Q2 2025 Healthcare Realty Trust Inc Earnings Call

August 1, 2025

Two five earnings conference call.

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

After the Speakers' 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 again press Star one.

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I would like to hand, the call over to Rob Hubbard, Vice President Investor Relations you May begin your conference.

Thank you for joining us today for healthcare Realty's second quarter 2025 earnings conference call.

A reminder, that except for the historical information contained within the batteries discussed in this call may contain forward looking statements that involve estimates assumptions risks and uncertainties.

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

The company disclaims any obligation to update this forward looking material.

A discussion of risks and risk factors are included in our press release and detailed in our filings with the SEC.

Certain non-GAAP financial measures will be discussed on this call. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings release for the quarter ended June 32025.

The company's earnings press release earnings supplemental information and Form 10-Q are available on the company's website.

Now I'd like to turn the call over to our President and CEO Pete Scott.

Thanks, Ron joining.

Joining me on the call today are Rob Hall, our COO and often helfrich our CFO.

Also available for the Q&A portion of the call is Ryan Crowley our CIO.

We had a very busy second quarter with excellent results and contributions across the organization.

Fundamentals are quite strong in outpatient medical and that was clear with our second quarter print.

Normalized <unk> was <unk> 41 per share a two penny sequential increase.

Fad was 33 per share a four penny sequential increase.

Same store occupancy was 90% a 40 basis point sequential increase.

Same store NOI growth was five 1%, a 280 basis point sequential increase and net debt to adjusted EBITDA at six times.

In addition, it was the second highest new leasing quarter in the last three years year to date sales increased to $211 million at a blended six 2% cap rate, we have over $700 million of additional assets under contract or LOI, we completed a very successful renewal of our <unk>.

<unk>, we extended the tenure of our term loans.

And we raised guidance.

Rob in Austin will cover these items in more detail.

Special Thanks to the entire healthcare Realty team for their extraordinary efforts this quarter.

Moving on to our strategic plan, which we published on our website concurrent with our earnings release.

I have now been at healthcare Realty, just over 100 days and my time has largely been spent seeing the real estate assessing the team and receiving valuable feedback from our shareholders.

During the quarter the team an eye towards 10 core markets encompassing approximately 50% of our overall NOI and more importantly about two thirds of our overall real estate values.

In addition, I spent considerable time with our teams out in the field, including leasing and operations.

Each and every one of these interactions has had an influence on the strategic plan and I am confident now is the right time to disclose the vision for healthcare Realty to point out.

Let me start with my overall assessment the good news, we have the best in class outpatient medical portfolio, we have scale in the right market and we are aligned with the nation's leading health care system.

In short we have the essential ingredients of what is needed to be a successful real estate company.

Great asset desirable locations solid tenants.

That said, we have fallen short of expectations, Despite our solid foundation.

Healthcare Realty, one pointed out was a transaction oriented culture that relied almost exclusively on acquisition and development to drive growth to the detriment of asset management.

This strategy work too and for many years the company traded at a premium valuation on.

Unfortunately, this business model collapsed in 2022, and Swift changes are necessary to reverse course and reestablish credibility.

Healthcare Realty to point out will be in operations oriented culture, where earnings growth is paramount strong tenant relationships are essential leasing decisions are made based on economics.

Capital allocation is initially prioritized towards accretive reinvestment into our existing portfolio.

With that as the backdrop, let me elaborate on the five key action items of the strategic plan first action items improved corporate governance as was previously disclosed we've reduced the size of our board from 12 to seven directors.

Go forward Board brings a fresh perspective and decades of industry experience to support our value creation initiatives.

Five of the seven directors have been appointed since 2024, and all directors have been appointed since 2020.

In addition, five board members have REIT CEO experience.

Second action items, a significant organizational restructuring.

We have implemented a new operating model that will drive meaningful cost savings and promote incremental accountability at the property level between our operations and leasing personnel.

This new asset management oriented platform will create stronger and better aligned tenant relationships.

Over the past few months I have had the benefit of sitting down with leadership at some of our largest health system tenants to discuss expansion opportunities. These.

These tenants include Baylor Scott White.

CA Ascension common spirit and banner health.

With our enhanced platform and renewed focus we can and will do better.

To advance our platform changes during the second quarter, we hired Tony Acevedo and Glenn Preston to lead our asset management efforts Tony.

Tony and Glenn have extensive track records in the outpatient medical sector with 16 years and 25 years of experience respectively.

Peter Scott: This new asset management-oriented platform will create stronger and better aligned tenant relationships. Over the past few months, I have had the benefit of sitting down with leadership at some of our largest health system tenants to discuss expansion opportunities. These tenants include Baylor Scott & White, HCA, Ascension, CommonSpirit, and Banner Health. With our enhanced platform and renewed focus, we can and will do better. To advance our platform changes, during the second quarter, we hired Tony Acevedo and Glenn Preston to lead our asset management efforts. Tony and Glenn have extensive track records in the outpatient medical sector, with 16 years and 25 years of experience, respectively. They have been trusted partners of mine in the past, and they have hit the ground running.

Platform will create a stronger and better aligned tenant relationships.

They have been trusted partners are mined in the past and they have hit the ground running.

Over the past few months I've had the benefit of sitting down with leadership at some of our largest health system tenants to discuss expansion opportunities.

Another important restructuring initiatives and streamlining our corporate overhead costs, we've completed a thorough review of <unk>.

These tenants include Baylor Scott White.

Every line item and have already achieved our initial goal of at least $10 million can run rate G&A savings.

CA Ascension common spirit and banner health.

With our enhanced platform and renewed focus we can and will do better.

100% of this has been captured through head count reduction office expense savings and of course, the previously mentioned reduction in our board side.

To advance our platform changes during the second quarter, we hired Tony Acevedo and Glenn Preston to lead our asset management efforts Tony.

At yearend, Julie Wilson, EVP, and Chief administrative officer will be departing the organization. After a 24 year career with the company.

Tony and Glenn have extensive track records in the outpatient medical sector with 16 years and 25 years of experience respectively.

We would all like to express sincere thanks to Julie who played a valuable role in the growth of the organization she will be missed.

They have been trusted partners are mined in the past and they have hit the ground running.

Peter Scott: Another important restructuring initiative is streamlining our corporate overhead costs. We have completed a thorough review of every line item and have already achieved our initial goal of at least $10 million in run rate G&A savings. 100% of this has been captured through headcount reduction, office expense savings, and, of course, the previously mentioned reduction in our board size. At year end, Julie Wilson, EVP and Chief Administrative Officer, will be departing the organization after a 24-year career with the company. We would all like to express sincere thanks to Julie, who played a valuable role in the growth of the organization. She will be missed. Third action item: portfolio optimization to maximize NOI growth. We have completed a full bottom-up property-by-property analysis and segmented all 650 assets into three distinct buckets: the stabilized portfolio, the lease-up portfolio, and the disposition portfolio. Each of these buckets has different characteristics.

Another important restructuring initiatives and streamlining our corporate overhead costs.

Third action items portfolio optimization to maximize NOI growth.

We've completed a thorough review of every line item and have already achieved our initial goal of at least $10 million can run rate G&A savings.

We have completed a full bottom up property by property analysis and segmented all 650 assets into three distinct buckets.

100% of this has been captured through head count reduction office expense savings and of course, the previously mentioned reduction in our board side.

The stabilized portfolio.

The lease up portfolio and the disposition portfolio.

Each of these buckets has different characteristics.

At year end, Julie Wilson, EVP, and Chief administrative officer will be departing the organization. After a 24 year career with the company.

Starting with the stabilized portfolio, which is 75% of the total.

Ours is hands down the premier outpatient medical portfolio and are well performing stabilized assets will be the primary engine of growth for healthcare Realty to point out.

We would all like to express sincere thanks to Julie who play a valuable role in the growth of the organization she will be missed.

The stabilized portfolio consists of 470 properties encompassing over 25 million square feet.

Third action items portfolio optimization to maximize NOI growth.

We have completed a full bottom up property by property analysis and segmented all 650 assets into three distinct buckets.

It includes trophy properties on flagship campuses, such as Ascension, Saint Thomas Midtown and Nashville.

Multi care overlaid medical center in Seattle, and Baylor, Scott and White, all safe Medical center in Fort worth.

Our stabilized portfolio.

The lease up portfolio and the disposition portfolio.

Just to name a few.

Each of these buckets has different characteristics.

Current occupancy is 95%.

Peter Scott: Starting with the stabilized portfolio, which is 75% of the total, ours is hands down the premier outpatient medical portfolio, and our well-performing stabilized assets will be the primary engine of growth for Healthcare Realty 2.0. The stabilized portfolio consists of 470 properties encompassing over 25 million square feet. It includes trophy properties on flagship campuses such as Ascension St. Thomas Midtown in Nashville, MultiCare Overlake Medical Center in Seattle, and Baylor Scott & White All Saints Medical Center in Fort Worth, just to name a few. Current occupancy is 95%. NOI margins are over 65%. Our average lease term is eight years, and our average escalators are 3%. Our strategy with this portfolio is to maintain high occupancy and maximize lease economics to drive consistent NOI growth.

Starting with the stabilized portfolio, which is 75% of the total.

Why margins are over 65% our average lease term is eight years and our average escalators are 3%.

Ours is hands down the premier outpatient medical portfolio and are well performing stabilized assets will be the primary engine of growth for healthcare Realty to point out.

Our strategy with this portfolio is to maintain high occupancy and maximize lease economics to drive consistent NOI growth move.

The stabilized portfolio consists of 470 properties encompassing over 25 million square feet.

Moving to the lease up portfolio, which is approximately 13% of the total.

These 95 assets contained over 7 million square feet of well located health system aligned clinical space.

It includes trophy properties on flagship campuses, such as Ascension, Saint Thomas Midtown and Nashville, multi care overlaid medical center in Seattle, and Baylor, Scott and White, all saves Medical center in Fort worth.

Performance has lagged due to years of underinvestment or deteriorated local relationships. These.

Just to name a few.

These properties are primarily located within our priority markets with the top three markets of Denver, Dallas, and Phoenix, comprising 25% of the square footage.

Current occupancy is 95%.

<unk> margins are over 65% our average lease term is eight years and our average escalators are 3%.

We have strong conviction that through targeted ROI, driven investments and engaged asset management leadership, we can harvest meaningful upside in this portfolio and generate up to $50 million of incremental NOI.

Our strategy with this portfolio is to maintain high occupancy and maximize lease economics to drive consistent NOI growth move.

Peter Scott: Moving to the lease-up portfolio, which is approximately 13% of the total, these 95 assets contain over 7 million square feet of well-located health system-aligned clinical space. Performance has lagged due to years of underinvestment or deteriorated local relationships. These properties are primarily located within our priority markets, with the top three markets of Denver, Dallas, and Phoenix comprising 25% of the square footage. We have strong conviction that through targeted ROI-driven investments and engaged asset management leadership, we can harvest meaningful upside in this portfolio and generate up to $50 million of incremental NOI. Current occupancy in these properties is 70%. NOI margins are 55%, and our rents are nearly 20% below market. In a bit, I will touch more on unlocking this potential through prudent capital allocation.

Moving to the lease up portfolio, which is approximately 13% of the total.

These 95 assets contain over 7 million square feet of well located health system aligned clinical space.

Current occupancy in these properties to 70%.

Margins are 55% and our rents are nearly 20% below market.

Performance has lagged due to years of underinvestment or deteriorated local relationships.

In a bit.

Touch more on unlocking this potential through prudent capital allocation.

These properties are primarily located within our priority markets.

Shifting to the disposition portfolio, which is approximately 12% of the total over the last two years NOI growth for these assets has lagged our stabilized portfolio by 700 basis points.

The top three markets of Denver, Dallas, and Phoenix, comprising 25% of the square footage.

In addition, 80% of this portfolio is located outside of our priority markets, where demographic trends are weaker limiting upside potential.

We can capitalize on the current strength in the outpatient medical transaction market to strategically exit these assets at attractive relative valuations.

Current occupancy in these properties to 70% NOI margins are 55% and our rents are nearly 20% below market.

We have a robust and balanced disposition pipeline across a variety of asset profiles to maximize value and minimize execution risk.

And a bit I'll touch more on unlocking this potential through prudent capital allocation.

Peter Scott: Shifting to the disposition portfolio, which is approximately 12% of the total, over the last two years, NOI growth for these assets has lagged our stabilized portfolio by 700 basis points. In addition, 80% of this portfolio is located outside of our priority markets, where demographic trends are weaker, limiting upside potential. We can capitalize on the current strength in the outpatient medical transaction market to strategically exit these assets at attractive relative valuations. Today, we have a robust and balanced disposition pipeline across a variety of asset profiles to maximize value and minimize execution risk. We expect asset sales of approximately $1 billion to close in 2025 at a blended cap rate of 7%. We extensively evaluated the real estate fundamentals of these assets and believe our time and capital are best focused on the lease-up portfolio.

Shifting to the disposition portfolio, which is approximately 12% of the total over the last two years NOI growth for these assets has lagged our stabilized portfolio by 700 basis points.

We expect asset sales of approximately $1 billion to close in 2025 at a blended cap rate of 7%.

We extensively evaluated the real estate fundamentals of these assets and believe our time and capital are best focus on the lease up portfolio.

In addition, 80% of this portfolio is located outside of our priority markets, where demographic trends are weaker limiting upside potential.

The end result of the portfolio optimization strategy will be significantly improved occupancy and margin and enhanced NOI growth profile and a sharpened geographic focus.

We can capitalize on the current strength in the outpatient medical transaction market to strategically exit these assets at attractive relative valuations today.

Fourth action items re prioritizing our capital allocation internally.

Today, we have a robust and balanced disposition pipeline across a variety of asset profiles to maximize value and minimize execution risk.

Our near term priority will be investing capital back into our lease up portfolio. This will come from two different types of targeted investment number one ready to occupy spec suites, which we refer to as our <unk> and our.

We expect asset sales of approximately $1 billion to close in $2025 at a blended cap rate of 7%.

We extensively evaluated the real estate fundamentals of these assets and believe our time and capital are best focus on the lease up portfolio.

<unk> investment into select vacant suites to drive leasing number two redevelopments, which are significant investments to reposition buildings and drive higher rental rates occupancy and cash on cash return.

Peter Scott: The end result of the portfolio optimization strategy will be significantly improved occupancy and margin, an enhanced NOI growth profile, and a sharpened geographic focus. Fourth action item: reprioritizing our capital allocation internally. Our near-term priority will be investing capital back into our lease-up portfolio. This will come through two different types of targeted investment. Number one, ready to occupy spec suites, which we refer to as RTO, and our strategic investment into select vacant suites to drive leasing. Number two, redevelopments, which are significant investments to reposition buildings and drive higher rental rates, occupancy, and cash-on-cash returns. Between RTO and redevelopment opportunities over the next three years, we estimate approximately $300 million of capital investment at attractive returns. Additional accretive opportunities, including acquisitions and development, will come when our cost of capital allows for it or we have sufficient balance sheet capacity.

The end result of the portfolio optimization strategy will be significantly improved occupancy and margin and enhanced NOI growth profile and a sharpened geographic focus.

Between RTL and redevelopment opportunities over the next three years, we estimate approximately $300 million.

Fourth action items re prioritizing our capital allocation internally.

Capital investments at attractive returns.

Additional accretive opportunities, including acquisitions and development will come when our cost of capital allows for it or we have sufficient balance sheet capacity.

Our near term priority will be investing capital back into our lease up portfolio.

This will come through two different types of targeted investment number one ready to occupy spec suites, which we refer to as our T O and our strategic investments into select vacant suites to drive leasing.

As our balance sheet continues to improve we could utilize a portion of sale proceeds to repurchase stock should the opportunity present itself.

Number two redevelopments, which are significant investments to reposition buildings and drive higher rental rates occupancy and cash on cash return.

Fifth action items and improved balance sheet. The company has been playing defense for years with extremely limited financial flexibility due to excessive leverage.

Between <unk> and redevelopment opportunities over the next three years, we estimate approximately $300 million of capital investment at attractive returns.

The sale of the disposition portfolio, we expect net debt to EBITDA to be in the mid five times area by year end.

This lower leverage combined with extended maturities will allow us to gradually shift from defense to offense.

Additional accretive opportunities, including acquisitions and development will come when our cost of capital allows for it or we have sufficient balance sheet capacity.

Turning now to the dividend.

A final part of the strategic plan, we completed a thorough and careful evaluation of the dividend the.

Peter Scott: As our balance sheet continues to improve, we could utilize a portion of sale proceeds to repurchase stock should the opportunity present itself. Fifth action item: an improved balance sheet. The company has been playing defense for years with extremely limited financial flexibility due to excessive leverage. With the sale of the disposition portfolio, we expect net debt to EBITDA to be in the mid-five times area by year end. This lower leverage, combined with extended maturities, will allow us to gradually shift from defense to offense. Turning now to the dividend. As a final part of the strategic plan, we completed a thorough and careful evaluation of the dividend. The result of this analysis is that the board unanimously approved a dividend reduction of 23% to $0.24 per share on a quarterly basis.

As our balance sheet continues to improve we could utilize a portion of sale proceeds to repurchase stock should the opportunity present itself.

The result of this analysis is that the board unanimously approved a dividend reduction of 23% to <unk> 24 per share on a quarterly basis.

Fifth action items and improved balance sheet. The company had been playing defense for years with extremely limited financial flexibility due to excessive leverage with the sale of the disposition portfolio. We expect net debt to EBITDA to be in the mid five times area by year end.

While we could maintain the dividend and grow into a sustainable payout ratio over time.

The key factors for right sizing the dividend arm.

It alleviates pressure from $1 4 billion of low coupon bonds maturing over the next three years.

This lower leverage combined with extended maturities will allow us to gradually shift from defense to offense.

It provides $100 million annually of capital that we need to reinvest into our portfolio to drive performance.

Turning now to the dividend as a final part of the strategic plan, we completed a thorough and careful evaluation of the dividend.

And it positions the company to maximize our go forward earnings potential.

Let me finish with the value creation opportunity.

The result of this analysis is that the board unanimously approved a dividend reduction of 23% to <unk> 24 per share on a quarterly basis.

In our strategic plan presentation. We have included a high level framework for a potential earnings growth over a three year forward looking period.

Peter Scott: While we could maintain the dividend and grow into a sustainable payout ratio over time, the key factors for right-sizing the dividend are: it alleviates pressure from $1.4 billion of low coupon bonds maturing over the next three years. It provides $100 million annually of capital that we need to reinvest into our portfolio to drive performance, and it positions the company to maximize our go forward earning potential. Let me finish with the value creation opportunity. In our strategic plan presentation, we have included a high-level framework for a potential earnings growth over a three-year forward-looking period. There is a clear path to creating attractive FFO per share, and the analysis excludes any upside from accretive capital allocation. In addition, we currently trade at approximately 10 times FFO, which is six turns below both our 10-year average and the 10-year average of our healthcare peers.

There is a clear path to creating attractive <unk> per share in the analysis excludes any upside from accretive capital allocation.

While we could maintain the dividend and grow into a sustainable payout ratio over time.

The key factors for right sizing the dividend arm.

In addition, we currently trade at approximately 10 times <unk>, which is six turns below both our 10 year average and the 10 year average of our health care REIT peers. We know our evaluation is a function of many self inflicted wounds and a loss of credibility and does.

It alleviates pressure from one $4 billion of low coupon bonds maturing over the next three years at.

It provides $100 million annually of capital that we need to reinvest into our portfolio to drive performance.

And it positions the company to maximize our go forward earnings potential.

Not remotely reflect the significant value embedded in our irreplaceable portfolio.

Let me finish with the value creation opportunity.

In our strategic plan presentation. We have included a high level framework for a potential earnings growth over a three year forward looking period.

With the purposeful changes underway at healthcare royalty to point out we see a real opportunity to improve operating performance restore credibility and unlock shareholder value.

There is a clear path to creating attractive <unk> per share in the analysis excludes any upside from accretive capital allocation and.

With the implementation of our strategic plan, we will remain the only public REIT focused exclusively on outpatient medical we will have a positive earnings outlook, our balance sheet will be a source of strength, we will no longer be burdened by an uncovered dividend, we can use free cash flow to invest accretively in our poor.

Peter Scott: We know our evaluation is a function of many self-inflicted wounds and a loss of credibility and does not remotely reflect the significant value embedded in our irreplaceable portfolio. With the purposeful changes underway at Healthcare Realty 2.0, we see a real opportunity to improve operating performance, restore credibility, and unlock shareholder value. With the implementation of our strategic plan, we will remain the only public REIT focused exclusively on outpatient medical. We will have a positive earnings outlook. Our balance sheet will be a source of strength. We will no longer be burdened by an uncovered dividend. We can use free cash flow to invest accretively in our portfolio. Our assets will be operating at maximum NOI capacity. We will have a lean cost structure, and we will have a best-in-class team and board.

Folio, our assets will be operating at maximum NOI capacity, we will have a lean cost structure and we will have a best in class team and board.

Remotely reflect the significant value embedded in our irreplaceable portfolio.

We are firmly committed to this vision and are confident it will maximize value for all stakeholders. Nevertheless overtime. If our platform continues to trade at a significant discount to our intrinsic value and it will be our responsibility to explore all additional alternative needed to unlock value.

With the purposeful changes underway at healthcare royalty to point out we see a real opportunity to improve operating performance restore credibility and unlock shareholder value.

Let me now turn the call over to Rob.

Thanks Pete.

Demand for outpatient medical space remained strong.

Driven by tightening supply and the ongoing migration of services into a lower cost outpatient setting.

Folio, our assets will be operating at maximum NOI capacity, we will have a lean cost structure and we will have a best in class team and board.

During the quarter, we executed nearly one 5 million square feet of leases, including over 450000 square feet of new leases.

Peter Scott: We are firmly committed to this vision and are confident it will maximize value for all stakeholders. Nevertheless, over time, if our platform continues to trade at a significant discount to our intrinsic value, then it will be our responsibility to explore all additional alternatives needed to unlock value. Let me now turn the call over to Rob.

Our signed not occupied pipeline, where snow remained solid at nearly 610000 square feet representing.

Representing almost 170 basis points of occupancy in the coming quarters.

We continue to see robust demand from our health system partners.

Let me now turn the call over to Rob.

Counting for about a third of our lease execution this quarter.

Thanks, Steve.

Austen Helfrich: Thanks, Pete. Demand for outpatient medical space remains strong, driven by tightening supply and the ongoing migration of services into a lower-cost outpatient setting. During the quarter, we executed nearly 1.5 million square feet of leases, including over 450,000 square feet of new leases. Our signed not occupied pipeline, or SNO, remains solid at nearly 610,000 square feet, representing almost 170 bps of occupancy in the coming quarters. We continue to see robust demand from our health system partners, accounting for about a third of our lease executions this quarter. A few notable transactions include a 24,000 square foot new lease in a redevelopment project on the campus of HCA's North Cypress Hospital in Houston, a 42,000 square foot renewal also in Houston with the Premier Pediatrics Group associated with Texas Children's Hospital, and a 23,000 square foot new lease in Orange County, California, with UC Irvine Health.

Demand for outpatient medical space remained strong.

A few notable transactions include a 24000 square foot new lease and a redevelopment project on the campus of Hca's North Cypress Hospital in Houston.

Driven by tightening supply and the ongoing migration of services into a lower cost outpatient setting.

During the quarter, we executed nearly one 5 million square feet of leases, including over 450000 square feet of new leases.

A 42000 square foot renewal also in Houston with a premier Pediatrics group associated with Texas Children's Hospital.

Our signed not occupied pipeline or snow remains solid at nearly 610000 square feet representing.

And a 23000 square foot new lease in Orange County, California.

With UC Irvine health.

Representing almost 170 basis points of occupancy in the coming quarters.

UCI recently acquired the campus hospital from tenant health.

We continue to see robust demand from our health system partners.

Looking ahead, our new lease pipeline remains solid at over one 3 million square feet and growing.

Counting for about a third of our lease execution this quarter.

Within our pipeline about 60% is in the letter of intent or lease documentation phase, indicating a high probability of lease execution.

A few notable transactions include a 24000 square foot new lease and a redevelopment project on the campus of Hca's North Cypress Hospital in Houston.

Shifting to operations with second quarter marked the beginning of our transition to an operating platform with a greater focus on asset management.

A 42000 square foot renewal also in Houston with a premier Pediatrics group associated with Texas Children's Hospital.

As Pete mentioned, we made some key hires to lead the team and have taken the initial steps to transition portfolio operations under their leadership.

And a 23000 square foot new lease in Orange County, California.

With UC Irvine health.

Austen Helfrich: UCI recently acquired the campus hospital from Tenet Health. Looking ahead, our new lease pipeline remains solid at over 1.3 million square feet and growing. Within our pipeline, about 60% is in the letter of intent or lease documentation phase, indicating a high probability of lease execution. Shifting to operations, the second quarter marked the beginning of our transition to an operating platform with a greater focus on asset management. As Pete mentioned, we made some key hires to lead the team and have taken the initial steps to transition portfolio operations under their leadership. We expect to complete the transition to this new model by year end. Once completed, we will continue to refine the platform over the next year by implementing new operating procedures, identifying further efficiencies, and emphasizing discipline around leasing decisions based on economic returns.

UCI recently acquired the campus hospital from tenant health.

We expect to complete the transition to this new model by year end.

Looking ahead, our new lease pipeline remains solid at over one 3 million square feet and growing.

Once completed we will continue to refine the platform.

Over the next year by implementing new operating procedures.

Within our pipeline about 60% is in the letter of intent or lease documentation phase, indicating a high probability of lease execution.

Identifying further efficiencies and emphasizing discipline around leasing decisions based on economic returns.

Turning to our same store portfolio.

Shifting to operations the second quarter marked the beginning of our transition to an operating platform with a greater focus on asset management.

With strong new lease commencements and tenant retention of 83%.

We gained 40 basis points of occupancy this quarter.

As Pete mentioned, we made some key hires to lead the team and have taken the initial steps to transition portfolio operations under their leadership.

Consistent with seasonal trends, we expect most of our occupancy gains to come in the second half of the year.

Our outlook for 2025 remains 75 from 125 basis points of absorption by year end.

We expect to complete the transition to this new model by year end.

I want to congratulate our team on the leasing and absorption progress we made this quarter.

Once completed we will continue to refine the platform.

Over the next year by implementing new operating procedures.

With a robust leasing pipeline strong tenant retention and tightening supply.

Identifying further efficiencies and emphasizing discipline around leasing decisions based on economic returns.

Our portfolio is poised to see further leasing momentum and NOI growth throughout the remainder of the year and into 2026.

Austen Helfrich: Turning to our same store portfolio, with strong new lease commencements and tenant retention of 83%, we gained 40 bps of occupancy this quarter. Consistent with seasonal trends, we expect most of our occupancy gains to come in the second half of the year. Our outlook for 2025 remains 75 to 125 bps of absorption by year end. I want to congratulate our team on the leasing and absorption progress we made this quarter. With a robust leasing pipeline, strong tenant retention, and tightening supply, our portfolio is poised to see further leasing momentum and NOI growth throughout the remainder of the year and into 2026. I will now turn it over to Austen Helfrich to discuss financial results. Thanks, Rob. In my remarks this morning, I will cover our Q2 results, progress on asset sales, balance sheet improvements, and increased 2025 guidance.

Turning to our same store portfolio.

I'll now turn it over to Austin to discuss financial results.

With strong new lease commencements and tenant retention of 83%.

Thanks, Rob and my remarks. This morning, I will cover our second quarter results.

We gained 40 basis points of occupancy this quarter.

Consistent with seasonal trends, we expect most of our occupancy gains to come in the second half of the year.

Progress on asset sales balance sheet improvements and increased 2025 guidance.

Our outlook for 2025 remains 75 to 125 basis points of absorption by year end.

But before I jump in let me say, how pleased I am with our performance this quarter and our momentum heading into the back half of the year.

I want to congratulate our team on the leasing and absorption progress we made this quarter.

Now, let's dive into the details.

Normalized <unk> per share was <unk> 41 for the quarter.

With a robust leasing pipeline strong tenant retention and tightening supply.

Up nearly 7% year over year, driven by strong occupancy gains.

Our portfolio is poised to see further leasing momentum and NOI growth throughout the remainder of the year and into 2026.

Disciplined cost management and a decrease in share count.

Quarterly <unk> per share increased to 33, representing a 96% payout ratio a significant improvement from the first quarter, primarily due to strong earnings growth and lower seasonal maintenance capital.

I will now turn it over to Austin to discuss financial results.

Thanks, Rob and my remarks. This morning, I will cover our second quarter results.

Progress on asset sales balance sheet improvements and increased 2025 guidance.

Second quarter same store cash NOI growth of five 1% was the highest in nine years as a 100 basis point increase in occupancy coupled with strong expense controls drove 50 basis points of year over year margin improvement.

Austen Helfrich: Before I jump in, let me say how pleased I am with our performance this quarter and our momentum heading into the back half of the year. Now let's dive into the details. Normalized FFO per share was $0.41 for the quarter, up nearly 7% year over year, driven by strong occupancy gains, disciplined cost management, and a decrease in share count. Quarterly add per share increased to $0.33, representing a 96% payout ratio, a significant improvement from the first quarter, primarily due to strong earnings growth and lower seasonal maintenance capital. Second quarter, same store cash NOI growth of 5.1% was the highest in nine years, as a 100 basis point increase in occupancy, coupled with strong expense controls, drove 50 basis points of year over year margin improvement.

But before I jump in let me say, how pleased I am with our performance this quarter and our momentum heading into the back half of the year.

Now, let's dive into the details.

Normalized <unk> per share was 41 for the quarter.

Since the start of the year Ive been transparent that we expected the first quarter to be a difficult comp and growth to meaningfully accelerate beginning in the second quarter.

Nearly 7% year over year, driven by strong occupancy gains.

Disciplined cost management and a decrease in share count.

I will say that I'm very pleased with the level of growth in the second quarter and believe that it more accurately reflects the strong current fundamentals in our business.

On disposition activity, we completed $211 million of asset sales through the end of July.

Inclusive of a $38 million loan repayment. Our total proceeds generated year to date are approximately $250 million.

Consistent with our disposition strategy the sales were largely concentrated in assets with weaker growth prospects outside of our priority markets.

Austen Helfrich: Since the start of the year, I've been transparent that we expected the first quarter to be a difficult comp and growth to meaningfully accelerate beginning in the second quarter. I will say that I'm very pleased with the level of growth in the second quarter and believe that it more accurately reflects the strong current fundamentals in our business. On disposition activity, we completed $211 million of asset sales through the end of July. Inclusive of a $38 million loan repayment, our total proceeds generated year to date are approximately $250 million. Consistent with our disposition strategy, the sales were largely concentrated in assets with weaker growth prospects outside of our priority markets. Importantly, we fully exited two smaller, slower growth MSAs in Indiana and Washington.

Since the start of the year I have been transparent that we expected the first quarter to be a difficult comp and growth to meaningfully accelerate beginning in the second quarter.

Importantly, we fully exited two small quarter.

I will say that I'm very pleased with the level of growth in the second quarter and believe that it more accurately reflects the strong current fundamentals in our business.

Slower growth Msas in Indiana and Washington.

With an additional $700 million under contract or LOI, we are raising our full year disposition outlook to $800 million to $1 billion as part of our strategic plan.

On.

<unk> activity, we completed $211 million of asset sales through the end of July.

Inclusive of a $38 million loan repayment. Our total proceeds generated year to date are approximately $250 million.

Turning to the balance sheet.

In the second quarter, we successfully completed the first phase of our de risking strategy.

Today, we are pleased to announce the recast of our $1 5 billion revolver as well as the addition of extension options to all of our outstanding term loans.

Consistent with our disposition strategy the sales were largely concentrated in assets with weaker growth prospects outside of our priority markets.

We extended the outside maturity of our revolver to 2030 and term loans to 2027 and 2029.

Importantly, we fully exited two small quarter.

Slower growth Msas in Indiana and Washington.

With this we have decreased the amount of debt maturing through the end of 2026 from $1 5 billion at the end of the first quarter to approximately $600 million today.

Austen Helfrich: With an additional $700 million under contractor LOI, we are raising our full-year disposition outlook to $800 million to $1 billion as part of our strategic plan. Turning to the balance sheet, in the second quarter, we successfully completed the first phase of our de-risking strategy. Today, we are pleased to announce the recast of our $1.5 billion revolver, as well as the addition of extension options to all of our outstanding term loans. We extended the outside maturity of our revolver at 2030 and term loans to 2027 and 2029. With this, we have decreased the amount of debt maturing through the end of 2026 from $1.5 billion at the end of the first quarter to approximately $600 million today. This decrease in near-term maturities gives us financial flexibility and bolsters our liquidity profile. We would like to thank our bank partners for a very successful transaction.

With an additional $700 million under contract or LOI, we are raising our full year disposition outlook to $800 million to $1 billion as part of our strategic plan.

This decrease in near term maturities gives us financial flexibility and bolsters our liquidity profile.

Turning to the balance sheet.

In the second quarter, we successfully completed the first phase of our de risking strategy.

We'd like to thank our bank partners for a very successful transaction.

Today, we are pleased to announce the recast of our $1 5 billion revolver as well as the addition of extension options to all of our outstanding term loans.

Over the coming quarters, we will execute the next phase of our balance sheet strategy as we delever by paying off our 2027 term loans with disposition proceeds.

We extended the outside maturity of our revolver to 2030 and term loans to 2027 and 2029.

Pro forma for our July asset sales, our net debt to EBITDA to six times and we expect leverage to decrease into the mid fives to the balance of the year.

With this we have decreased the amount of debt maturing through the end of 2026 from $1 5 billion at the end of the first quarter to approximately $600 million today.

Coupled with the announced dividend re sizing our liquidity and leverage profile has vastly improved from just a few quarters ago.

This decrease in near term maturities gives us financial flexibility and bolsters our liquidity profile.

I'm very pleased to report that we are raising our 2025 normalized <unk> per share outlook by a penny at the midpoint to $1 57 to $1 61.

We'd like to thank our bank partners for a very successful transaction.

Austen Helfrich: Over the coming quarters, we will execute the next phase of our balance sheet strategy as we delever by paying off our 2027 term loans with disposition proceeds. Pro forma for our July asset sales, our net debt to EBITDA is 6 times, and we expect leverage to decrease into the mid-fives through the balance of the year. Coupled with the announced dividend resizing, our liquidity and leverage profile has vastly improved from just a few quarters ago. I am very pleased to report that we are raising our 2025 normalized FFO per share outlook by a penny at the midpoint to $1.57 to $1.61. Driving this change is a reduction in our G&A expectations, reflecting the restructuring efforts discussed in our strategy presentation, as well as a 25 basis point increase in our same store NOI guidance.

Over the coming quarters, we will execute the next phase of our balance sheet strategy as we delever by paying off our 2027 term loans with disposition proceeds.

Driving this change is a reduction in our G&A expectations, reflecting the restructuring efforts discussed in our strategy presentation as well as a 25 basis point increase in our same store NOI guidance.

Pro forma for our July asset sales, our net debt to EBITDA to six times and we expect leverage to decrease into the mid fives to the balance of the year.

We are proud of our second quarter financial performance and energized by our improved outlook for the year, Despite an almost $500 million increase to our disposition guidance.

Coupled with the announced dividend re sizing our liquidity and leverage profile has vastly improved from just a few quarters ago.

Before turning to Q&A I'd like to highlight two items from our second quarter press release regarding reporting.

I'm very pleased to report that we are raising our 2025 normalized <unk> per share outlook by a penny at the midpoint to $1 57 to $1 61.

First this quarter, we began reporting leverage utilizing the carrying value of debt.

This aligns with the methodology of our peer group as well as the rating agencies.

Driving this change is a reduction in our G&A expectations, reflecting the restructuring efforts discussed in our strategy presentation.

Second we adjusted our maintenance capital definition to align with peers by classifying leasing commissions based on corresponding Ti classifications.

As well as a 25 basis point increase in our same store NOI guidance.

Austen Helfrich: We are proud of our second quarter financial performance and energized by our improved outlook for the year, despite an almost $500 million increase to our disposition guidance. Before turning to Q&A, I would like to highlight two items from our second quarter press release regarding reporting. First, this quarter we began reporting leverage utilizing the carrying value of debt. This aligns with the methodology of our peer group as well as the rating agencies. Second, we adjusted our maintenance capital definition to align with peers by classifying leasing commissions based on corresponding TI classifications. Simply put, any leasing commissions associated with first-generation capital spend will now also be classified as first gen. This aligns us with industry norms, and we expect this change to reduce maintenance capital by approximately $5 million to $10 million annually.

We are proud of our second quarter financial performance and energized by our improved outlook for the year, Despite an almost $500 million increase to our disposition guidance.

Simply put any leasing commissions associated with first generation capital spend will now also be classified as first gen.

Before turning to Q&A I'd like to highlight two items from our second quarter press release regarding reporting.

This aligns us with industry norms, and we expect this change to reduce maintenance capital by approximately $5 million to $10 million annually.

First this quarter, we began reporting leverage utilizing the carrying value of debt.

It is important to note that our fad per share in the second quarter would have been 32.

This aligns with the methodology of our peer group as well as the rating agencies.

Even without this change.

Operator, we're now ready to move to the Q&A portion of the call.

Second we adjusted our maintenance capital definition to align with peers by classifying leasing commissions based on corresponding Ti classifications.

Yes.

At this time I would like to remind everyone that in order to ask a question. Please press star followed by the number one on your telephone keypad. Once again that is star followed by the number one we'll pause for just a moment to compile the Q&A roster.

Simply put any leasing commissions associated with first generation capital spend will now also be classified as first gen.

This aligns us with industry norms, and we expect this change to reduce maintenance capital by approximately $5 million to $10 million annually.

Our first question comes from the line of Nick <unk> with Scotiabank. Your line is opened.

Thanks, Good morning, guys I guess, maybe first off.

Austen Helfrich: It is important to note that our FAD per share in the second quarter would have been $0.32 even without this change. Operator, we are now ready to move to the Q&A portion of the call.

It is important to note that our fad per share in the second quarter would have been 32.

In terms of the strategic plan a lot of the upside it feels like as you know in the law.

Lease up portfolio.

Even without this change.

Talk a little bit more about.

Operator, we're now ready to move to the Q&A portion of the call.

Composition of that portfolio, it's all multi tenant or if there's any single tenant and then.

Okay.

In terms of the numbers I, just want to make sure I'm understanding the annie's.

Yes.

Operator: At this time, I would like to remind everyone that in order to ask a question, please press star followed by the number one on your telephone keypad. Once again, that is star followed by the number one. We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Nick Yulico with Scotiabank. Your line is opened.

At this time I would like to remind everyone that in order to ask a question. Please press star followed by the number one on your telephone keypad. Once again that is star followed by the number one well pause for just a moment to compile the Q&A roster.

You're talking about $20 million to $40 million of upside.

In that portfolio over three years, but then there's also a $50 million number that you gave elsewhere and so I just wanted to understand kind of the difference between those.

Two numbers and then also the composition portfolio.

Our first question comes from the line of Nick <unk> with Scotiabank. Your line is opened.

Hey.

Nick It's Pia here.

Thanks, Good morning, guys I guess, maybe first off.

Nick Yulico: Thanks. Good morning, guys. Maybe first off, you know, in terms of the strategic plan, a lot of the upside feels like is, you know, in the lease-up portfolio. Can you just talk a little bit more about, you know, the composition of that portfolio if it is all multi-tenant or if there is any single tenant? Then, you know, in terms of the numbers, I just want to make sure I am understanding. You talk about $20 million to $40 million of upside in that portfolio over three years, but then there is also a $50 million number that you give elsewhere. I just wanted to understand kind of the difference between those two numbers and also the composition portfolio.

Hope all is well and great to hear from me I'm glad you brought up the.

In terms of the strategic plan a lot of the upside it feels like as you know in the lease up portfolio can you just talk a little bit more about.

20% to $40 million versus the $50 million of upside.

We see $50 million in total upside I think realistically it will take us some time to start to spend that capital.

The composition of that portfolio, it's all multi tenant or if there's any single tenant and then.

And to get that return immediately these readout projects can take upwards of 12 to 18 months, we've obviously.

In terms of the numbers I just want to make sure I'm understanding the.

And you're talking about $20 million to $40 million of upside.

<unk> identified a nice group of assets that will.

In that portfolio over three years, but then there is also a $50 million number that you gave elsewhere and so just wanted to understand kind of the difference between those.

Go into redevelopment.

But to get the full $50 million within the first three years I think would be a very aggressive assumption. So we did add some footnote disclosure that we still assume we will get the full 50, but its going to get.

Two numbers and then also the composition portfolio.

Hey.

Peter Scott: Hey, Nick, it's Pete here. Hope all's well and great to hear from you. I am glad you brought up the $20 million to $40 million versus the $50 million of upside. We see $50 million in total upside. I think realistically it will take us some time to start to spend that capital and to get that return immediately. These redevelopment projects can take upwards of 12 to 18 months. We have obviously identified a nice group of assets that will go into redevelopment. But to get the full $50 million within the first three years, I think would be a very aggressive assumption. So we did add some footnote disclosure that we still assume we will get the full $50 million, but it is going to get layered in or phased in over a little bit more time.

Its Pete here.

Hope all is well and great to hear from me I'm glad you brought up.

Layered in are phased in over a little bit more time.

20% to $40 million versus the $50 million of upside.

As to the lease up portfolio. So I think what gets me really excited about the opportunity to get the upside to $50 million that we're talking about is if you simply just look at that map page and you see where these assets are located I mentioned, the top markets being Denver.

See $50 million in total upside I think realistically it will take us some time to start to spend that capital.

And to get that return immediately these readout projects can take upwards of 12 to 18 months.

You've got Dallas and there is while there are some other really good markets to heal.

We've obviously identified a nice group of assets that will.

Charlotte and the way I think about it is it's really like a value add portfolio embedded within our primary markets and we really like the demographic trends within those markets. So.

Go into redevelopment.

But to get the full $50 million within the first three years I think would be a very aggressive assumption. So we did add some footnote disclosure that we still assume we'll get the full 50, but its going to get.

That's what gives us the confidence to be able to put out a number like that which is a pretty big incremental amount of capital.

<unk> phased in over a little bit more time.

Peter Scott: As to the lease-out portfolio, I think what gets me really excited about the opportunity to get the upside, the $50 million that we are talking about, is if you simply just look at that map page and you see where these assets are located. I mentioned the top markets being Denver. You got Dallas in there as well. There are some other really good markets too, Houston, Charlotte. The way I think about it is it is really like a value-add portfolio embedded within our primary markets, and we really like the demographic trends within those markets. So that is what gives us the confidence to be able to put out a number like that, which is a pretty big incremental amount of capital and amount of NOI. But we feel quite good about our ability to achieve that.

As to the lease up portfolio. So I think what gets me really excited about the opportunity to get the upside the $50 million that we're talking about is if you simply just look at that map page and you see where these assets are located I mentioned, the top markets being Denver.

An amount of NOI, but we feel quite good about our ability to achieve that.

Okay, Great and then I just wanted to be clear as well I mean in terms of the capital that's going into that portfolio and you talked about 300 million.

Over three years I wasn't sure whether it was additional capital to get to the $50 million of total.

You've got Dallas and there is while there are some other really good markets to heal.

Upside and then from a funding standpoint now you have the money saved from.

Eastern Charlotte.

I think about it is it's really like a value add portfolio embedded within our primary markets and we really like the demographic trends within those markets. So that's what gives us the confidence to be able to put out a number like that which is a pretty big incremental amount of capital.

The dividend cut but is there also and can also may be some.

Capital Youre sort of putting aside from the.

The asset sales.

Sides, what youre paying off from that that you're going to use for this portfolio.

Yeah. So the $300 million is what's required we believe to get to the full 50, So we don't see incremental.

An amount of NOI, but we feel quite good about our ability to achieve that.

Nick Yulico: Okay, great. I just wanted to be clear as well. In terms of the capital that is going into that portfolio, you talked about $300 million over three years. I was not sure though if it was additional capital to get to the $50 million of total upside. From a funding standpoint, I know you have the money saved from the dividend cut, but is there also, I think there also may be some capital you are sort of putting aside from the asset sales besides what you are paying off from debt that you are going to use for this portfolio? Thanks.

Okay, Great and then I just wanted to be clear as well I mean in terms of the capital that's going into that portfolio and you talked about $300 million.

Capital required to get to the balance that you're mentioning there.

The primary source of funding is the way we looked at it was to come through the dividend adjustment.

Over three years I wasn't sure whether it was additional capital to get to the $50 million of total.

Dollars are fungible.

So to the extent, we can actually commence some of these developments.

Upside and then from a funding standpoint now you have the money saved from that.

Redevelopment is I'll call them earlier than certainly we could use sale proceeds for that I think we've just we're putting our balance sheet in a position where it's no longer.

Dividend cut but is there also I think there also may be some.

Capital Youre sort of putting aside from the.

A weakness of ours, but a.

The asset sales.

Strength.

And so where the dollars come from are somewhat fungible, we don't have to wait for year three to be able to spend that capital to the extent that we see the opportunities present themself earlier.

What you are paying off from that that you're going to use for this portfolio.

Peter Scott: The $300 million is what is required, we believe, to get to the full 50. We do not see incremental capital required to get to the balance that you are mentioning there. I think the primary source of funding, as the way we looked at it, was to come through the dividend adjustment. Dollars are fungible though. To the extent we can actually commence some of these developments or redevelopments, I will call them earlier, then certainly we could use sale proceeds for that. I think we have just, we are putting our balance sheet in a position where it is no longer a weakness of ours, but a strength. Where the dollars come from are somewhat fungible. We do not have to wait for year three to be able to spend that capital to the extent that we see the opportunities present themselves earlier.

Yeah. So the $300 million is what's required we believe to get to the full 50. So if we don't see incremental capital required to get to the balance that you're mentioning there and I think the primary source of funding is the way we looked at it was to come through the dividend adjustment.

Alright, Thanks, Steve Yes.

Yes, thanks, Nick.

Our next question comes from the line of.

Austin workshop with Keybanc capital markets. Your line is open.

Dollars are fungible so.

Hi, good morning, everybody.

So to the extent, we can actually commence some of these developments.

Just wanted to follow a little bit up on sort of the redevelopment pool and some of the rents that you've outlined in the confidence that you can kind of get from that low $20 range.

Developments I'll call them earlier than certainly we could use sale proceeds for that I think we've just we're putting our balance sheet in a position where it's no longer.

A weakness of ours, but a strength.

Up to nearly $40. Once you you invest this capital just can you can you talk about that versus maybe underlying market dynamics. Thanks.

And so where the dollars come from are somewhat fungible, we don't have to wait for year three to be able to spend that capital to the extent that we see the opportunities present themself earlier.

Yes, yes.

Maybe I can I can jump into that I mean, obviously, we see some below market rents within our markets with regard to redevelop the asset.

Yes.

Nick Yulico: All right. Thanks, Pete.

Alright, Thanks, Steve Yes.

Peter Scott: Yeah. Thanks, Nick.

Yes, thanks, Nick.

Our next question comes from the line up.

Operator: Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is opened.

I'm not sure that I would use the white Plains example, that we put in our DAC, although that is a great example of.

Austin <unk> with Keybanc capital markets. Your line is open.

Nick Yulico: Yeah. Hi. Good morning, everybody. Just wanted to follow a little bit up on the redevelopment pool and some of the rents that you have outlined, and the confidence that you can kind of get from that low $20 range up to nearly $40 once you invest this capital. Can you talk about that versus maybe underlying market dynamics? Thanks.

Hi, good morning, everybody.

How we can achieve a really solid 10% cash on cash yield rents there were in the low twenties.

Just wanted to follow a little bit up on sort of the redevelopment pool and some of the rents that you've outlined in the confidence that you can kind of get from that low $20 range.

With the capital investments they've gone now to around $40, a share which is actually up pretty significantly I am not sure I would look at white claims, though that is a pretty tight market.

Up to nearly $40. Once you invest this capital just can you can you talk about that versus maybe underlying market dynamics. Thanks.

We've done a lot of leasing with white players hospital, there, but but nevertheless, I think thats, maybe an extreme example of what can happen and the IRR on that would be well in excess of the 10% cash on cash yield, but we certainly see with capital getting spent the opportunity to drive rental rates I don't know if theyre going to go from 23% to 40%, but we saw.

Peter Scott: Yeah. Yeah. Maybe I can jump into that. I mean, obviously, we see some below market rents within our markets where we are going to redevelop the assets. I am not sure that I would use the White Plains example that we put in our deck, although that is a great example of how we can achieve a really solid 10% cash-on-cash yield. Rents there were in the low $20s. With the capital investment, they have gone now to around $40 a share, which is actually up pretty significantly. I am not sure I would look at White Plains, though. That is a pretty tight market. We have done a lot of leasing with White Plains Hospital there. Nevertheless, I think that is maybe an extreme example of what can happen. The IRRs on that would be well in excess of the 10% cash-on-cash yield.

Yeah Yeah.

Maybe I can I can jump into that I mean, obviously, we see some below market rents within our markets where regard to redevelop the asset.

I'm not sure that I would use the white Plains example, that we put in our DAC, although that is a great example of.

Certainly see a nice pop in our underwriting will be.

How we can achieve a really solid 10% cash on cash yield rents there were in the low twenties.

Yes.

We will be judicious in the way, we think about that and obviously the 10% cash on cash yield is is really a requirement.

With the capital investment they've gone now to around $40, a share which is actually up pretty significantly I am not sure I would look at white claims, though that is a pretty tight market.

Understood sorry about that misunderstood that was a single example.

Austin I wanted to ask about the capitalized interest that increase pretty significantly presumably related to some of this redevelopment and just speak was there any change in the policy here.

We've done a lot of leasing with White Plains hospital, there, but but nevertheless, I think thats, maybe an extreme example of what can happen and the IRR on that would be well in excess of the 10% cash on cash yield, but we certainly see with capital getting spent the opportunity to drive rental rates I don't know if theyre going to go from 23% to 40%, but we.

To outline the capital needs here and just the decision to push these forward into redevelopment as it doesn't look like it made it into the projects that are that are under construction in the supplemental.

Peter Scott: We certainly see with capital getting spent the opportunity to drive rental rates. I do not know if they are going to go from $23 to $40, but we certainly see a nice pop. Our underwriting will be, we will be judicious in the way we think about that. Obviously, the 10% cash-on-cash yield is really a requirement.

We see a nice pop in our underwriting will be.

Yeah, Hey, good morning Austin.

Yeah.

I would highlight that if you go into the supplemental we've got almost 2 million square feet and redevelopment today.

We will be judicious in the way, we think about that and obviously the 10% cash on cash yield is is really a requirement.

On the redevelopment page, where we break out projects specifically, we only are breaking out about 650000 square feet. There. So you should assume if you read the footnote on that page, there's about one 2 million square feet.

Understood sorry about that misunderstood that was a single example.

Nick Yulico: Understood. Sorry about that. Misunderstood. That was a single example. Austen Helfrich, I wanted to ask about the capitalized interest that increased, you know, pretty significantly, presumably related to some of this redevelopment. Just speak, was there any change in the policy here? You kind of outlined the capital needs here, and, you know, just the decision to push these forward into redevelopment as it doesn't look like it made it into, you know, the projects that are under construction in the supplemental.

Austin I wanted to ask about the capitalized interest that increase pretty significantly presumably related to some of this redevelopment and just speak was there any change in the policy here.

That's not broken out on that page.

In that bucket of redevelopment projects, we have obviously been working on that since the beginning of the year and had a significant portion of those.

You've kind of outlined the capital needs here.

Just the decision to push these forward into redevelopment as it doesn't look like it made it into the projects that are that are under construction in the supplemental.

<unk> in the second quarter.

So obviously I think given that commencement you are seeing a commensurate step up in cap interest.

Austen Helfrich: Yeah. Hey, good morning, Austen Helfrich. I would highlight that if you go into the supplemental, we have almost 2 million square feet in redevelopment today. On the redevelopment page where we break out projects specifically, we only are breaking out about 650,000 square feet there. You should assume if you read the footnote on that page, there is about 1.2 million square feet that is not broken out on that page. In that bucket of redevelopment projects, we have obviously been working on that since the beginning of the year and had a significant portion of those commence in the second quarter. Obviously, I think given that commencement, you are seeing a commensurate step up in cap interest, which is what you are referring to.

Yeah, Hey, good morning Austin.

I would highlight that if you go into the supplemental we've got almost 2 million square feet and redevelopment today.

Which is what youre, referring to I will say on the page, where we are breaking out specific redevelopment projects given the strategic plan and given the focus on redevelopment over the next three years, we will start to provide additional information on that page to allow you to better see what's going on in the <unk>.

On the redevelopment page when we breakout projects specifically, we only are breaking out about 650000 square feet. There. So you should assume if you read the footnote on that page, there's about one 2 million square feet.

<unk> portfolio.

That's not broken out on that page.

How much of that should we coincide with how.

In that bucket of redevelopment projects, we have obviously been working on that since the beginning of the year and had a significant portion of those.

How much spend I guess should we coincide with that step up.

And should that continue to ramp as you kind of ramp these redevelopment efforts. Thanks.

<unk> in the second quarter. So obviously I think given that commencement you are seeing a commensurate step up in cap interest.

Yes, I think I think from here Austin, what I would tell you is given the increased level of spend that we will have in redevelopments and the increased projects that Pete spoke about earlier in the lease up portfolio I think it is.

Which is what you're referring to I will say on the page, where we are breaking out specific redevelopment projects given the strategic plan and given the focus on redevelopment over the next three years, we will start to provide additional information on that page to allow you to better see what's going on in the <unk>.

Austen Helfrich: I will say on the page where we are breaking out specific redevelopment projects, given the strategic plan and given the focus on redevelopment over the next three years, we will start to provide additional information on that page to allow you to better see what is going on in the redevelopment portfolio.

Should assume that capitalized interest stays at.

At around this level going forward. It will obviously move from quarter to quarter, just depending on development moving out or redevelopments moving in and out but I think generally around this level would be a good assumption.

<unk> portfolio.

Nick Yulico: So, how much of that should we coincide with, you know, how much spend, I guess, should we coincide with that step up? And should that continue to ramp as you kind of ramp these redevelopment efforts? Thanks.

How much of that should we coincide with how.

That's helpful. Thank you.

Thanks Austin.

How much spend I guess should we coincide with that step up.

Our next question comes from the line of John Pawlowski with Green Street. Your line is opened.

And should that continue to ramp as you kind of ramp these redevelopment efforts.

Hey, Thanks for the time good morning.

<unk>.

Austen Helfrich: Yeah. I think from here, Austen Helfrich, what I would tell you is given the increased level of spend that we will have in redevelopments and the increased projects that Peter Scott spoke about earlier in the lease-up portfolio, I think you should assume that capitalized interest stays at around this level going forward. It will obviously move from quarter to quarter just depending on development moving out or redevelopments moving in and out. But I think generally around this level would be a good assumption.

Yes, I think I think from here also what I would tell you is given the increased level of spend that we will have in redevelopments and the increased projects that Pete spoke about earlier in the lease up portfolio.

Rob I wanted to drill into the lease up portfolio, but specifically they are ready to occupy space.

Can you give me give me some historical context of why you couldn't get this occupied why was it under managed and what youre going to specifically going forward to unlock that potential.

Should assume that capitalized interest stays at around this level going forward. It will obviously move from quarter to quarter, just depending on development moving out of Redevelopments moving in and out but I think generally around this level would be a good assumption.

Yeah, Hey, John maybe I'll start with that and then I want Rob to go through the <unk> program, which we've had a lot of success on arena I went out and saw a lot of markets. This last quarter.

<unk> tend to see a lot more going forward I would like to see every single asset in the portfolio.

Nick Yulico: That's helpful. Thank you.

That's helpful. Thank you.

Austen Helfrich: Thanks, Austen.

Thanks Austin.

Operator: Our next question comes from the line of John Pawlowski with Green Street. Your line is opened.

Our next question comes from the line of John Pawlowski with Green Street. Your line is opened.

<unk>.

What I would say is that it was very clear is that went out into the market that certain assets had just been.

Nick Yulico: Hey, thanks for the time. Good morning. Rob, I wanted to drill into the lease-up portfolio, but specifically the ready-to-occupy space. Can you give me some historical context of why you couldn't get this occupied, why was it undermanaged, and what you're going to do specifically going forward to unlock that potential?

Hey, Thanks for the time good morning.

Rob I wanted to drill into the lease up portfolio, but specifically they are ready to occupy space is can you give me give me some historical context of why you couldn't get this occupied wireless under managed and what youre going to specifically going forward to unlock that potential.

Under invested into for many many years and that would be one.

Well before the merger as well.

And a lot of these assets were assets that came over as part of that merger, we own them now so they're ours right, but they clearly had not been invested into <unk> and the other thing I would say that became very clear to me in certain markets is the relationship with the health system.

Peter Scott: Yeah. Hey, John. Maybe I will start with that, and then I want Rob to go through the RTO program, which we have had a lot of success on. I went out and saw a lot of markets this last quarter, and I intend to see a lot more going forward. I would like to see every single asset in the portfolio. What I would say is that it was very clear as I went out into the market that certain assets had just been underinvested into for many, many years. That would be well before the merger as well. A lot of these assets were assets that came over as part of that merger. We own them now, so they are ours, right? They clearly had not been invested into.

Yeah, Hey, John maybe I'll start with that and then I want Rob to go through the <unk> program, which we've had a lot of success on I mean, I went out and saw a lot of markets. This last quarter.

<unk> tend to see a lot more going forward I would like to see every single asset in the portfolio.

Had deteriorated or decline to a level, where they were not supporting our assets, even if they were proximate to the hospital.

What I would say is that it was very clear is that went out into the market that certain assets had just been.

And Thats a problem when you don't have your health system and your partner in that market supporting your real estate.

Under invested into for many many years and that would be one.

We are fixing that the team has been fixing that good work has been done but there is more work to continue to do and I would say a great example of where this has turned around in Houston with our north Cypress assets I would say the relationship with HCA was fractured for many many years, we have redeveloped that campus.

Well before the merger as well.

Peter Scott: The other thing I would say that became very clear to me in certain markets is the relationship with the health system had deteriorated or declined to a level where they were not supporting our assets, even if they were proximate to the hospital. That is a problem when you do not have your health system and your partner in that market supporting your real estate. We are fixing that. The team has been fixing that. Good work has been done. There is more work to continue to do. I would say a great example of where this has turned around is in Houston with our North Cypress assets. I would say the relationship with HCA was fractured for many, many years. We are redeveloping that campus. We are actually having a lot of progress there in leasing that up.

We're actually having a lot of progress there and leasing that up and we're getting the support of the local hospital Ceos, who is actually encouraging tenants to look at our properties now as opposed to discouraging them in the past.

Ted deteriorated or decline to a level, where they were not supporting our assets, even if they were proximate to the hospital.

And that's a problem when you don't have your health system and your partner in that market supporting your real estate.

So those are really the main two drivers I mean, there's more in there Jon but I just wanted to lay out what I saw when I went out into the road that became like abundantly clear to me maybe I'll have Rob just talk about the RTL programme now yes. Thanks Pete.

We are fixing that the team has been fixing that good work has been done but there is more work to continue to do and I would say a great example of where this has turned around as in Houston with our north Cypress assets I would say the relationship with HCA was fractured for many many years, we have redeveloped that campus.

<unk> program is certainly.

It's been something that we've.

<unk> had some success within the past having more success now I think if you look at year to date.

Just a little over 100000 square feet and that program second quarter.

We're actually having a lot of progress there and leasing that up.

Significantly.

Peter Scott: We are getting the support of the local hospital CEO, who is actually encouraging tenants to look at our properties now as opposed to discouraging them in the past. Those are really the main two drivers. There is more in there, John, but I just wanted to lay out what I saw when I went out into the road that became abundantly clear to me. Maybe I will have Rob just talk about the RTO program now.

About 16%, 17% of our new leases were in coming from the <unk> program. So we are seeing some good success there the benefits come in being able to capture demand.

Getting the support of the local hospital CEO, who is actually encouraging tenants to look at our properties now as opposed to discouraging them in the past.

Some tenants who need to move quickly moving and in some cases, they want to move in that month, so having read a readily available move in ready suites is really critical for the leasing team.

I would also say that.

Austen Helfrich: Yeah. Thanks, Pete. The RTO program has certainly been something that we have had some success with in the past, having more success now. If you look at year to date, we have leased a little over 100,000 square feet in that program second quarter. It is significantly about 16% to 17% of our new leases were coming from the RTO program. So we are seeing some good success there. The benefits come in being able to capture demand from tenants who need to move quickly. In some cases, they want to move in that month. So having readily available move-in ready suites is really critical for the leasing team. I would also say that when you look at getting to cash rent and from lease execution to cash rent paying tenants, the time is significantly reduced through the RTO program.

When you look at getting to <unk>.

To a program that certainly.

That's been something that we've.

Cash rent from lease execution to cash rent paying tenants the time to significantly reduced through the <unk> program. We see generally it's about a 6% to 10 month improvement and from the time the executed lease to getting to cash paying rent. So some real benefits there.

<unk> had some success within the past having more success now I think if you look at year to date.

Just a little over 100000 square feet in that program second quarter.

Significantly.

About 16%, 17% of our new leases were in coming from the <unk> program. So we are seeing some good success there the benefits come in being able to capture demand.

The organization from a cash flow perspective, I would say is in terms of the returns on the.

<unk> program generally targeting mid mid teens IRR.

From tenants, who need to move quickly moving and in some cases, they want to move in that month, so having read a readily available move in ready suites is really critical for the leasing team.

And generally.

Targeting about seven year.

All comments on those deals so substantial.

I would also say that.

Substantial.

Returns good use of capital and a nice lease for the organization. So.

When you look at getting to <unk>.

Cash rent from lease execution to cash rent paying tenants. The time is significantly reduced through the <unk> program. We see generally it's about a 6% to 10 month improvement and from the time the executed lease to getting to cash paying rent. So some real benefits there.

Okay. Thanks for that context second question is on the pool of assets sold or in the process of selling.

Austen Helfrich: We see generally it is about a 6 to 10-month improvement from the time they execute a lease to getting to cash paying rent. So some real benefits there for the organization from a cash flow perspective. I would say in terms of the returns on the RTO program, generally targeting in the mid-teens IRRs and generally, targeting about a seven-year wall upon those deals. So substantial returns, good use of capital, and a nice lease for the organization.

I think we averaged 7% cap rate struck us as high given there are only 80% occupied so maybe our buyers will be underwriting a higher going in yield is it mostly a function of deferred capex or onerous a short while our short term ground leases.

The organization from a casualty perspective, I would say is in terms of the returns on the <unk>.

<unk> program generally targeting mid mid teens IRR and.

It's pushing those cap rates on those assets higher in terms of a stabilized stabilized cap rate.

And generally.

<unk> targeted about seven year.

Yeah, I mean, it's a variety of things, but let me.

Walt on this on those deals so substantial.

Let me have Brian Crowley spend a little bit of time on that portfolio.

Substantial.

Returns are good use of capital and a nice lease for the organization. So.

Yes, when you think about what we have under contract or LOI youre looking at over 40 different assets and nearly 20 different transactions.

Nick Yulico: Okay. Thanks for all that context. The second question is on the pool of assets you have sold or in the process of selling. I think the average 7% cap rate struck us as high given they are only 80% occupied. So maybe a buyer is going to be underwriting a higher going-in yield. Is it mostly a function of deferred CapEx or onerous or short-term ground leases? What is pushing those cap rates on those assets higher in terms of a stabilized cap rate?

Okay. Thanks for that context. The second question is on the pool of assets installed or in the process of selling.

And these assets really run the spectrum of MLP types, whether it's on campus and off campus single tenant multi tenant large small grew.

Ground lease terms of various.

Term lengths, so yes, youre right I would say there is definitely a value add component in there, but there is also some core assets in.

Undesirable markets that are sprinkled in there so.

It's pushing those cap rates on those assets higher in terms of a stabilized stabilized cap rate.

So when you think about what we're really doing the overarching theme is that we are exiting markets with weak real estate fundamentals, where we don't have scale and we don't see a path to scale.

Yeah, I mean, it's a variety of things, but let me.

Peter Scott: It is a variety of things, but let me have Ryan Crowley spend a little bit of time on that portfolio.

Let me have Brian Crowley spend a little bit of time on that portfolio.

But by and large the disposition portfolio is generally characterized by lower occupancy lower margin in older vintage and all those things play into that 7% blended cap rate you are talking about.

Austen Helfrich: When you think about what we have under contract or LOI, you are looking at over 40 different assets and nearly 20 different transactions. These assets really run the spectrum of MOB types, whether it is on-campus and off-campus, single tenant, multi-tenant, large, small, ground lease terms of various term lengths. You are right, I would say there is definitely a value-add component in there, but there are also some core assets in undesirable markets that are sprinkled in there. When you think about what we are really doing, the overarching theme is that we are exiting markets with weak real estate fundamentals where we do not have scale and we do not see a path to scale. By and large, the disposition portfolio is generally characterized by lower occupancy, lower margin, and older vintage. All those things play into that 7% blended cap rate you are talking about.

Yes, when you think about what we have under contract or LOI youre looking at over 40 different assets and nearly 20 different transactions.

And these assets really run the spectrum of MLP types, whether it's on campus and off campus single tenant multi tenant large small grew.

Okay. Thank you.

Our next question comes from the line of Oh, My Tayo Okusanya with Deutsche Bank. Your line is opened.

Ground lease terms of various.

Term lengths, so yes, youre right I would say there is definitely a value add component in there, but there's also some core assets in <unk>.

Hi, yes, good morning.

Great to see you are seeking the tables so soon.

Question around the lease up portfolio.

Undesirable markets that are sprinkled in there.

So when you think about what we're really doing the overarching theme is that we are exiting markets with weak real estate fundamentals. When we don't have scale and we don't see a path to scale, but by and large the disposition portfolio is generally characterized by lower occupancy lower margin in older vintage and all those things play into that 7% blended cap rate youre talking about.

$300 million you talked about.

Trying to understand the $50 million NOI opportunity there how much of that is just pure lease up versus.

How much of it again is kind of getting better pricing. After you reposition these assets and could any of the repositioning or redevelopment disruptive to current NOI.

Okay. Thank you.

Operator: Okay. Thank you. Our next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is opened.

Our next question comes from the line of Oh, My Tayo Okusanya with Deutsche Bank. Your line is opened.

Yes.

Nice to chat with you as well I would say.

Vast majority of the $50 million is simply just leasing up from.

Hi, Yes, good morning, Pete Great to see you are seeking the tables. So soon.

Omotayo Okusanya: Hi. Yes, good morning. Pete, great to see you shaking the table so soon. Question around the lease-up portfolio, the $300 million you talked about. Trying to understand the $50 million NOI opportunity there. How much of that is just pure lease-up versus how much of it again is kind of getting better pricing after you reposition these assets? Could any of the repositioning or redevelopment be disruptive to current NOI?

70% to 90%.

Question around the lease up portfolio, the $300 million you talked about.

But obviously getting a better rental rate is going to have some contribution to it as well, but today, we're getting nothing.

Trying to understand the $50 million NOI opportunity there how much of that is just pure lease up versus.

On those on that vacant space that we're actually absorbing all of the expenses. So the lion's share of that move is getting tenants into the space.

How much of it again is kind of getting better pricing. After you reposition these assets.

That said, we do see an opportunity to drive rate with capital that gets spent if we don't see that opportunity than what we would do is just look at selective rte OS and vacant suites right. So it's not as if the entire amount is going to come off a redevelopment I mean, as we look at redevelopment of those 95 assets we see.

Could any of the repositioning or redevelopment disruptive to current NOI.

Yes, Hey, Tayo nice to chat with you as well I would say the vast majority of the $50 million is simply just leasing up from <unk>.

Peter Scott: Yeah. Hey, Tayo. Nice to chat with you as well. I would say the vast majority of the $50 million is simply just leasing up from, you know, 70% to 90%. But obviously, getting a better rental rate is going to have some contribution to it as well. Today we are getting nothing on those, on that, you know, vacant space, and we are actually absorbing all the expenses. So the lion's share of that move is getting, you know, tenants into the space. That said, we do see an opportunity to drive rate with capital that gets spent. If we do not see that opportunity, then what we would do is just look at selective, you know, RTOs and vacant suites. So it is not as if the entire amount is going to come all from redevelopment.

About 10 that fit into the redevelopment bucket, where we think we can get the returns that we need the balance of that is really going to come through selective capital spend in the vacant suites.

70% to 90%.

But obviously getting a better rental rate is going to have some contribution to it as well, but today, we're getting nothing.

Okay. That's helpful and then Austin.

On those on that vacant space that we're actually absorbing all the expenses. So the lion's share of that move is getting tenants into the space that said, we do see an opportunity to drive rate with capital that gets spent if we don't see that opportunity than what we would do is just look at selective <unk> and <unk>.

You can help us kind of reconcile guidance again, you have a penny increase in the guidance.

You are picking up from increasing NOI.

Penny or two.

Picking up on the G&A spend about a penny or so.

Sounds like you're talking about higher capitalized interests. That's also a couple of pennies.

<unk> suites right. So it's not as if the entire amount is going to come off a redevelopment I mean, as we look at redevelopment of those 95 assets, we see probably about 10 that fit into the redevelopment bucket, where we think we can get the returns that we need the balance of that is really going to come through selective capital.

Peter Scott: As we look at redevelopment of those, you know, 95 assets, we see probably about 10 that fit into the redevelopment, you know, bucket where we think we can get the returns that we need. The balance of that is really going to come through selective capital spend in the vacant suites.

You have an offset from increased asset sales, but it still feels like you know that all kind of sums up to three or four on guidance was only increased by a penny so trying to understand the difference.

Yeah, Hey, Tayo. Thanks for the question I think you should assume that we had good insight into the capitalized interest moves at the beginning of the year and so what I would point you to from a guidance perspective is really a $4 million decrease in G&A.

Spend in the vacant suites.

That's helpful and then Austin.

Omotayo Okusanya: That's helpful. Then, Austen Helfrich, hopefully, you can help us kind of reconcile guidance. Again, you have a penny increase in the guidance. You are picking up from increased same-store NOI of, you know, a penny or two. You are picking up on the G&A spend, you know, about a penny or so. It sounds like, you're talking about higher capitalized interest that's also a couple of pennies. You have an offset from increased asset sales, but it still feels like, that all kind of sums up to 3 or 4 cents, but guidance was only increased by a penny. So trying to understand the difference.

Hoping you can help us kind of reconcile guidance again, you have a penny increase in the guidance.

Coupled with the 25 basis points increase in same store NOI and then obviously, we've taken disposition volume up half a billion dollars what I would also say.

You are picking up from increased same store NOI, a penny or two.

You are picking up on the G&A spend about a penny or so.

It sounds like you're talking about higher capitalized interests. That's also a couple of pennies you have an offset from increased asset sales, but it still feels like that'll kind of sums up to three or four on guidance was increased by a penny so trying to understand the difference.

Sure.

Tayo as we're halfway through the year Ryan and his team are very hard at work at getting through the $1 2 billion of strategic dispositions as quickly as they can we've guided $800 to $1 billion. This year, but I would say it's early in the year and there is continued timing uncertainty around.

Austen Helfrich: Yeah. Hey, Tayo. Thanks for the question. I think you should assume that we have good insight into the capitalized interest moves at the beginning of the year. What I would point you to from a guidance perspective is really the $4 million decrease in G&A coupled with the 25 basis points increase in same-store NOI. Then, obviously, we've taken disposition volume up half a billion dollars. What I would also say, Tayo, is we're halfway through the year. Ryan and his team are very hard at work at getting through the $1.2 billion of strategic dispositions as quickly as they can. We've guided $800 million to $1 billion this year, but I would say it's early in the year, and there's continued timing uncertainty around when exactly Ryan will close on dispositions in the back half of the year.

And when exactly Ryan will close on dispositions in the back half of the year. So I'd say when you put all that together.

Pleased to be able to raise a penny given the increase in dispositions and given where Ryan and his team are working to accomplish this year.

In same store NOI and then obviously, we've taken disposition volume up half a billion dollars what I would also say.

How much I appreciate it thank you and best of luck to you guys.

Thanks Tayo.

Yes.

Our next question comes from the line of Seth <unk> with Citigroup. Your line is opened.

Tayo is we're halfway through the year Ryan and his team are very hard at work at getting through the $1 2 billion of strategic dispositions as quickly as they can we guided $800 to $1 billion. This year, but I would say it's early in the year and there is continued time.

Hi, good morning, Thanks for taking my question.

What gives you the confidence you can achieve the 92% 93% occupancy given.

Occupancy has kind of trended near or at the high 80% range over the past several years is that just a function of.

Uncertainty around when exactly Ryan will close on dispositions in the back half of the year. So I'd say when you put all that together, we're pleased to be able to raise a penny given the increase in dispositions and given where Ryan and his team are working to accomplish this year.

Our go forward portfolio composition as it did.

Austen Helfrich: I'd say when you put all that together, we're pleased to be able to raise a penny given the increase in dispositions and given what Ryan and his team are working to accomplish this year.

Change in.

Structure to better align leasing and operations just if you could talk a little bit more about that.

Yeah.

I would say couple of things to that one the macro environment has improved.

Much appreciate it thank you and best of luck to you guys.

Omotayo Okusanya: Much appreciated. Thank you, and best of luck to you guys.

Austen Helfrich: Thanks, Tayo.

If you look the last five years and even the last couple of years occupancy has trended up in outpatient medical so you've got simply demand.

Hi.

Our next question comes from the line of Seth <unk> with Citigroup. Your line is opened.

Operator: Our next question comes from the line of Seth Berke with Citigroup. Your line is opened.

Hi, good morning, Thanks for taking my question.

Nick Yulico: Hi. Good morning. Thanks for taking my question. What gives you the confidence you can achieve the 92% to 93% occupancy given occupancy has kind of trended near the high 80% range over the past several years? Is that just a function of go-forward portfolio composition? Is it the change in the structure to better align leasing and operations? If you could talk a little bit more about that.

<unk> supply and I think thats something that we see.

What gives you the confidence you can achieve the 92%, 93% occupancy given occupancy has kind of trended near or at the high 80% range over the past several years is that just a function of.

For the foreseeable future. So obviously, we have that opportunity as well a couple of other things that were just mentioned we are doing a very significant revamp to our asset management.

Our go forward portfolio composition is it the change in.

Platform here.

I outlined in my prepared remarks, and we certainly see a benefit coming from that we're also disposing of assets that have historically been under occupied and as we laid out the bridge to go from the high <unk> into the low ninety's the disposition portfolio certainly plays a role so our same store occupancy.

Structure to better align leasing and operations just if you could talk a little bit more about that.

Peter Scott: Yeah. So I would say a couple of things to that. One, the macro environment has improved. If you look the last five years and even the last couple of years, occupancy has trended up in outpatient medical. So you've got simply demand exceeding supply. I think that's something that we see for the foreseeable future. So obviously, we have that opportunity as well. A couple of other things I would just mention. We are doing a very significant revamp to our asset management platform here, which I outlined in my prepared remarks. We certainly see a benefit coming from that. We're also disposing of assets that have historically been underoccupied. As we laid out the bridge to go from the high 80s into the low 90s, the disposition portfolio certainly plays a role. So our same-store occupancy today is at 90%. I think that's the highest it's been.

Yes.

So I would say couple of things to that one the macro environment has improved.

And if you look the last five years and even in the last couple of years occupancy has trended up and outpatient medical so you've got simply demand exceeding supply and I think thats something that we see.

<unk> today is at 90% I think thats the highest its been in IR.

I asked someone for the staff I think since like 2016. So it's been almost 10 years since you've seen a 90% same store number here. So I mean things are changing on their own and then obviously I've set a little bit of this in my.

For the foreseeable future. So obviously, we have that opportunity as well couple of other things that were just mentioned we are doing a very significant revamp to our asset management.

Prepared remarks, but the company was not really in a position to have free cash flow to reinvest into its assets the.

Platform here.

The balance sheet was.

Clearly a big liability.

<unk> not a source of strength and we're fixing all of those things. So I have a lot of confidence now that we have the cash flow to invest into our assets to be able to get that occupancy upside and thats something that hasn't existed for quite some time here. So I think for all those reasons, we have a lot of confidence that we can get into that $92 90.

Today is at 90% I think thats the highest its been in.

Peter Scott: I asked someone for the stat, I think since like 2016. So it's been almost 10 years since you've seen a 90% same-store number here. So things are changing on their own. Obviously, I've said a little bit of this in my prepared remarks, but the company was not really in a position to have free cash flow to reinvest into its assets. The balance sheet was really a big liability, not a source of strength. We're fixing all of those things. So I have a lot of confidence now that we have the cash flow to invest into our assets to be able to get that occupancy upside. That's something that hasn't existed for quite some time here. So I think for all those reasons, we have a lot of confidence that we can get into that 92%, 93% range over time.

I asked somewhat for the staff I think since like 2016. So it's been almost 10 years since you've seen a 90% same store number here. So I mean things are changing on their own and then obviously I've set a little bit of S and my.

3% range over time, it's not going to happen overnight, although you should see a nice incremental benefit as we get more and more of these dispositions done.

Yeah.

Prepared remarks, but the company was not really in a position to have free cash flow to reinvest into its assets the.

Thanks, and then.

<unk> talked in your opening remarks about the opportunities for expansion with some of your top tenants in a can you just provide a little bit about what that looks like is that.

The balance sheet was.

Really.

Kind of investing in the portfolio and leasing an existing space with Amazon external acquisitions.

Liability not a source of strength and we're fixing all of those things. So I have a lot of confidence now that we have the cash flow to invest into our assets to be able to get that occupancy upside and thats something that hasn't existed for quite some time here. So I think for all those reasons, we have a lot of confidence that we can get into that 92.

Just kind of what is the growth opportunity to look like with that.

Yeah, I think first and foremost, it's having our health systems expand within our existing portfolio. If there is room for that.

293% range over time, it's not going to happen.

And I think what we outlined on that slide in the strategic plan was in some cases, we can do better and I think we will do better and we've opened.

Peter Scott: It's not going to happen overnight, although you should see a nice incremental benefit as we get more and more of these dispositions done.

Overnight, although you should see a nice incremental benefit as we get more and more of these dispositions done.

Okay.

Nick Yulico: Thanks. You talked in your opening remarks about the opportunities for expansion with some of your top tenants. Can you just provide a little bit about what that looks like? Is that investing in the portfolio and leasing existing space for them? Is that external acquisitions? What does a growth opportunity look like with that?

Thanks, and then.

Communication with all of those health systems to improve upon that and I feel confident that we will gain some traction within that.

In your opening remarks about the opportunities for expansion with some of your top tenants in a can you just provide a little bit about what that looks like is that.

I don't know, Rob if you want to add anything more on to that topic.

Kind of investing in the portfolio and leasing existing space with Amazon external acquisitions.

Yes, I mean, I think I think certainly.

<unk>.

I think restructuring the platform is going to help in that area, having relationships really driving the more.

Just kind of what is the growth opportunity could look like with that.

Peter Scott: I think first and foremost, it is having our health systems expand within our existing portfolio if there is room for that. I think what we outlined on that slide in the strategic plan was, in some cases, we can do better. I think we will do better. We have opened communication with all of those health systems to improve upon that. I feel confident that we will gain some traction within that. I do not know, Rob, if you want to add anything more onto that topic.

More at the local level.

I think first and foremost, it's having our health systems expand within our existing portfolio. If there is room for that.

But I also think that.

Yeah.

The opportunities within the rehab.

And I think what we outlined on that slide in the strategic plan was in some cases, we can do better and I think we will do better and we've opened.

The lease up portfolio Theres a lot of <unk>.

Strong relationships inside of that lease up portfolio that we are going to continue to expand on and we think a lot of the.

Communication with all of those health systems to improve upon that.

The opportunities are going to be taken by the health systems I mentioned in my remarks that about a third of our leasing.

Confident that we will gain some traction within that.

It was related to health or came from our health system partners. I think we can do better than that and so I think we're going to continue to focus on that stat and drive that upwards.

I don't know, Rob if you want to add anything more on to that topic.

Austen Helfrich: I think certainly, restructuring the platform is going to help in that area, having relationships really driving more at the local level. I also think that the opportunities within the redebt and lease-up portfolio, there is a lot of strong relationships inside of that lease-up portfolio that we are going to continue to expand on. We think a lot of the opportunities are going to be taken by the health systems. I mentioned in my remarks that about a third of our leasing was related to health systems or came from our health system partners. I think we can do better than that. I think we are going to continue to focus on that stat and drive that upwards.

Yes, I mean, I think I think certainly.

<unk>.

I think restructuring the platform is going to help in that area, having relationships really driving the.

Great. Thanks.

More at the local level.

Our next question comes from the lineup Juan Sanabria with BMO capital markets. Your line is open.

But I also think that.

Yeah.

The opportunities within the rehab.

Alright, thanks for the time.

The lease up portfolio Theres a lot of <unk>.

It's just not the.

Strong relationships inside of that lease up portfolio that we are going to continue to expand on and we think a lot of the.

Piggybacking off of titles prior question with regards to dispositions in the earnings.

How should we think about the exit run rate because it seems like some of the disposition dilution won't necessary.

The opportunities are going to be taken by the health systems I mentioned in my remarks that about a third of our leasing.

Fully factored into this year's increased <unk> guidance.

It was related to helps US came from our health system partners I think we can do better than that and so I think we're going to continue to focus on that stat and drive that upwards.

As part of that could you talk about the.

The next leg of cost cutting and what that's what's driving that.

Okay, Yes.

Great. Thanks.

Nick Yulico: Great. Thanks.

Let me, let me start with that.

Operator: Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is opened.

Our next question comes from the line of Juan Sanabria with BMO capital markets. Your line is opened.

Look we've been spending a lot of time first of all one square to talk with you.

We've been spending a lot of time going through.

Alright, thanks for your time.

Omotayo Okusanya: Hi. Thanks for the time. Just maybe piggybacking off of Omotayo Okusanya's prior question with regards to dispositions and the earnings. How should we think about the exit run rate? It seems like some of the disposition dilution will not necessarily be fully factored into this year's increased FFO guidance. As part of that, could you talk about the next leg of cost cutting and what is driving that?

It's just not the.

The platform and savings within the platform, it's a little bit of what I would call just pure blocking and tackling.

Piggybacking off of <unk>. Prior question with regards to dispositions in the earnings.

And so we've started heavily on the G&A side.

How should we think about the exit run rate because it seems like some of the disposition dilution won't necessary.

I think we are pretty pleased that we've been able to identify we said we thought we could find about three pennies of savings to help offset some of the dilution as we want to get the balance sheet into a better spot.

Fully factored into this year's increased <unk> guidance.

As part of that could you talk about the kind of the next leg of cost cutting and what that.

We've been able to do that right, it's not easy and those are tough conversations to have with people but.

What's driving that.

Okay, Yes.

Peter Scott: Yeah. Let me start with that. Look, we have been spending a lot of time. First of all, Juan, it is great to talk with you. We have been spending a lot of time going through the platform and savings within the platform. It is a little bit of what I would call just pure blocking and tackling. We have started heavily on the G&A side. I think we are pretty pleased that we have been able to identify, we said we thought we could find about three pennies of savings to help offset some of the dilution as we want to get the balance sheet into a better spot. We have been able to do that. It is not easy. Those are tough conversations to have with people. But everybody, I think here, understands that we have got an objective and we know where we want to go.

Let me, let me start with that.

Everybody I think here understands that we've got an objective and we know where we want to go.

Look we've been spending a lot of time first of all wants great to talk with you.

With regards to additional savings we will certainly continue to look for that I think most of that will come at the property level right, which will certainly help from a margin perspective.

We've been spending a lot of time going through.

The platform and savings within the platform, it's a little bit of what I would call just pure blocking and tackling.

As we complete the dispositions, we look at the stabilized plus the lease up portfolio and if you look at the chart in there there is some references to the total amount of <unk>.

And so we've started heavily on the G&A side.

Employees within the platform and that number.

Coming down I would say that's not the biggest driver of.

Margins improving that certainly helps.

We've been able to do that right. It's not easy those are tough conversations to have with people but.

Improve those margins, but really the biggest driver of margins improving is going to be from.

Everybody I think here understands that we've got an objective and we know where we want to go.

Occupancy, increasing and Thats, where our focus is going to shift. So we certainly have some additional cost savings opportunities, but really what's going to drive that.

Peter Scott: With regards to additional savings, we will certainly continue to look for that. I think most of that will come at the property level, which will certainly help from a margin perspective. As we complete the dispositions, we look at the stabilized plus the lease-up portfolio. If you look at the chart in there, there are some references to the total amount of employees within the platform and that number coming down. I would say that is not the biggest driver of margins improving. That certainly helps improve those margins. But really, the biggest driver of margins improving is going to be from occupancy increasing. That is where our focus is going to shift. We certainly have some additional cost savings opportunities, but really what is going to drive the path to FFO growth is going to come through lease-up and revenue growth.

With regards to additional savings will certainly continue to look for that I think most of that will come at the property level right, which will certainly help from a margin perspective.

Path to <unk> growth is going to come through lease up and revenue growth.

One it's also sturdy.

As we complete the dispositions, we look at the stabilized plus the lease up portfolio and if you look at the chart in there there is some references to.

Maybe ill just touch on your disposition I think at the beginning of that you had a question around disposition timing as well.

The total amount of <unk>.

Yes, more just the run rate given the acquisitions are going to be back half loaded and how you'll exit the year from our perspective music in your revised guidance yes.

Employees within the platform and that number.

Coming down I would say that's not the biggest driver of.

Margins improving that certainly helps.

Yes that makes sense I would I would point you to page 28 of the strategy presentation. One just.

Improve those margins, but really the biggest driver of margins improving is going to be from.

Give you some insight into this on the dispositions line item here, we give you the $1 2 billion at a 7% cap rate.

Occupancy, increasing and Thats, where our focus is going to shift. So we certainly have some additional cost savings opportunities, but really what's going to drive the path to <unk> growth is going to come through lease up and revenue growth.

You should expect that.

We are selling assets at that 7% cap rate to pay down debt at approximately 5%. We have given you. The six <unk> of estimated dilution off of the 25 revised guidance it would be safe to assume that we would assume the vast majority of that <unk> is going to impact 2026.

One it's also sturdy.

Austen Helfrich: Juan, it's all.

Omotayo Okusanya: Thank you, sir.

Austen Helfrich: Maybe I will just touch on your disposition. I think at the beginning of that, you had a question around disposition timing as well.

Maybe I'll just touch on your disposition I think at the beginning of that you had a question around disposition timing as well.

Omotayo Okusanya: Yeah. More just the run rate given the acquisitions are going to be back half loaded of how you will exit the year from an FFO perspective vis-à-vis your revised guidance.

Yes, just the run rate given the acquisitions are going to be back half loaded on how you'll exit the year from a <unk> perspective.

To the extent that we close on additional asset sales in 2006, I would expect it to be earlier in the year and so I think it is a good assumption to include that full <unk> impact in your 26 numbers.

Perspectives vis vis your revised guidance.

Austen Helfrich: Yeah, that makes sense. I would point you to page 28 of the strategy presentation, Juan, just to give you some insight into this. On the dispositions line item here, we give you the $1.2 billion at a 7% cap rate. You should expect that we are selling assets at that 7% cap rate to pay down debt at approximately 5%. We have given you the six pennies of estimated dilution off of the 25 revised guidance. It would be safe to assume that we would assume the vast majority of that $0.06 is going to impact 2026. To the extent that we close on additional asset sales in 2026, I would expect it to be earlier in the year. I think it is a good assumption to include that full $0.06 impact in your 2026 numbers.

Yes that makes sense I would I would point you to page 28 of the strategy presentation. One just.

Give you some insight into this on the dispositions line item here, we give you the $1 2 billion at a 7% cap rate you should expect that.

Perfect. Thanks, and then just.

Okay.

Just on the capital spend on the lease up some of which sounds like it's Reid add some.

His first Gen, which is now not included in <unk> could you just.

Give us a breakdown of us to drive that lease up occupancy higher the different buckets of capex and what will be kind of lumpy in <unk>.

That makes sense.

To the extent that we close on additional asset sales in 2006, I would expect it to be earlier in the year and so I think that is a good assumption to include that full <unk> impact in your 2006 numbers.

Yes, I think it's a good question one if you look at redevelopment and the RTI.

<unk> fall into first Gen capital and then obviously, we break out the redevelopment.

Separately, so I would I would assume that the vast majority of that 300 million will not be included in maintenance capital.

Perfect. Thanks, and then just.

Omotayo Okusanya: Perfect. Thanks. Then just on the capital spend on the lease-up, some of which sounds like it is redebt, some of it is first gen, which is now not included in SAD. Could you just give us a breakdown of like to drive that lease-up occupancy higher to different buckets of CapEx and what will be and kind of won't be in SAD, if that makes sense?

Okay.

Just on the capital spend on the lease up some of which it sounds like its readout.

<unk>.

Thank you.

First Gen, which is now not included inside could you just.

Our next question comes from the line of Michael Gorman with <unk>. Your line is opened.

Give us a breakdown of of <unk>.

To drive that lease up occupancy higher the different buckets of Capex and what will be kind of won't be in.

Yeah. Thanks, Good morning, Pete could you spend just a minute on kind of the core portfolio you talked about our focus being maximizing lease economics, and maybe give us some context.

If that makes sense.

Yes, I think it's a good question one if you look at redevelopment and the R. R.

Austen Helfrich: Yeah, I think it's a good question, Juan. If you look at redevelopment and the RTO, RTOs fall into first-gen capital. Then, obviously, we break out the redevelopment separately. So, I would assume that the vast majority of that $300 million will not be included in maintenance capital.

With the new organizational structure and with kind of the refined focus maybe what the opportunity set there is from the lease escalator perspective, or the lease spread perspective to kind.

<unk> fall into first Gen capital and then obviously, we break out the redevelopment.

Drive incremental growth out of that 75% that really represents kind of a core of the HR platform yes.

Separately, so I would I would assume that the vast majority of that 300 million will not be included in maintenance capital.

Yes, it's good question, Michael because I think that's gonna pizza to biggest growth engine and the biggest driver of earnings going forward.

Yeah.

Thank you.

Omotayo Okusanya: Thank you.

Our next question comes from the line of Michael Gorman with <unk>. Your line is opened.

Operator: Our next question comes from the line of Michael Gorman with BTIG. Your line is opened.

One of the things that actually was encouraging when I was out seeing the real estate is.

I'm not saying, we're getting this in every lease but in some leases were actually getting escalators all the way up to <unk> to 4% you look back three five years ago escalators were kind of in that two 5% range and didn't move for a long long time, they started to trend up to 3% I think three is absolutely the norm.

Yeah. Thanks, Good morning, Pete could you spend just a minute on kind of the core portfolio you talked about our focus being maximizing lease economics, and maybe give us some context.

Nick Yulico: Yeah. Thanks. Good morning. Pete, could you spend just a minute on the core portfolio? You talked about a focus being maximizing lease economics and maybe give us some context that with the new organizational structure and with the refined focus, maybe what the opportunity set there is from the lease escalator perspective or the lease spread perspective to drive incremental growth out of that 75% that really represents the core of the Healthcare Realty Trust platform.

With the new organizational structure and with kind of the refined focus maybe what the opportunity set there is from the lease escalator perspective, or the lease spread perspective to kind of drive incremental growth out of that 75% that really represents kind of a core of the HR platform yes.

Unless a tenant has.

Lease extension option Orient bedded in with a fixed.

Escalator.

If they don't have that and we're getting 3% or better and every single deal and we've actually started to talk about can we push that even further.

Peter Scott: Yeah, it's a good question, Michael, because I think that's going to be the biggest growth engine and the biggest driver of our leasing going forward. One of the things that actually was encouraging when I was out seeing the real estate is, I am not saying getting this in every lease, but in some leases, we are actually getting escalators all the way up to 4%. You look back three, five years ago, escalators were kind of in that 2.5% range and did not move for a long, long time. They started to trend up to 3%. I think 3% is absolutely the norm today unless a tenant has a lease extension option already embedded in with a fixed escalate. If they do not have that, then we are getting 3% or better in every single deal.

Yes.

Good question, Michael because I think that's gonna pizza to biggest growth engine and the biggest driver of earnings going forward.

The other thing I would say is.

One of the things that actually was encouraging when I was out saying the real estate is.

That portfolio being 95% occupied we certainly don't want to keep retention really really high because capital spend and downtime is actually would really impact. Your go forward earnings trajectory, so keeping that portfolio of fully occupied pushing on retention and then obviously when youre in.

I'm not saying, we're getting this in every lease but in some leases, we're actually getting escalators all the way up to 4% you look back three five years ago escalators were kind of in that two 5% range and didn't move for a long long time, they started to trend up to 3% I think three is absolutely the norm.

95% range I think pushing on cash leasing spreads is important as well. So it's really a combination of all those but I think pushing on the escalators Moore is something that we're going to continue to work on and see if we can have some success with that.

Unless a tenant has a.

Our lease extension option already embedded in with a fixed.

Escalator.

If they don't have that and we're getting 3% or better and every single deal and we've actually started to talk about can we push that even further.

Peter Scott: We have actually started to talk about, can we push that even further? The other thing I would say is that portfolio being 95% occupied, we certainly want to keep retention really, really high because capital spend and downtime is actually what really impacts your go-forward earnings trajectory. Keeping that portfolio fully occupied, pushing on retention. And then, obviously, when you are in the 95% range, I think pushing on cash leasing spreads is important as well. It is really a combination of all those. But I think pushing on the escalators more is something that we are going to continue to work on and see if we cannot have some success with that.

Yeah.

That's helpful. Thanks, and then maybe a question for Ryan.

The other thing I would say is that.

That portfolio being 95% occupied.

Can you just give us a sense for as you look at the pipeline of dispositions.

We certainly want to keep retention really really high because capital spend and downtime is actually would really impact. Your go forward earnings trajectory, so keeping that portfolio of fully occupied pushing on retention and then obviously when you are in that 95% range I think pushing on cash.

Sure.

Given the volatility we've seen year to date.

Leverage sensitive are the buyers that are coming in and looking at these assets.

Or are these more cash buyers owner occupants whats the composition of the buyer pool here for those dispositions.

Yes, it's a great question, Mike and given the breadth of what we're doing it really runs the gamut, but I would say is that today. There is more buyers and more equity looking to be deployed and there are assets available for sale frankly, our beta rosters, we've seen them deeper here on.

Leasing spreads is important as well so it's really a combination of all those but I think pushing on the escalators Moore is something that we're going to continue to work on and see if we can have some success with that.

That's helpful. Thanks, and then maybe a question for Ryan.

Austen Helfrich: That's helpful. Thanks. Then maybe a question for Ryan. Can you just give us a sense for, as you look at the pipeline of dispositions, given the volatility we've seen year to date, how leverage-sensitive are the buyers that are coming in and looking at these assets? Or are these more cash buyers, owner-occupants? What's the composition of the buyer pool here for those dispositions?

Recent deals than we have in recent years.

A lot of competitive bidding in the later rounds of our transaction processes and that drives up pricing.

Can you just give us a sense for as you look at the pipeline of dispositions.

So as we work through this large disposition portfolio.

Given the volatility we've seen year to date.

Leverage sensitive are the buyers that are coming in and looking at these assets.

It's about finding the right properties for the right buyer.

And the private investors operators to partner in recent years with a lot of new institutional equity that's coming to our space.

Or are these more cash buyers owner occupants whats the composition of the buyer pool here for those dispositions.

Ryan Crowley: It is a great question, Mike. Given the breadth of what we are doing, it really runs the gamut. What I would say is that today there are more buyers and more equity looking to be deployed than there are assets available for sale. Frankly, our bid rosters, we have seen them deeper here on recent deals than we have in recent years. We are seeing a lot of competitive bidding in the later rounds of our transaction processes, and that drives up pricing. As we work through this large disposition portfolio, as always, it is about finding the right property for the right buyer. The private investors, the operators, they have partnered in recent years with a lot of new institutional equity that has come into our space. That equity is continuing to look to flow into outpatient medical.

Yes, it's a great question, Mike and given the.

Equities continue to look to flow into an outpatient medical.

Breadth of what we're doing it really runs the gamut.

Over the last several quarters the financing market has been accretive to going in cap rates, we've seen banks really step up today, they're eager to lend we've seen compression on the spreads and we've seen good movement on the base rates and today, if you're looking at financing a deal that you're acquiring from us.

I would say is that today, there is more buyers and more equity is looking to be deployed and there are assets available for sale frankly, our beta rosters, we've seen them deeper here.

On recent deals than we have in recent years.

We're seeing a lot of competitive bidding in the later rounds of our transaction processes and that drives up pricing.

It's five six to the low sixes on an all in rate, which again is accretive to the going in cap rates cap rates today, we're seeing deals go off in the high fives to the to the 7% range for stabilized assets you could see typically in that six five.

As we work through this large disposition portfolio.

As always it's about finding the right properties for the right buyer and the private investors operators.

Partner in recent years with a lot of new institutional equity that's coming to our space.

Cap rate range, but one of the more interesting observations we've had as well.

Net equities continue to look to flow into the outpatient medical.

As we've been progressing through the dispositions through the year as a real increase in health system MLB acquisition activity.

Ryan Crowley: Over the last several quarters, the financing market has been accretive to going-in cap rates. We have seen banks really step up. Today, they are eager to lend. We have seen compression on the spreads, and we have seen good movement on the base rates. Today, if you are looking at financing a deal that you are acquiring from us, it is 5.6% to the low 6s on an all-in rate, which again is accretive to going-in cap rates. Cap rates today, we are seeing deals go off in the high 5s to the 7% range for a stabilized asset. You could see typically in that 6.5% cap rate range. One of the more interesting observations we have had as we have been progressing through the dispositions through the year is a real increase in health system MOB acquisition activity.

Over the last several quarters the financing market has been accretive to going in cap rates.

We've seen banks really step up today, they are eager to lend we've seen compression on the spreads and we've seen good movement on the base rates and today, if you're looking at financing a deal that you are acquiring from US. It's five six to the low sixes on an all in rate, which again is accretive to the going in cap rates.

Activity.

Proportion of deals that we're going to health systems has more than doubled when you look at the transactions volume over the last two years and what's interesting about the health systems.

Their decision, making is less about price, it's more about long term strategy and control over an asset and frankly, that's constructive to our disposition pricing. So we're doing direct deals with health systems. We're doing marketed deals that are broker driven we're maximizing price and finding the right buyers.

Cap rates today, we're seeing deals go off in the high fives to the to the 7% range for stabilized assets you could see typically in that six and a half.

GAAP rate range, but one of the more interesting observations we've had.

And there is no shortage of buyers out there.

Okay.

As we've been progressing through the dispositions through the year as a real increase in health system MLB acquisition offers.

That's really helpful. Thank you for the time guys.

Thanks, Michael.

Our next question comes from the line of John Kim with Koski with Wells Fargo. Your line is open.

Activity.

Ryan Crowley: The proportion of deals that were going to health systems has more than doubled when you look at the transactions volume over the last two years. What is interesting about the health systems is their decision-making is less about price. It is more about long-term strategy and control over an asset. Frankly, that is constructive to our disposition pricing. We are doing direct deals with health systems. We are doing marketed deals that are broker-driven. We are maximizing price and finding the right buyers. There is no shortage of buyers out there.

Proportion of deals that we're going to health systems has more than doubled when you look at the transactions volume over the last two years.

Good morning.

Great work on the strategic plan team.

What's interesting about the health systems.

First question for me is on just on the G&A savings I know there is roughly $5 million, that's kind of identified but could you maybe help me bucket sort of that that second tranche of savings into or maybe the entirety of it into already achieved or identified but not achieved and then maybe you get to identify and give us sort of a.

A timeline on that three year plan and when you expect to achieve that savings.

And there is no shortage of buyers out there.

Okay.

Yeah, Hey, John It's Austin, Let me, let me bucket this starting with the G&A savings that we have already identified and I would say carried out the actions necessary to achieve that is the $10 million of initial savings that we spell out in the strategy presentation.

That's really helpful. Thank you for the time guys.

Nick Yulico: That's really helpful. Thank you for the time, guys.

Peter Scott: Thanks, Michael.

Thanks, Michael.

Our next question comes from the line of John Kim with Koski with Wells Fargo. Your line is opened.

Operator: Our next question comes from the line of John Kilichowski with Wells Fargo. Your line is opened.

Nick Yulico: Thank you. Good morning. Great work on the strategic plan team. My first question is just on the G&A savings. I know there is roughly $5 million that has kind of been identified. Could you maybe help me bucket that second tranche of savings, or maybe the entirety of it, into already achieved or identified but not achieved? Then maybe you have to identify and give us a timeline on that three-year plan and when you expect to achieve that savings?

Good morning.

Great work on the strategic plan team.

We will have achieved $5 million of that this year and.

First question for me is on just on the G&A savings I know, there's roughly $5 billion, that's kind of identified but could you maybe help me bucket sort of that that second tranche of savings into or maybe the entirety of it into already achieved or identified but not achieved and then maybe yet to identify and give us sort of a.

And we expect to capture the remaining $5 million next year.

You then look at page 28 of our three year growth plan.

We are highlighting another $5 million to $10 million in additional saves beyond the $10 million of G&A that I, just outlined I think it would be safe to assume that $5 million to $10 million will be embedded more on the property operating expense side as Pete mentioned the majority of the increase in margin at the.

A timeline on that three year plan and when you expect to achieve that savings.

Peter Scott: Yeah. Hey, John. It's Austen Helfrich. Let me bucket this starting with the G&A savings that we have already identified and I would say carried out the actions necessary to achieve. That is the $10 million of initial savings that we spell out in the strategy presentation. We will have achieved $5 million of that this year, and we expect to capture the remaining $5 million next year. If you then look at page 28 of our three-year growth plan, we are highlighting another $5 million to $10 million in additional saves beyond the $10 million of G&A that I just outlined. I think it would be safe to assume that $5 million to $10 million will be embedded more on the property operating expense side. As Peter Scott mentioned, the majority of the increase in margin at the properties will be driven by occupancy.

Properties will be driven by occupancy, but with the asset management platform.

And new leadership, we do believe there are some opportunities to achieve some additional savings in there as well, but I would expect that to be more split over the next three years.

We will have achieved $5 million of that this year and.

And we expect to capture the remaining $5 million next year.

Got it. Thank you and then maybe on the same store performance. The same store cash NOI growth is running still well ahead of the midpoint of your new revised upward guidance.

You then look at page 28 of our three year growth plan.

Curious how much of that is just youre seeing better demand for your product and better leasing up versus maybe this is also part of the call and process of those noncore assets.

It's a really good question, John I am going to be really specific on this which is just to your last point the assets that were sold during the quarter had only about a 30 basis point impact on our same store. So we were right at five either way I would say if you look under the surface.

Our properties will be driven by occupancy, but with the asset management platform and new leadership. We do believe there are some opportunities to achieve some additional savings in there as well, but I would expect that to be more split over the next three years.

Peter Scott: But with the asset management platform and new leadership, we do believe there are some opportunities to achieve some additional savings in there as well. But I would expect that to be more split over the next three years.

Got it. Thank you and then maybe on the same store performance. The same store cash NOI growth is running still well ahead of the midpoint of your new revised upward guidance.

Nick Yulico: Got it. Thank you. On the same-store performance, the same-store cash NOI growth is running still well ahead of the midpoint of your new revised upward guide. I am curious how much of that is just you are seeing better demand for your product and better leasing up versus maybe this is also part of the culling process of those non-core assets.

It is happening is the 100 basis points year over year increase in occupancy is really starting to pull into that same store NOI growth in the first quarter I talked about some difficult comps, but I think as we get into second quarter. This is what I would say much more reflective of what I would expect from the business given the year over year occupant.

Curious how much of that is just youre seeing better demand for your product and better leasing up versus maybe this is also part of the call and process of those noncore assets.

See increases that we're seeing I do think to your earlier question. Our same store growth year to date is three 9%, obviously thats a little bit above where our guidance. Our revised guidance is for the year. What I'd say is we're halfway through the year. We've got a lot of leasing is still to do this year. So we'll see how things play out.

Peter Scott: It's a really good question, John. I'm going to be really specific on this, which is just to your last point, the assets that were sold during the quarter had only about a 30 bps impact on our same store. So we were right at 5 either way. I would say if you look under the surface, what is happening is the 100 bps year-over-year increase in occupancy is really starting to pull into that same-store NOI growth. In the first quarter, I talked about some difficult comps. I think as we get in the second quarter, this is what I would say much more reflective of what I would expect from the business given the year-over-year occupancy increases that we're seeing. I do think to your earlier question, our same-store growth year to date is 3.9%.

Third quarter and update you that yeah, and the one thing I would add to that John I mean, obviously as you look at the.

Three year framework that we put out in the deck.

It's got 3% to 4%.

AOI growth embedded within it.

I'm searching for the 3% to 4% I know some of the numbers you've seen it had been at 5%. If we can do better great, but but the baseline that we set out was the 3% to 4%.

See increases that we're seeing I do think to your earlier question. Our same store growth year to date is three 9%, obviously, that's a little bit above where our guidance. Our revised guidance is for the year, let's say as we're halfway through the year. We've got a lot of leasing is still to do this year. So we'll see how things play out.

We're working hard to achieve that.

Okay very helpful and just last one for me I know you've already talked a ton about this today, but just on as we think about capex and the focus on the <unk> I'm just kind of curious how I should think about the cadence of capex as a percentage of NOI going forward here.

Peter Scott: Obviously, that's a little bit above where our guidance, our revised guidance is for the year. What I'd say is we're halfway through the year. We've got a lot of leasing still to do this year. So we'll see how things play out in the third quarter and update you then.

Third quarter and update you that yeah, and the one thing I would add to that John I mean, obviously as you look at the.

Nick Yulico: Yeah. The one thing I would add to that, John, obviously, as you look at the three-year framework that we put out in the deck, it has 3% to 4% NOI growth embedded within it. I am searching for the 3% to 4%. I know some of the numbers you have seen have been at 5%. If we could do better, great. But the baseline that we set out was the 3% to 4% when working hard to achieve that.

Yeah, Austin do you want to take that yes, I think.

John It would be a fair assumption I answered this a little bit earlier, but just to put a fine point on it. The <unk> program is really I think what many people will call spec suite program, which is going to fall into and does fall into our first generation Ti bucket and then the capital for redevelopment will obviously flow through the redevelopment bucket. So I think from.

Three year framework that we put out in the deck.

It's got 3% to 4%.

Ground's embedded within it.

I'm searching for the 3% to 4% I know some of the numbers you have seen a 5% if we can do better great, but but the baseline that we set out was the 3% to 4%.

Maintenance capital perspective, it would be fair to look at our year to date experience and assume that's a reasonable starting place looking forward but.

We're working hard to achieve that.

Peter Scott: Okay. Very helpful. Just last one for me. I know, Pete, you have already talked a ton about this today. As we think about CapEx and the focus on the RTO plan, I am kind of curious how I should think about the cadence of CapEx as a percentage of NOI going forward here.

Maybe.

That didn't answer your question entirely.

All the right facts I would just.

Your question might just be how should we model the $300 million getting spent I mean, I think the R&D I'll probably get spent.

Nick Yulico: Austen, you want to take that?

Yeah, Austin do you want to take that yes, I think.

Austen Helfrich: I think, John, it would be a fair assumption. I answered this a little bit earlier, but just to put a fine point on it, the RTO program is really, I think, what many people call a spec suite program, which is going to fall into and does fall into our first-generation TI bucket. The capital for redevelopment will obviously flow through the redevelopment bucket. So I think from a maintenance capital perspective, it would be fair to look at our year-to-date experience and assume that is a reasonable starting place looking forward.

John It would be a fair assumption I answered this a little bit earlier, but just to put a fine point on it. The <unk> program is really I think what many people call spec suite program, which is going to fall into and does fall into our first generation Ti bucket and then the capital for redevelopment will obviously flow through the redevelopment bucket. So I think from.

Ratably over three years and I think the read out is probably the best assumption today is it's probably more of a ratable spend but if we can accelerate that a little bit because we've talked about $20 million to $40 million of the 50 in our framework I would like to get as much of that as we can.

But I think the way we initially thought about it is spending that over three years.

Maintenance capital perspective, it would be fair to look at our year to date experience and assume that's a reasonable starting place looking forward but.

And if there is an opportunity to accelerate it right, but I think for modeling purposes, I'd, probably look at that $300 million at $100 million each year for the next three years.

Peter Scott: But maybe that didn't answer your question entirely. I know that those are all the right facts. Your question might just be, how should we model the $300 million getting spent? I think the RTO will probably get spent ratably over three years. I think the redebt, probably the best assumption today is it's probably more of a ratable spend. But if we can accelerate that a little bit, because we talked about $20 million to $40 million of the $50 million in our framework, I'd like to get as much of that as we can. But I think the way we initially thought about it is spending that over three years. If there's an opportunity to accelerate it, great. But I think for modeling purposes, I'd probably look at that $300 million at $100 million each year for the next three years.

Maybe.

That didn't answer your question entirely.

Got it very helpful. Thanks, guys, yeah. Thanks, Jonathan.

Those are all the right facts I would just.

Your question might just be how should we model the $300 million getting spent I mean, I think the R&D I'll probably get spent.

Our next question comes from the line of Mike Mueller with Jpmorgan. Your line is opened.

Yes, Hi, I have a couple of questions, but a quick clarification first problem. When you were talking about 75 to 125 basis points of <unk>.

Leasing absorption in 25 was that overall occupancy same store occupancy multi tenant occupancy.

Metric that was poor.

Yes, that's the same store.

But I think the way we initially thought about it is spending that over three years and if there's an opportunity to accelerate it right, but I think for modeling purposes, I would probably look at that $300 million is a $100 million each year for the next three years.

Occupancy gain guide that we gave for this year.

Okay. So thats overall okay.

And then I guess when we're looking at the three year <unk> target of 165 to 185, what are the biggest.

Nick Yulico: Got it. Very helpful. Thanks, guys.

Got it very helpful. Thanks, guys.

Peter Scott: Yeah. Thanks, John.

Thanks, Jonathan.

Moving parts between the top and the bottom end of those of the range.

Okay.

Operator: Our next question comes from the line of Mike Mueller with JPMorgan. Your line is opened.

Our next question comes from the line of Mike Mueller with Jpmorgan. Your line is opened.

Yes, yes. Good question, Mike I think on page 28, we try to give you some of kind of what I'll call. The.

Ryan Crowley: Yeah. Hi. I have a couple of questions, but a quick clarification first. Rob, when you were talking about 75 to 125 bps of leasing absorption in 2025, was that overall occupancy, same-store occupancy, multi-tenant occupancy? What was the metric that was for?

Yes, Hi, a couple of questions, but a quick clarification first Rob when you were talking about 75 to 125 basis points of absorb leasing absorption in 25 was that overall occupancy same store occupancy multi tenant occupancy metric.

Sure.

Goalposts here for either side I would say I think some of the biggest things that we'll look to drive is the biggest number if you look across this page right as the annual NOI growth that Pete touched on earlier for the base portfolio, so driving that compounding cash flow growth of 3% to 4% in the portfolio.

Metric that was poor.

Yes, that's the same store.

Peter Scott: That's the same-store occupancy gain guide that we gave for this year in the same store.

Occupancy gain guide that we gave for this year.

Ryan Crowley: Okay, so that's overall.

Okay. So thats overall.

Peter Scott: Yeah.

The closer we can be to for the bigger that delta becomes and there's obviously an enormous amount of spread there in terms of the compounding over three years I think the second is how quickly can we achieve the $50 million of upside in the lease up portfolio from a redevelopment perspective that can take time for that number to hit so how.

Ryan Crowley: What are the biggest moving parts between the top and the bottom end of the range when we are looking at the three-year NFFO target, $1.65 to $1.85?

And then I guess when we're looking at the three year <unk> target at $1 65 to 185, what are the biggest moving parts between the top and the bottom end of those put the range.

Yes, yes. Good question, Mike I think on page 28, we tried to give you some of kind of what I'll call. The.

Peter Scott: Yeah. Good question, Mike. I think on page 28, we try to give you some of what I will call the goalpost here for either side. I would say I think some of the biggest things that we will look to drive is the biggest number, if you look across this page, is the annual NOI growth that Pete touched on earlier for the base portfolio. So driving that compounding cash flow growth of 3% to 4% in the portfolio, the closer we can be to 4%, the bigger that delta becomes. There is obviously an enormous amount of spread there in terms of the compounding over three years. I think the second is how quickly can we achieve the $50 million of upside in the lease-up portfolio? From a redevelopment perspective, that can take time for that number to hit.

<unk> falls into that three year period, we're going to be working as hard as we can but that will be a little bit of a spread as well I think from the disposed and other things that we've laid out those things kind of are what they are.

No.

<unk>.

Goalpost here for either side I would say I think some of the biggest things that we'll look to drive is the biggest number if you look across this page right is the annual NOI growth that <unk> touched on earlier for the base portfolio, so driving that compounding cash flow growth of 3% to 4% in the portfolio the claw.

And the math is what it is at this point based on the strategic plan. So I would kind of point to those two top side items and obviously.

Mike as you know everyone's going to model.

Our refinancing rates.

So we can be to for the bigger that delta becomes and there's obviously an enormous amount of spread there in terms of the compounding over three years I think the second is how quickly can we achieve the $50 million of upside in the lease up portfolio from a redevelopment perspective that can take time for that number to hit so how much fall.

In some way and we laid out what we think the sort of bookends are with a little bit of cushion on the low end and the high end I mean, we have zero control over that at this point in time.

So obviously that could change and there is nothing that we can obviously do about it.

Obviously, we'd be fans of rates.

Peter Scott: So how much falls into that three-year period? We are going to be working as hard as we can, but that will be a little bit of a spread as well. I think from the dispos and other things we have laid out, those things kind of are what they are. The math is what it is at this point based on the strategic plans. I would kind of point to those two top side items.

Into that three year period, we're going to be working as hard as we can but that will be a little bit of a spread as well I think from the disposed and other things that we've laid out those things kind of are what they are.

Declining I think everyone in REIT land would say that'd be fantastic, but we don't have any control over that but we did lay out what we thought were kind of the bookends today and that could change tomorrow.

Got it okay. That's good thank you.

The math is what it is at this point based on the strategic plans I would kind of point to those two top side items and obviously my.

Yeah. Thanks, Mike Thank you.

Our next question comes from the line of Tayo Okusanya with Deutsche Bank. Your line is opened.

Nick Yulico: Mike, as you know, everyone is going to model our refinancing rates in some way. We laid out what we think the sort of bookends are with a little bit of cushion on the low end and the high end. We have zero control over that at this point in time. That could change, and there is nothing that we can do about it. We would be fans of rates declining. Everyone in REIT land would say that would be fantastic, but we do not have any control over that. We did lay out what we thought were kind of the bookends today, and that could change tomorrow.

Nick as you know everyone's going to model our refinancing rates.

Okay.

In some way.

And we laid out what we think the sort of bookends are with a little bit of cushion on the low end and the high end I mean, we have zero control over that at this point in time.

Thanks for taking my follow up I, just wanted Hello, Yeah, Hey, Tayo.

Just a quick follow up just curious what your thoughts are in regards to the.

So obviously that could change and there is nothing that we can obviously do about it.

The one the big beautiful bill and potential positive or negative implications for for medical office buildings.

Obviously, we'd be fans of rates.

Climbing I think everyone in REIT land would say that'd be fantastic, but we don't have any control over that but we did lay out what we thought were kind of the bookends today and that could change tomorrow.

Yeah. That's a good question I think.

The short answer is probably it's still a little.

Got it okay. That's good thank you.

Ryan Crowley: Got it. Okay, that's good. Thank you.

Too soon for us to know exactly what's going to happen, we actually met with one of our larger health systems.

Nick Yulico: Thanks, Mike.

Yeah. Thanks, Mike Thank you.

Peter Scott: Thank you.

Earlier, this year and she conceded that theyre still getting their arms around what exactly this means.

Operator: Our next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is opened.

Our next question comes from the line of Tayo.

Okay Sanya with Deutsche Bank. Your line is opened.

So I would say.

Okay.

Probably too soon to tell our initial reaction to it is like a lot of these changes.

Thanks for taking my follow up I was just wondering Hello, Yeah, Hey, Tayo.

Omotayo Okusanya: Thanks for taking my follow-up. I just wanted to hello.

Peter Scott: Yeah. Hey, Tayo.

It tends to indirectly have a benefit on the outpatient model and that's something that has not changed for a long time and I think theyre charts that show that that's been happening for many many years just given that the profitability inside of our buildings versus inside of the hospital what hospitals could be most affected by this we have talked about.

Omotayo Okusanya: Hey. Just a quick follow-up. Just curious what your thoughts are in regards to the one, the big beautiful bill and potential positive or negative implications for medical office buildings.

Just a quick follow up just curious what your thoughts are in regards to the.

The one the big beautiful bill and potential positive or negative implications for for medical office buildings.

Yeah. That's a good question I think.

Peter Scott: Yeah, I mean, that is a good question. I think the short answer is probably it is still a little too soon for us to know exactly what is going to happen. We actually met with one of our larger health systems earlier this year, and she conceded that they are still getting their arms around what exactly this means. I would say, you know, probably too soon to tell. Our initial reaction to it is, like a lot of these changes, it tends to indirectly have a benefit on the outpatient model. That is something that has not changed for a long time. I think there are charts that show that that has been happening for many, many years, just given the profitability inside of our buildings versus inside of the hospital. What hospitals could be most affected by this? We have talked about that as well.

The short answer is probably it's still a little.

That as well.

Too soon for us to know exactly what's going to happen, we actually met with one of our larger health systems.

And I think that the rural hospitals are probably the ones that will struggle. The most with the Medicaid cost, we really are not impacted at all by that.

Earlier, this year and she conceded that theyre still getting their arms around what exactly this means.

Just given where our assets are geographically located so it's a good question Tayo, we're continuing to monitor it and outside of that there's obviously been some cm.

So I would say.

Probably too soon to tell our initial reaction to it is like a lot of these changes.

CMS.

It tends to indirectly have a benefit on the outpatient model and Thats something that has not changed for a long time and I think theyre charts that show that that's been happening for many many years just given that the profitability inside of our buildings versus inside of the hospital what hospitals could be most affected by this we have talked about.

<unk> that have been out there on site neutrality, that's come up a little bit and again I'll just reiterate the point I said before which is that to me feels more like a real benefit to the outpatient model as doctors can choose the site, where they would like that procedure to happen. They don't just have to have the default at the half.

That as well.

And again, we see that as a demand driver for our space as well and I think a lot of our other peers have been saying the same thing as well. So it's a really good question, we're continuing to monitor it but I don't look at it as having an impact necessarily on our business.

Peter Scott: I think the rural hospitals are probably the ones that will struggle the most with the Medicaid cuts. We really are not impacted at all by that, just given where our assets are geographically located. So it is a good question, Tayo. We are continuing to monitor it. Outside of that, there has obviously been some CMS proposals that have been out there on, you know, site neutrality. That has come up a little bit. Again, I will just reiterate the point I said before, which is, that to me feels more like a real benefit to the outpatient model as doctors can choose the site where they would like that procedure to happen. They do not just have to have the default at the hospital. Again, we see that as a demand driver for our space as well.

And I think that the rural hospitals are probably the ones that will struggle. The most with the Medicaid cuts, we really are not impacted at all by that.

Just given where our assets are geographically located so it's a good question Tayo, we're continuing to monitor it and outside of that there's obviously been some.

Yes.

Great. Thank you thanks Kyle.

And there are no further questions at this time I would like to hand the call back.

CMS.

Proposals that have been out there on site neutrality, that's come up a little bit and again I'll just reiterate the point I said before which is that to me feels more like a real benefit to the outpatient model as doctors can choose the site, where they would like that procedure to happen. They don't just have to have the default at the half.

Peter Scott: I think a lot of our other peers have been saying the same thing as well. So it is a really good question. We are continuing to monitor it, but I do not look at it as having an impact necessarily on our business.

Yes.

Omotayo Okusanya: Great. Thank you.

Great. Thank you thanks Kyle.

Peter Scott: Thanks, Tayo.

Operator: There are no further questions at this time. I would like to hand the call back over to Peter Scott for some closing remarks.

And there are no further questions at this time I would like to hand, the call back over to Pete Scott for some closing remarks.

Peter Scott: Perfect. Thanks very much. Thanks for everyone for joining the call. We put a lot out. We appreciate you digesting it all and asking some great questions on this call. We look forward to seeing all of you as we get out into the market and do a lot more IR work this quarter. We look forward to seeing you in the upcoming months. Thanks very much.

Perfect. Thanks, very much and thanks for everyone for joining the call. We put a lot out we appreciate you're digesting at all and asking some great questions. On this call. We look forward to seeing all of you as we get out into.

Into the market and do a lot more IR work this quarter. So we look forward to seeing you in the upcoming months, thanks very much.

Operator: This concludes today's conference call. You may now disconnect.

This concludes today's conference call you may now disconnect.

Yeah.

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