at all the capital raising that has gotten done.

Speaker Change: Feel like we probably had too much of a cushion at the beginning of the year. So.

Speaker Change: Or at least a little bit of that and then we are getting internalization benefit as well so.

Speaker Change: We're probably trending towards the higher end of that initial.

Speaker Change: One 5% to 3% guide number the biggest headwind and this is something that we've talked about is just the fact that we did have an occupancy decline as we look towards.

Speaker Change: Full year 2023, compared to where we expect that to be in full year 2024, We do think we'll see.

Speaker Change: Occupancy increase as the year progresses in our operating portfolio, but we're comparing that to the full year number last year.

Speaker Change: Yeah.

Austin Todd Wurschmidt: Okay, that's helpful. And then I'm just curious, you know, certainly, some of the VC funding and capital raising you highlighted have been, you know, positive, presumably for some of the leasing discussions and pipeline. I'm just wondering if there's been any change in those discussions or the pace with which things are moving forward on the leasing front and in the lab, just given some of the added economic uncertainty and volatility we've seen in the capital markets.

Speaker Change: Okay got it that's helpful and then I am just curious certainly.

Speaker Change: Yes, some of the VC funding and capital raising you highlighted have been positive presumably for some of the leasing discussions and pipeline I'm. Just wondering if theres been any change in those discussions or the pace with which things are moving forward on the leasing front lab, just given some of the added economic uncertainty and volatility we've seen in the capital.

Austin Todd Wurschmidt: And then just maybe even as you think forward from here, I know it's been sort of the last 30 days or so, but you know, any impact do you see that having on sort of the future pipeline and decision making?

Speaker Change: Markets and then just maybe even as you think forward from here I know, it's been sort of the last 30 days or so but any impact do you see that having on sort of the future pipeline and decision making.

Speaker Change: I mean as you look.

Speaker Change: And the capital raising has been at least year to date 24 relative to year to date 2023, I mean, it's been off across every single category, especially on follow on equity offerings as well as private placements that we fit into that bucket well.

Unknown Executive: I mean, if you look, Austin, the capital raising has been at least year-to-date in 24 relative to year-to-date 2023. I mean, it's been up across every single category, especially on follow-on equity offerings, as well as private placements that we fit into that bucket well. Certainly, there could be some risk going forward with interest rates going up. But I think it's a little less rate-sensitive. [inaudible] Please see the complete disclaimer at https://sites.google.com.

Speaker Change: Certainly there could be some risks going forward with interest rates going up I think it's a lateral a little less.

Speaker Change: Rate sensitive.

Speaker Change: In the lab side of it then maybe cap rates in.

Speaker Change: The world of real estate and those private placements and follow ons do take some time to come together. They are still happening. If you look across the last 30 days. The data will show you that even with the increase in rates Youre seeing.

Speaker Change: Capital falling into biotech the SDI is still holding up pretty well last night there was some pretty good. Thanks.

Speaker Change: The earnings as well despite the interest rate environment. So we still remain optimistic that that capital raising environment has a pretty decent runway in front of it.

Austin Todd Wurschmidt: I appreciate your thoughts. Thank you.

Speaker Change: Okay I appreciate the thoughts thank you.

Speaker Change: Yes.

Juan Carlos Sanabria: Your next question comes from the line of Juan Sanabria with BMO Capital Markets.

Speaker Change: Your next question comes from the line of Juan and embryo with BMO capital markets.

Scott M. Brinker: Hi, good morning. I'm just hoping you could talk a little bit more about the disposition pipeline, how much is potentially for sale, and what you could expect to transact on and how those proceeds would be split between Debt Reductions to Stay Leverage Neutral versus Buybacks from here.

Juan: Please go ahead.

Juan: Hi, Good morning, just hoping you could talk a little bit more about the disposition pipeline how much is potentially.

Juan: For sale.

Juan: What you could expect to transact on them and how those proceeds would be split between.

Debt reductions to stay leverage neutral versus buybacks from here.

Scott M. Brinker: Yeah, hey Juan. It's Scott here.

Juan: Yes.

It's Scott here, we've done $350 million plus of.

Scott M. Brinker: We've done 350 million plus in pure asset sales year-to-date, the pipeline is at least that large, but it's a volatile environment, as Austin just pointed out. So when we have clarity on transactions, we'll announce the details at that time. But it's certainly a big pipeline, more focused on outpatient medical, whereas the sales to date have been more life science or this R&D portfolio that we had. So, yeah, it's an active pipeline.

Scott: Pure asset sales year to date the pipeline is at least that large, but it's a volatile environment as Austin just pointed out so when we have clarity on transactions, we will announce the details at that time, but it's certainly a big pipeline more focused on outpatient medical whereas the sales to date had been.

More life science or this R&D portfolio that we had.

Scott: In power.

Scott: So yes, it's an active pipeline in terms of how that proceeds would be used in large part it depends on the environment.

Scott M. Brinker: In terms of how the proceeds would be used, in large part, it depends on the environment, the stock price in particular. That's been the highest and best use of capital in recent months, just given where the stock was trading. If that continues to be the case, then that would be priority number one. If interest rates stay high or move higher, obviously, we could always delever even beyond staying leverage neutral, which is just fine. We for sure will do that. We won't lever up the balance sheet to buy back stock.

Scott: In the stock price in particular.

Scott: That's been the highest and best use of capital in recent months, just given where the stock was trading if that continues to be the case, then that would be priority number one.

Scott: If interest rates stay high or move higher obviously, we could always.

Scott: Delever, even beyond staying leverage neutral, which is just we for sure will do that we won't lever up the balance sheet to buy back stock.

Scott M. Brinker: So those are kind of priority numbers one and one A. And then, in terms of playing offense, it would be primarily focused on outpatient medical development, where we are seeing some highly pre-leased core markets, core health systems, and strong yields. And we feel like we should be recycling out some older assets with a little bit more CapEx and risk in exchange for those brand new assets in the right markets and right systems.

Scott: Or kind of priority number one in <unk> and then in terms of playing offense. It would be primarily focused on outpatient medical development, where we are seeing some highly pre leased core markets core health systems strong yields and we feel like we should be recycling out of some older assets with a little bit more capex and risk.

Scott: In exchange for those brand new assets in the right markets right systems.

Juan Carlos Sanabria: And just as a quick follow-up on that question, you previously talked about $500 million to $1 billion of potential disposals. Is that still kind of a big placeholder in people's minds just to think about that going forward for the balance of the year? Probably right.

Scott: Just as a quick follow up on that question you'd previously talked about $500 million to $1 billion of potential disposals that still kind of a a.

Scott: A good place holder in People's minds just to.

Scott: But that going forward for the balance of the year.

Scott: This is probably the right range.

Scott M. Brinker: It's probably in the right range.

Scott: Yes.

Juan Carlos Sanabria: And then just curious, as a second question, just on AI, lots of discussions, not just in real estate, on what the transition is going to mean for everybody, but just curious when we think about the physical infrastructure plant in the lab, what the incremental use of power may mean for CapEx or just the buildings being able to handle it. Just curious on your early thoughts as this kind of progresses and evolves. Hey Juan, it's Scott Bohn. I think you know what they're talking about...

Speaker Change: And then just curious as a second question just on AI.

Speaker Change: Lots of discussions not just in real estate on what Retrans.

Speaker Change: The transition is going to mean for everybody, but just curious when we think about.

Speaker Change: The physical infrastructure of plant and lab.

Speaker Change: The incremental use of power may mean for capex or just the buildings being able to handle it.

Speaker Change: Just curious on your early thoughts.

Speaker Change: And our progress as it evolves.

Scott R. Bohn: Hey Juan, it's Scott Bohn. I think, you know, with AI, you are seeing some, you know, maybe some automation labs within the labs, but you still have, you know, the bulk of those facilities still have chemistry and biology in, you know, your typical lab build-outs. So we aren't seeing a dramatic shift by any means in the build-outs for some of our tenants who are, you know, more AI focused. Our buildings, you know, have a ton of power to handle any of those.

Speaker Change: Hey, Ron It's Scott I think.

You are seeing some.

Scott: Maybe some automation labs within the last one you still have the bulk of those facilities still have chemistry, and biology and the typical lab build out so we aren't seeing a dramatic shift in any by any means and the build out for some of our tenants who are more AI focused.

Scott: Our buildings.

Scott: Yes.

Scott: A ton of power to them have the infrastructure that have the capabilities to handle any of those needs.

Richard Anderson: Your next question comes from the line of Rich Anderson with Wedbush.

Speaker Change: Thank you very much.

Speaker Change: The next question comes from the line of Rich Anderson with Wedbush.

Richard Anderson: Please go ahead. Hey, thanks. Good morning, everyone.

Richard Anderson: Please go ahead hey.

Richard Anderson: Hey, Thanks, good morning, everyone.

Richard Anderson: So, nice beat on the synergies, you know, typical, I guess, you know, most retail. That's the low-hanging fruit of the story. But going forward is perhaps a little bit more difficult, which is the life science leasing that you've been talking about, with $60 million of upside. Can you give me a hint about, you know, what the timing of that is? It's not all next year. Could it be as far out as 2027? Or you know, how long of a tail of life science leasing do you think is possible here going forward?

Richard Anderson: So nice beat on the synergies.

Speaker Change: A typical.

Richard Anderson: A typical I guess you know most Reits.

Richard Anderson: That's the low hanging fruit of the story, but going forward as perhaps.

Richard Anderson: A little bit more difficult, which is the life science leasing that you've been talking about I think $60 million of upside can you.

Richard Anderson: Can you take a shot at about what the timing of that is it's not all next year.

Richard Anderson: Could it could it be as far out into 2027 or how long of a tail to the life science leasing do you think is possible here going forward.

Unknown Executive: Yeah. Hey, Rich.

Speaker Change: Yeah, Hey, Rick.

Unknown Executive: Well, as you mentioned about the synergies, I'll just start there. We do feel... We're quite good about the trajectory that we're on, 45 million that we've been able to articulate, we think we can hit this year. And we feel very confident in our ability to hit the 60 million run rate as we head into next year. Obviously, the trickier part that you mentioned is the leasing pipeline and especially those three marquee campuses.

Rick: Well as you mentioned on the synergies of the start there we do feel.

Speaker Change: Quite good about the trajectory that were on $45 million that we've been able to articulate we think we can hit this year and we feel very confident in our ability to hit the $60 million run rate as we head into next year. Obviously, the trickier part that you mentioned is on the leasing pipeline in it.

Speaker Change: Especially the <unk> III marquee campuses, what I can say is that within our pipeline. We are having discussions on all of those campuses I would say.

Unknown Executive: What I can say is that within our pipeline we are having discussions on all of those campuses. I'd say some of those discussions are much further along than some of the other campuses. You know, realistically, if we signed a lease today or in the second quarter, it really wouldn't commence given some of the work we have to do until, you know, the earliest, the beginning of 2025. So, what I would say probably is at its high level, it's probably a one to two-year, you know, period where we phase in and get to the full run rate there on the NOI, and it's probably the best guidance I can give you as we signed leases and we're pretty good at disclosing those, we can try and get a little bit more specific on that number, but it's probably a bit in 2025, a bit more in 2026, and hitting that, you know, full run rate number probably towards the end of 2026.

Speaker Change: Those discussions are much further along than.

Speaker Change: Others.

Speaker Change: Realistically, if we signed a lease today or in the second quarter. It really wouldn't commence given some of the work we have to do until.

Speaker Change: The earliest at the beginning of 2025, so what I would say probably isn't as high a level, it's probably a one to two year.

Speaker Change: Period, where we phased in and get to the full run rate there on the NOI.

Speaker Change: Probably the best guidance I can give you is we signed leases and we're pretty good at disclosing those we can try and get a little bit more specific on that number, but it's probably a bit in 'twenty five a bit more in 2006 and hitting that full run rate number probably towards the end of 2020.

One other thing I wouldn't characterize characterize the synergies as low hanging fruit and most mergers actually don't achieve their projections. We've got a team of 300 plus people here. They have been working around the clock to achieve those synergies so hats off to Tim for making it happen it was anything but low hanging fruit, but I don't mean to trivialize it.

Scott M. Brinker: Hey Rich, one other thing: I wouldn't characterize the synergies as low-hanging fruit. Most mergers actually don't achieve their projections. We've got a team of 300 plus people here that have been working around the clock to achieve those synergies, so hats off to them for making it happen. It was anything but low-hanging fruit. I don't mean it.

Richard Anderson: I don't mean to trivialize it. Let's call it the middle-hanging fruit.

Speaker Change: Lets quote middle hanging fruit.

Speaker Change: So second question might be.

Richard Anderson: So my second question might be a tough one to answer, but I'm going to ask it anyway. When you think about the entirety of the transaction, including everything, including whatever the transaction fees were, if that's 3% of $5 billion, that's $150 million. When do you think the merger, the combination, is truly kind of break-even for the company when you take everything into consideration?

Speaker Change: A tough one to answer, but I'm going to ask it anyway.

Speaker Change: When you think about the entirety of the transaction, including everything including you know whatever the <unk>.

Speaker Change: Transaction fees were if that's 3% of $5 billion, that's $150 million.

Speaker Change: When do you think the merger the combination is truly kind of breakeven for for the company when you take everything into consideration.

Unknown Executive: Yeah, I mean, if you're just referring to a payback period, it's less than three years if you just take the synergies in comparison to the upfront cost. But obviously, company valuation is based on future cash flows, not just one year. And we feel with high confidence that we're going to achieve those synergies, and they are permanent. And if, you know, the discounted value of those future cash flows is many multiples of the upfront transaction costs.

Speaker Change: Yes, I mean, if youre, just referring to like a payback period I mean, it's less than three years. If you just take the synergies in comparison to the upfront cost, but obviously company valuations based on future cash flows not just.

Speaker Change: One year.

Speaker Change: And we feel with high confidence, we're going to achieve those synergies and it is permanent.

In this.

The discounted value of those future cash flows is many multiples of the upfront transaction costs are certainly value, creating transactions from that standpoint, and then most important for me for our board.

Unknown Executive: So it's certainly a value-creating transaction from that standpoint. And then, most important for me, for our board, and the same for the Physicians' Realty Board, as we created the best platform in the sector, and that has intangible benefits that will last forever. So, hard to put a number on that, but we have that. All right.

Speaker Change: And the same for the physicians Realty borders we created the best platform in the sector and that has intangible benefits that will last forever. So hard to put a number on that but we have that now.

Richard Anderson: All right. Sounds good. Thanks very much. Great quarter.

Speaker Change: Alright sounds good thanks, very much great quarter.

Michael Anderson Griffin: Your next question comes from the line of Michael Griffin with Citi.

Your next question comes from the line of Michael Griffin with Citi.

Michael Anderson Griffin: Great, thanks. I was wondering if you could give some more color on the powerway disposition. You mentioned it's a mix of industrial lab and office space. Is the cap rate indicative of where, you know, lab space might be trading today? Or were there some specificities given the asset mix that might warrant a higher cap rate?

Michael Anderson Griffin: Please go ahead.

Michael Anderson Griffin: Yeah.

Michael Anderson Griffin: Great. Thanks.

Michael Anderson Griffin: Wondering if you could give some more color on the highway disposition you mentioned, it's a mix of industrial lab and office space.

Michael Anderson Griffin: The cap rate indicative of where lab might be trading today or were there. Some specificity is given the asset mix it might warrant a higher cap rate.

Scott M. Brinker: Yeah, it wasn't really a life science property in any event. It was kind of a mix of uses, R&D, there was some manufacturing, some office, kind of an industrial footprint, and build out in parts of it. It certainly wasn't traditional life science, nor was it in the traditional life science market. So I wouldn't view that as a read through.

Speaker Change: Yes, it wasn't really a life science property in any event. It was kind of a mix of uses R&D manufacturing and some office.

Speaker Change: Kind of an industrial <unk>.

Speaker Change: Trent and build out in parts of it certainly wasn't traditional life science, nor was it in the traditional life science market. So I wouldn't view that as a read through I think it was a great price. That's why we sold it. So we were happy to recycle those proceeds into the balance of our portfolio, but yes, I don't think thats indicative of of life Science Catherine.

Scott M. Brinker: I think it was a great price. That's why we sold it. So we were happy to recycle those proceeds into the balance of our portfolio. But yeah, I don't think that's indicative of life science cap rates.

Speaker Change: Yes.

Michael Anderson Griffin: And Brinker, where would you say kind of class A lab space is trading these days on a cap rate basis?

Speaker Change: And Brinker, where would you say kind of class a and lab spaces trading these days on a cap rate basis.

Scott M. Brinker: Yeah, hard to say. Cap rates are always tough in life science, just given market rents versus in-place rents. You know, what we did in San Diego's Torrey Pines a couple months ago, rents were pretty close to market. So in that case, the cap rate is more indicative of valuation. And that was in the low fives, but it was also a premier sub-market, a brand new building, I mean, so if you're trying to, you know, make your list of A+, it was pretty much A+ across the board. So I'd say that's the low end of the continuum for life science.

Brinker: Yeah hard to say cap rates are always tough and life science just given.

Brinker: Market rents versus in place rents, what we did in San Diego to refines a couple of months ago rents were pretty close to market.

Brinker: So that in that case cap rate is more.

Brinker: Indicative of.

Brinker: Our valuation and that was in the low fives, but it was also a premier Submarkets brand new building credit tenants I mean, so if youre trying to.

Brinker: Make your list of <unk>.

Brinker: <unk> plus it was pretty much a plus across the board. So I'd say, that's the low end of the continuum for life Science.

Michael Anderson Griffin: Gotcha. That's helpful. And then maybe could you add some commentary around supply, particularly in South San Fran, where, you know, I think we've seen an elevated rate relative to the other core markets. And how might your competitive set compare to market supply overall?

Speaker Change: Gotcha Thats helpful.

Speaker Change: And then maybe could you add some commentary around supply, particularly in south San Fran where I.

Speaker Change: I think we've seen an elevated relative to the other core markets and how might your competitive set compare to market supply overall.

Unknown Executive: Yeah, maybe I'll just touch on supply for a second, Griff, because it is a good question. I'm going to repeat a statement that we've been saying for a while, and others have been saying as well, but, you know, not all new supply is built equally.

Speaker Change: Yes.

Speaker Change: Touch on the fly for a second Chris because it is a good question.

Speaker Change: To repeat a statement that we've been saying for a while and others have been saying as well, but not all new supply is built equally.

Unknown Executive: And we fully extract the incumbent landlords, which there are not a lot of them out there in the core sub-markets to outperform. You know, as we think just big picture, there were a lot of new entrants into the space over the last couple of years, not surprising because it was such an incredible money-making sub-sector in real estate for such a long period of time. But I think a lot of these new entrants, and I think a lot of the very poorly capitalized landlords that we see now, just fail to underwrite this incumbent risk.

Speaker Change: And we do fully expect the incumbent landlords, which there's not a lot of them out there in the core submarkets to outperform.

Speaker Change: We think just big picture there were a lot of new entrants into the space over the last couple of years not surprising because it was such an incredible moneymaking sub sector and real estate for such a long period of time, but I think a lot of these new entrants and I think a lot of the very poorly capitalized landlords that we see now they just failed to underwrite.

Speaker Change: This incumbent risks and we think a lot of them will struggle, but if we look at each one of our core Submarkets. When you look at the headline number that gets quoted by brokers.

Unknown Executive: And we think a lot of them will struggle. But as we look at each one of our core sub-markets, when you look at the headline number that gets quoted by brokers, when we parse through the data, and we have included this in our investor presentations, the competitive supply, going back to the fact that I said not all supply is created equal. And what we include in that bucket as well, it's a very manageable number.

Speaker Change: We parse through the data and we have included this in our Investor presentation.

Speaker Change: <unk> supply going back to the fact that I said not all supply is created equal what we view as competitive and I think we're probably still conservative.

Speaker Change: What we include in that bucket as well, it's a very manageable number.

Michael Anderson Griffin: Great. That's it for me. Thanks for the time.

Speaker Change: Great.

Speaker Change: Is it for me thanks for the time.

Michael Albert Carroll: Your next question comes from the line of Michael Carroll with RBC Capital Markets. Please go ahead.

Speaker Change: The next question comes from the line of Michael Carroll with RBC capital markets.

Michael Albert Carroll: Please go ahead.

Unknown Executive: Yeah, thanks. I wanted to touch on the life science LOIs that you kind of highlighted in the press release. I mean, how many of those are true expansionary spaces that could be earmarked to push up overall occupancy levels within the space?

Michael Albert Carroll: Yes, Thanks, I wanted to touch on the life Science LOI is that you kind of highlight in the press release I mean, how many of those are true expansionary spaces that could be earmarked to push up overall occupancy levels within the space.

Unknown Executive: Yeah, well, maybe I'll just talk quickly about the overall leasing pipeline. Mike, I think that may be an easier way to answer your question, but, you know, our lab leasing pipeline today sits at around 2 million square feet, and all of those LOIs are included within that pipeline. Obviously, we have a pretty high degree of confidence that those LOIs are going to turn into, you know, leases. Parsing that 2 million square feet, I'd say about 70% of that is with existing tenants within the portfolio.

Michael Albert Carroll: Yeah, well, maybe I'll just talk quickly about the overall leasing pipeline, Mike I think that maybe an easier way to answer your question, but our lab leasing pipeline today sits at around two.

Michael Albert Carroll: 2 million square feet and all of those LOI are included within that pipeline. Obviously, we have a pretty high degree of confidence those LOI they are going to turn into <unk>.

Michael Albert Carroll: <unk>, but as we look at some of the.

Michael Albert Carroll: Parsing of that 2 million square feet I would say about.

Michael Albert Carroll: 70% of that is with existing tenants within the portfolio and then take.

Unknown Executive: And then taking it even a step further, I'd say that probably 50% of new lease deals, about a million square feet, would be new lease deals within the portfolio, and then the rest would be renewals. So a nice 50-50 split, and if you think about the amount of vacancy that we have within the portfolio across the marquee projects, whether it be Vantage or Gateway, as well as Portside and South San Francisco, you know, a million square feet within our pipeline of new lease deals actually matches up quite well with what we have as vacancy for new leases.

Michael Albert Carroll: Looking at even a step further I would say that probably 50% new lease deal.

Michael Albert Carroll: About 1 million square feet would be new lease deals within the portfolio.

Michael Albert Carroll: And then the rest would be renewals. So a nice 50 50 split if you think about the amount of vacancy that we have within the portfolio across the marquee projects, whether it be vantage or gateway.

Michael Albert Carroll: As well as port site in South San Francisco.

Michael Albert Carroll: 1 million square feet within our pipeline of new lease deals actually matches up quite well with.

Michael Albert Carroll: What we have is vacancy for new lease deal.

Unknown Executive: And related to that pipeline, how many tenants need to raise funds to kind of take down that space, or will any of those tenants decide to delay making decisions just given the increased volatility that we've seen in the capital markets over the past handful of weeks?

Michael Albert Carroll: And I guess as it related to that pipeline, how many tenants need to raise funds to kind of take down that space or will any of those tenants decided to delay making decisions just given the increased volatility that we've seen in the capital markets over the past handful of weeks.

Michael Albert Carroll: Yeah.

Unknown Executive: I would say very few need to raise capital, if any. We wouldn't be having active discussions. In fact, you don't really have a lot of active discussions for deals that are contingent upon capital raising. Those discussions tend to happen, at least today, after the capital has been raised. You know, there's really no risk to that within the pipeline.

Michael Albert Carroll: I'd say.

Michael Albert Carroll: Very few need to raise capital if any.

We wouldn't be having.

Michael Albert Carroll: Active discussions in fact, you don't really have a lot of active discussions for.

Michael Albert Carroll: Deals that are contingent upon capital raising those discussions tend to happen at least today. After the capital has been raised so I'd say that.

Michael Albert Carroll: There's really no risk to that within the pipeline.

Unknown Executive: And will those tenants delay making decisions, or are they Do you think that they could wait longer just given what's happened in the capital markets and the geopolitical landscape over the past few weeks?

Michael Albert Carroll: And will those tenants delay, making decisions or are they do you think that they could wait longer just given what's happened in the capital markets and the geopolitical landscape over the past few weeks.

Unknown Executive: No, because as I said, I think all those tenants have effectively raised capital if they needed to raise capital. But not all of them need to raise capital. There are some mid-cap and large-cap names in there as well, so I think the answer to that is no, they're not delaying decisions. It does take a little bit longer to get lease deals done today, though, specifically as you price out the various TI packages and build-outs.

Michael Albert Carroll: Now because as I said I think all of those tenants that are effectively raise capital if we needed to raise capital not all of them need to raise capital. There's some mid cap and large cap names in there as well.

Michael Albert Carroll: So I think the answer to that is no theyre not delaying decision. It does take a little bit longer to get lease deals done today, those specifically as you price out the various ti packages and Buildout.

Unknown Executive: Okay, and then just last one for me, I know there have been issues over the past year where the company wants to take down space, but the boards of those companies have kind of vetoed it. I mean, to have the, I don't know, do you know if the boards have approved just the leasing that's currently in the pipeline? And do you think that they could potentially veto some of those transactions or at least push them out? The pipeline is 30.

Speaker Change: Okay, and then just last one from me.

Speaker Change: There has been issues over the past year, where the company wants to take down space, but the boards of those companies so kind of vetoed it.

Speaker Change: Have the <unk>.

Speaker Change: I am just wondering do you know if the boards have approved just the leasing thats currently in the pipeline and do you think that they could potentially vito some of those transactions or at least push them out.

Speaker Change: The pipeline is 30 plus.

Unknown Executive: I mean, the pipeline is 30-plus, so we'll refrain from going down the list, but the quality of the discussions today is much higher than it has been in the last two years. So we can't give you certainty on any of this stuff, and certainly, the geopolitical environment doesn't help at the margin, but I don't think it's a driving factor. The bottom line is that the pipeline is massively bigger than it ever was in the last two years, and it continues to grow, and the quality of the conversations is higher.

Speaker Change: Tenants, so we'll refrain from going down.

Speaker Change: List, but the quality of the discussions today is much higher than it has been in the last two years. So we can't give you certainty on any of this stuff.

Speaker Change: The geopolitical environment doesn't help at the margin, but I don't think its a driving factor at the bottom line is that pipeline is massively bigger than it ever has been in the last two years continues to grow and the quality of the conversations is higher.

Wesley Keith Golladay: Your next question comes from the line of Wes Golladay with Baird. Please go ahead.

Speaker Change: Okay, great. Thank you.

Speaker Change: Your next question comes from the line of Wes Golladay with Baird. Please go ahead.

Wesley Keith Golladay: Hey, good morning, everyone. Just want to follow up on the new lease conversation. Looking at the 1 million square feet, are you seeing any change in demand for first generation space, or any submarkets standing out in any tenant categories picking up activity?

Wesley Keith Golladay: Hey, good morning, everyone. Just wanted to follow up on the new lease conversation I was looking at the 1 million square feet are you seeing any change in demand for first generation space in each submarket standing out in any tender categories picking up activity.

Unknown Executive: Yeah, I mean, I think the part of that I'd like to focus on is the sub market, you know, we never thank you. In Boston, it's the Lexington Route 128 market in West Cambridge, and it's really South San Francisco. And what we're actually seeing is a gravitation toward tenants wanting to be in those core submarkets. And I think some of those other submarkets that were not fully proven, that there was speculative development done in those, they're going to take a lot longer to lease up if they ever do lease up.

Wesley Keith Golladay: Yes, I mean, I think the part.

Wesley Keith Golladay: Out of that I would like to focus on.

Wesley Keith Golladay: The Submarket we never.

Wesley Keith Golladay: Really exited or.

Outside of that.

Wesley Keith Golladay: Our submarkets that we wanted to focus on so in San Diego Torrey Pines in Sorrento Mesa.

Wesley Keith Golladay: In Boston at the Lexington Route 128 market in West, Cambridge, and it's really South San Francisco and what we're actually seeing is a gravitation towards tenants wanting to be in those core sub markets.

Wesley Keith Golladay: Some of those other submarkets that were not fully proven that irrespective of development done in those.

Wesley Keith Golladay: I would take a lot longer to lease up if they ever do that yourself.

Unknown Executive: Okay, and then when you look at potential distressed opportunities, do you think you'll get any distressed pricing for those? Or is there still a lot of capitalization in those great submarkets? And how would you look to potentially get involved? Would it be a JV, or MES lending? Can you elaborate on that?

Speaker Change: Okay, and then when you look at potential distressed opportunities do you think you'll get any distressed pricing for those or is there still a lot of capital chasing those great Submarkets and how would you look to potentially get involved would it be a JV mezz lending can you elaborate on that.

Unknown Executive: I could be any of the above, and it would be very...

Speaker Change: It could be any of the above it would be very opportunistic.

Unknown Executive: I could be any of the above, it would be very opportunistic, but it would have to be in core submarkets. We really bring something unique to the table, which is our existing footprint, tenant relationships, broker relationships, etc. So we'll be very focused on particular submarkets, but we could be more open-minded on deal structure, but it would have to be opportunistic type pricing.

Speaker Change: But it would have to be in core submarkets, we really bring something unique to the table, which is our existing footprint tenant relationships broker relationships et cetera. So it will be very focused on particular, submarkets, but we could be more open minded.

Speaker Change: On deal structure, but it would have to be opportunistic type pricing.

Speaker Change: Okay. Thanks for the time.

James Hall Kammert: Your next question comes from the line of Jim Kammert with Evercore. Please go ahead.

Your next question comes from the line of Tim cameras with Evercore.

James Hall Kammert: Good morning. Thank you. You're just building a little further, if possible, on the lab leasing demand. It sounds like your pipeline is larger.

Tim Cameras: Please go ahead.

Tim Cameras: Hi, Good morning. Thank you just building a little further if possible on the lab leasing demand. It sounds like your pipeline is larger. These tenants are funding is that translate into any ability for landlords like yourself to kind of hold the economics in terms of Ti packages and whatnot, because if I recall.

Unknown Executive: These tenants have funding. Is that translating to any ability for landlords like yourself to kind of hold the economics in terms of TI packages and whatnot? Because, if I recall, that was kind of being pushed more and more towards landlords in terms of $150, maybe to $250 and plus. Any comments there? And if you are still being required to pay for them, are you able to get an economic return on that and effectively bake it into the rent?

Tim Cameras: That was kind of a green push more and more towards landlords in terms of 150 Bucks maybe to 215, plus any comments there and if you are still be required to pay those are you able to get an economic return on that effectively baked into the rent.

Unknown Executive: Thanks.

Unknown Executive: Yeah, you know our release spread in the first quarter was around 3%. Now it could vary quarter to quarter, but as we look at our current pipeline, the renewal spreads will be above that level in the aggregate, some higher, some lower, but on average certainly above. We still feel like we're in the 5-10% range, and at least in recent quarters, the leasing and TI that we're putting into the buildings to drive those rents are very modest, around 5% of rent on renewal leasing and around 10% on new leasing, so those are pretty modest leasing costs across commercial real estate.

Tim Cameras: Yes, our re leasing spreads in the first quarter was around 3%.

Tim Cameras: Now it could vary quarter to quarter, but as we look at our current pipeline the renewal spreads will be above that level in the aggregate some higher some lower but on average certainly above.

Tim Cameras: 3% across the portfolio, we still feel like from the 5% to 10% range and at least in recent quarters, the leasing and Ti that we're putting into the buildings to drive those rents is very modest around 5%.

Tim Cameras: Rents on renewal leasing and around 10% on new leases. So those are pretty modest leasing costs gross commercial real estate.

James Hall Kammert: Right, I'm sorry, I wasn't clear, but I meant like on a brand new space, weren't landlords being required to put in a $250 type of allowance and stuff to make the deal happen, or am I mistaken? Yeah, so for you to

Speaker Change: Alright, I wasn't clear if I meant like Ron.

Speaker Change: <unk> new space.

Speaker Change: Britain landlords being required to put in.

Speaker Change: 250 box type of allowance is tough to make the deal happen or am I mistaken.

Speaker Change: Yes.

Unknown Executive: Yeah, so for new development, that's true. I was speaking more to renewal and releasing spreads, but for new development, certainly there's an expectation of turnkey or closer to it, which we've been talking about for the last year or so that we're actually having more success in the current environment on our second generation space that's turnkey in nature, but at a much more modest investment, but lower rent, lower op-ex, and no TI from the tenant, so that's certainly a big part of our leasing pipeline, but we are getting some interest in our development projects as well.

Speaker Change: For new development is that that is true.

Speaker Change: Speaking more to renewal and re leasing spreads, but for new development is certainly there is an expectation of turnkey or closer to it which we've been talking about for the last year or so that we're actually having more success in the current environment on our second generation space, that's turnkey in nature, but are a much more modest investment but.

Speaker Change: Rents lower Opex and no ti from the tenants. So that's certainly a big part of our leasing pipeline, but we are getting some interest in our development projects as well.

Unknown Executive: All right. Thank you. Your next question comes from the line of

Speaker Change: Alright, thank you.

Speaker Change: Your next question comes from the line of Mike Mueller with Jpmorgan. Please go ahead.

Michael William Mueller: Your next question comes from the line of Mike Mueller with J.P. Morgan. Please go ahead.

Michael William Mueller: Yes, hi, thanks.

Michael William Mueller: I'm curious how do you see tenant retention shaping up for the balance of the year and where do you think.

Unknown Executive: Yeah, hey, Mike, it's Keith. You know, tenant retention, the headline number was a little bit lower, assuming you're talking just about labs. Just because we actually had a subtenant that went direct, and we don't include that in the Retention Statistics, it was NGM that went direct on one of the Amgen buildings, and they had been a subtenant in that building for years, but the way we report it, we don't include that.

Michael William Mueller: The 96% operating portfolio occupancy could end the year.

Speaker Change: Yeah, Hey, Mike.

Speaker Change: Tenant retention the headline number was a little bit lower.

Michael William Mueller: You are talking just about lab.

Michael William Mueller: Just because we actually had a subtenant that went direct and we don't include that in the.

Michael William Mueller: Retention statistics it was MGM.

Michael William Mueller: Went direct on one of the Amgen buildings and they had been a sub tenant in that building for years.

Michael William Mueller: But the way we report it we don't include that as well.

Unknown Executive: The tenant was retained within the building, so we report that as a new lease. Therefore, if you did include it as tenant retention, you'd be right around 60%. And I would say that, you know, that's probably a pretty good number. Labs are always going to be a little bit below what we achieve in outpatient medical, which I think this quarter, the number out there was 84%, which was, It's pretty darn, you know, hi. So I think the tenant retention number is a little bit misleading, and you

Michael William Mueller: And it was retained within the building we report that as a.

Michael William Mueller: New lease. Therefore, we did include it as tenant retention you'd be right around 60% and I would say that that's probably a pretty good number labs are always going to be a little bit below what we achieve in outpatient medical which I think this quarter.

A number out there were 84% which was.

Michael William Mueller: Pretty darn.

Michael William Mueller: Hi.

Michael William Mueller: So I think the tenant retention number is a little bit misleading and you got to dig into it.

Unknown Executive: And then on occupancy, on the 96%, our view is that that should pick up a little bit. In fact, I know there was a sequential decline from the fourth quarter to the first quarter. That was actually a proactive termination we did at the Towers building in South San Francisco, and we've actually already released that space; it just hasn't commenced yet, so we don't include that in the occupancy number until the lease commences. So, just if you factor that in alone, we'd expect occupancy to tick up a little bit as the year progresses.

Michael William Mueller: Net occupancy and then on occupancy 90.

Michael William Mueller: 96%.

Michael William Mueller: Our view is that that should pick up a little bit in fact, I know there was a sequential decline from the fourth quarter. The first quarter that was actually proactive termination we did at the towers building in <unk>.

San Francisco and we've actually already re leased that space that just hasnt commenced yet. So we don't include that in the occupancy number until the lease commences. So just if you factor that in a while and we would expect occupancy to pick up a little bit as the year progresses.

Speaker Change: Got it okay. Thank you.

Speaker Change: Yes.

Michael Stroyak: Your next question comes from the line of Michael Stroyak with Green Street. Please go ahead.

Speaker Change: Your next question comes from the line of Michael <unk> with Green Street. Please go ahead.

Michael Stroyak: Thanks and good morning. Could you just provide some color on the outpatient medical sequential occupancy decline during the quarter and just whether that largely came from legacy dock or legacy peak portfolios?

Michael Albert Carroll: Thanks, and good morning.

Michael Albert Carroll: Could you just provide some color on the outpatient medical sequential occupancy declined during the quarter and just whether that largely came from legacy Doc or legacy portfolios.

Thomas M. Klaritch: Yeah, really, you typically see, this is Tom Klaritch, but you see a decline from Q4 to Q1.

Michael Albert Carroll: Yes, it really <unk>.

Michael Albert Carroll: You typically see is as Tom clarity, but you see it you see a decline from Q4 to Q1 pretty regularly because a lot of doctors hold over over the holiday period, and then when things settle down after the first of the year they'll move out so that's pretty typical I wouldn't point to.

Thomas M. Klaritch: pretty regularly because a lot of doctors hold them over.

Thomas M. Klaritch: Legacy Peak or Legacy Dock is a cause for that.

Michael Stroyak: Got it. So, I guess nothing really stands out in terms of, like, tenant credit, asset quality, or anything else, just normal seasonality. Just normal rhythm during the year. Okay, and then maybe following up on the Poway disposition discussion, can you just help us understand how much of your portfolio is similar to these assets in terms of it not necessarily being traditional life science properties?

Michael Albert Carroll: Legacy peak or luggage legacy Doc is a cause for that.

Speaker Change: Got it.

Speaker Change: Nothing really stands out in terms of tenant.

Speaker Change: Tenant credit asset quality or anything else, just just normal seasonality.

Speaker Change: Just normal rhythm during the year.

Speaker Change: Got it okay.

Speaker Change: And then maybe following up on the Poway disposition discussion can.

Speaker Change: Can you just help us understand how much of your portfolio is similar to these assets in terms of it.

Speaker Change: Some of it not necessarily being traditional life science properties.

Unknown Executive: That was really it.

Speaker Change: That was really it I mean, we like the land bank.

Unknown Executive: That was really it. I mean, we have, like, the land bank and conversions in West Cambridge, where we'll eventually tear buildings down and build life science facilities, but in terms of the stabilized asset.

Speaker Change: Convergent in West Cambridge.

Speaker Change: Where will eventually two buildings down in build by science, but in terms of the stabilized.

Michael Stroyak: Okay, that's helpful. Thank you.

Speaker Change: Asset that's it.

Speaker Change: Yes.

Speaker Change: Okay. That's helpful. Thank you.

Speaker Change: Yes.

Speaker Change: Yeah.

Vikram L. Malhotra: Your next question comes from the line of Vikram Malhotra with Mizzou. Please go ahead.

Speaker Change: Your next question comes from the line of Vikram Malhotra with Mizuho.

Vikram L. Malhotra: Please go ahead.

Vikram L. Malhotra: Morning, thanks for taking the questions. Maybe just the first one, you've talked a lot about the life sciences leading pipeline, but I'm wondering if you can update us or just provide color on the watch list. Given the capital raising, I'm assuming it's lower, but any numbers, any magnitude, or perhaps in other ways, like what's baked into the guide for the watch list?

Vikram L. Malhotra: Hi, good morning, Thanks for taking the question.

Vikram L. Malhotra: Maybe just first one you've talked a lot about the life sciences leasing pipeline, but I'm wondering if you can update us.

Vikram L. Malhotra: Just provide color on the watch list.

Vikram L. Malhotra: Given the capital raising I'm, assuming it's lower but any numbers any any magnitude or perhaps in other ways like what's baked into the guide for the watch list.

Unknown Executive: Hey, Vic, it's Pete here. I think you've done a very nice job, actually, in your research. We've been talking about this, and what's happening is actually following suit with what you're saying. The strong capital raising is certainly causing us to have a much lower tenant monitoring list. Our monitoring list would be a tenant that's got less than 12 months of cash runway. And if you just want to put percentages on that, I'd say that list today is 50% of the size of what it was a year ago.

Vikram L. Malhotra: Yeah.

Vikram L. Malhotra: If I could see here I think you've done a very nice job vaccine in your research talking about this and whats happening is actually following suit with what.

Vikram L. Malhotra: The strong capital raising is certainly.

Vikram L. Malhotra: Causing us to have a much lower.

Vikram L. Malhotra: Monitoring list, our monitoring list would be a tenant that's got less than 12 months of cash runway and if you just want to put percentages on that I'd say.

That list today is 60% of it.

Vikram L. Malhotra: <unk> of what it was a.

Unknown Executive: It continues to trend in the right direction, so it's down considerably. And the other thing I would just mention, we've said this before, even in the best of lab markets, you're always going to have a couple of tenants. We have 200 tenants. You're always going to have a couple of tenants that you're paying close attention to because it really comes down to the science and the success of the science and not necessarily always about the capital markets and the ability to raise capital.

A year ago.

Vikram L. Malhotra: Tenuous to trend in the right direction, So it's down considerably and the other thing I would just mentioned we've said this before even there.

Vikram L. Malhotra: Best of lab market Youre always going to have.

Vikram L. Malhotra: <unk> got 200 candidates Youre always going to have a couple of tenants that you are paying close attention to because it really comes down to the science and the success of the science in.

Vikram L. Malhotra: Not necessarily always about the capital market and ability to raise capital.

Vikram L. Malhotra: Okay, that's helpful. Just second, I'm wondering whether the HCA sort of programmatic deal you had with HCA in terms of MOBs was, you know, has been pretty fruitful. I'm wondering, with the combined company now with physicians, is there a likelihood of a similar deal with another system? Or is that, is it just given the capital environment, even hospital systems are just waiting on developments?

Speaker Change: Okay. That's helpful. Just second I'm wondering.

Speaker Change: The HCA.

Speaker Change: Sort of programmatic deal you had with MK in terms of Applebee's.

Speaker Change: I've been pretty fruitful I'm wondering with the combined company now.

Speaker Change: Physicians is there likelihood of a similar deal with another system or is that.

Speaker Change: Is it just given the capital environment, even hospital systems are just waiting on development.

JT: Hey Vikram, it's JT. We have a lot of historical relationships across the portfolio. So we've started, you know, we have kind of... I hate to call it systematic but a routine kind of steady pipeline with a number of health systems in multiple states. So all highly pre-leased, all kinds of outpatient services that are higher margin and that they need to kind of expand into kind of new markets for providing access to care in those markets. So it's pretty systematic across the board and just has to be at the right price and kind of the right markets for us to proceed, but a pretty steady flow of information. And I'm off the market relationship.

Speaker Change: Victor Ms J D.

Speaker Change: We have a lot of.

Speaker Change: The historical relationships across the portfolio.

Victor: So we have kind of.

Victor: I would call it systematic but routine.

Victor: Kind of steady pipeline with a number of health systems and multiple states of all highly pre leased all kind of outpatient services.

Victor: Services.

Higher margin and that they need to kind of expand into new markets for <unk>.

Victor: Providing access to care in those markets.

Victor: Systematic across the board and just estimate the right price and kind of the right. The right markets first to proceed but pretty steady flow of.

Victor: And I'm off market relationship business.

Vikram L. Malhotra: And then just one more, if I may, just a clarification, I think on the medical office rent spread. There was a 500,000 plus square foot deal that I think you noted was not in there, or it would impact rents later on. Can you just elaborate upon that? Like, when will that hit the rent spread metrics, and what was that? Yeah, the that

Speaker Change: And then just one more if I may just a clarification I think on the medical office rent spreads. There was a 500000 plus square foot deal that I think you've noted was not in there or it would impact rents later on can you just elaborate upon that like when will that hit the rent spread metrics on what was that.

Speaker Change: Yes.

Unknown Executive: Yeah, that lease was a master lease with a system in Houston, and it covers basically three campuses. I do want to point out that we did do that lease internally, so we saved about $3.5 million in lease commissions on that deal, and we also had no TI contribution, and we eliminated our capital liability for 10 years, so it was a great deal.

Speaker Change: That lease.

Speaker Change: The master lease with the system in Houston and it covers basically three campuses I do want to point out that we did do that lease internally. So we saved about $3 $5 million of lease commissions on that deal and we also had no ti contribution and we eliminated our capital liability for 10 years. So it was a great deal.

Unknown Executive: Two of the campuses did have an increase, and one of the campuses had a decrease, so it will have an impact on mark-to-market in July of 2020. I think it was a 6 to 8 percent decline, but to me, that's a great deal if you get absolutely no capital for 10 years on $600,000.

Speaker Change: Two of the campuses did have an increase there is one one of our campuses at a decrease so we will have.

Speaker Change: And impact on Mark to market in July of 25, I think it was 6% to 8% decline but.

Speaker Change: To me Thats, a great deal if you get absolutely no capital for 10 years on 600000 square feet.

Omotayo Tejamude Okusanya: Your next question comes from the line of Omotayo Okusanya, with Deutsche Bank. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of tail of Cusano with Deutsche Bank. Please go ahead.

Omotayo Tejamude Okusanya: Yes, good morning. Congratulations on a solid quarter and a solid and proven outlook.

Tali Cusano: Hi, yes, good morning, congrats on a solid quarter and a solid improvement outlook.

Omotayo Tejamude Okusanya: I'd like to get some clarification on the MOBs and the synergies. When you do do the next round of internalization, the targeted internalization, are those additional synergies beyond the 45 that's been identified? Like, is that going to the additional $20 million bucket that you kind of talked about? And could you also talk to us a little bit about just revenue synergies and how that fits also into maybe the $20 million additional revenue target you've talked about, or the additional synergy target you've talked about?

Speaker Change: Wanted to get some clarification.

Speaker Change: On the on the <unk>.

Speaker Change: We will be on the synergies.

Speaker Change: When you do we do the next round of internalization deposited internalization is that additional synergies beyond the 45.

Speaker Change: That's been identified like what's that going to be additional $20 million bucket that you've kind of talked about and could you also talk to us a little bit about the revenue synergies and how that hits also linked to maybe the 20 million additional revenue target.

Speaker Change: And as you talk about your thoughts about.

Unknown Executive: Yeah, Tayo, it's additional, and it's actual net cash revenue that comes in, so we're really ahead of schedule on... Internalizing markets across the portfolio, and there's more to come. So I think we've assumed a couple of years plan to internalize most of the markets where we have scale and where it makes sense. But it's net cash continuously, year after year after year, net cash to the bottom line.

Speaker Change: Yeah Tayo, it's additional in its actual net cash revenue that comes in so we're really ahead of schedule alone.

Speaker Change: Internalizing markets across the portfolio and there is more to come so I think we had assumed.

Speaker Change: A couple of year plan to internalize most of the markets that we where we have scale and where it makes sense, but it's it's net cash continuously.

Speaker Change: Yeah after year after year net cash.

Speaker Change: Bottom line, yes, and then on.

Speaker Change: Revenue synergies, we've been pretty clear that.

Unknown Executive: And then on revenue synergies, we've been pretty clear that that $60 million run rate does not include revenue synergies, so that could be some upside, whether that's through better lease executions, better retention, you know, better lease rates, so on and so forth. That would be upside. I think it's a little challenging to articulate or to go through what we think that is, but we certainly think that there are revenue synergies out there for us to capture.

Speaker Change: Of that $60 million run rate does not include revenue synergies, so that could be some upside whether that's through better lease execution better retention.

Speaker Change: Better lease rates, so on and so forth that would be upside I think it's a little challenging to articulate or to go through what we think that is but we certainly think that there are revenue synergies out there for us to get.

Omotayo Tejamude Okusanya: Got so the 60 mil run rate is just from more G&A type operating expense synergies that gets you from the 40 to the 60 and then revenues or anything on top. Yeah, that's the right way to do it. Perfect. That's very helpful. Thank you.

Speaker Change: Got it so the six female run ratings just from.

Speaker Change: More G&A type operating expense type synergies that get you from the 40 to 60 and then revenue is there anything onetime.

Speaker Change: Yes, that's the right way to go.

Speaker Change: Right.

Speaker Change: That's very helpful. Thank you.

Scott M. Brinker: I will now turn the call back over to Scott Brinker for his closing remarks. Please go ahead.

Speaker Change: Yeah.

Speaker Change: I will now turn the call back over to Scott Brinker for closing remarks. Please go ahead.

Scott M. Brinker: Yeah, thanks for joining us, everyone. Good momentum here. Happy to talk about it today and look forward to seeing you in the coming weeks and months. Take care.

Scott M. Brinker: Yes, thanks for joining us everyone get more message here happy to talk about it today and look forward to seeing you in the coming weeks and months take care.

Eric: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect.

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