Healthcare Realty Trust Inc (HR) 2016 Q4 法說會逐字稿

Good morning, and welcome to the Healthcare Trust of America's 2016 fourth-quarter and year-end earnings conference call. All participants will be in listen-only mode.

(Operator Instructions)

After today's presentation, there will be an opportunity to ask questions. (Operator Instructions)

Please note this event is being recorded.

I would now like to turn the conference over to Mary Jensen, Vice President, Capital Markets. Please go ahead.

Thank you. Welcome to Healthcare Trust of America's 2016 fourth-quarter and year-end conference call.

Yesterday we filed our earnings release and our financial supplement after the close. These documents can be found on the Investor Relations section of our website or with the SEC.

Please note this call is being webcast and will be available for replay for the next 90 days. We will be happy to take your questions at the conclusion of our prepared remarks.

During the course of this call we will make forward-looking statements. These forward-looking statements are based on the current beliefs of management and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and factors beyond our control or ability to predict.

Although we believe that our assumptions are reasonable, they are not guarantees of future performance. Therefore, our actual future results could materially differ from our current expectations. For a detailed description on some potential risks please refer to our SEC filings which can be found in the Investor Relations section of our website.

I will now turn the call over to Scott Peters, Chairman and CEO of Healthcare Trust of America. Scott?

Good morning. And thank you for joining us today for Healthcare Trust of America's fourth-quarter and year-end 2016 earnings conference call. Joining me on the call today are Robert Milligan, our Chief Financial Officer; Amanda Houghton, our Executive Vice President of Asset Management; and Mark Engstrom, our Executive Vice President of Acquisitions.

I am proud to say that 2016 was another successful year for HTA. Our management team continued to execute on our business plan. We continued to improve our enterprise value through our national asset management and leasing platform, and we produced strong results for our shareholders.

2016 was HTA's 10th year as a company and 5th year on the New York Stock Exchange. Our long-term performance as a dedicated MOB company has been very consistent. We have reduced over 185% in total returns since we were founded, and more than 10% per year through last Friday.

For the five-year period since we listed in 2012 we have averaged 3.1% same-store cash NOI growth, which has led the sector and has not benefited from any development related lease-up. During that same period we have grown our normalized FFO per share by over 54% or 9% per annum. We have accomplished this performance by remaining extremely disciplined and focused on maximizing shareholder returns.

As we look to 2017, the medical office sector continues to be an attractive place to invest.

We believe that the path delivery models in healthcare are no prediction of the future. Old and established paradigms are changing, and smart investors will need to adapt to generate consistent long-term growth for the future.

Some examples of this is, number one, the demand for healthcare is increasing rapidly as Americans get older, with over 10,000 individuals turning 65 every day. Millennials are reaching an age where they are forming families and spending more and more discretionary dollars on healthcare. We believe both these trends will continue to drive healthcare spending for the next 5, 10, 15 years.

We also believe these demographic groups have strong preferences for convenience, accessibility, and affordability in their healthcare destinations, and the providers and healthcare systems are reacting to these methods in a forward-looking trend.

The US healthcare system is still extremely expensive which is forcing healthcare systems and physician practices to focus on cost-efficient outpatient care. Most investors focus on the provider side of the equation, but it is important to note that payers, or large health insurers, are accelerating this cost effective process by focusing their resources on moving care to outpatient and off-campus locations.

Insurers are increasingly buying provider networks, physician, and surgery center groups to control care and costs. In fact, UnitedHealthcare is now the largest employer of physicians in the US with over 17,000 employed doctors.

And finally, technology advancements are allowing more and more services and procedures to be provided in outpatient settings, many away from the hospital campus. For instance, full hip and knee replacements can now be done off campus. These settings are generally more profitable for the independent physicians, and these changes will certainly impact campus-based healthcare in the future.

With these dynamics in mind, our investment philosophy at HTA is focused on maximizing our asset management platform to drive growth by investing in 20 to 25 markets that have attractive healthcare and real estate demographics. Generally places where millennials will live, highlighted by strong academic university presence. These markets generally have high levels of household income growth, population and job growth, strong infrastructure platforms, and finally, wealthy baby boomers.

Two, assets that are core critical and located in the best position for healthcare delivery. These MOBs are certainly on or around hospital campuses. However, this also includes off-campus core community outpatient MOBs which we define as multi-tenanted medical office buildings that have significant visibility, are within a healthcare clutter of assets, and are located close to attractive patient populations.

Three, properties with a mix of leading health care providers and specialties that feed off each other generating synergies, referrals, and great traffic patterns. This mix ensures long-term stability of leasing.

As a company we believe the following characteristics will set us apart and allow us to outperform for investors and healthcare providers alike. One, efficient property management. Generate critical core mass in our markets. Two, regional and local leasing teams that are in these markets and who understand the local dynamics and understand the local tenants. Three, aggressive but disciplined growth. Stick to our markets, generate critical core mass and generate efficiencies. And four, maintaining a strong and flexible balance sheet which provides capital sources for future growth while maintaining low leverage which allows flexibility for long-term performance.

This investment philosophy has generated results. In 2016 we generated the highest earnings in our company history, $225 million of normalized funds from operations, or $1.61 per share. We accomplished this by effectively operating our portfolio which generated 2.9% of annual same-store NOI growth. Investing in over $700 million of medical office buildings and expanded our presence in our key markets and grew our portfolio by approximately 20%.

Three, continue to access the capital markets through debt and equity transactions with extremely strong execution, raising long-term capital that load our leverage and lengthen our maturities, leaving us as we enter 2017 with below 30% levered balance sheet. And finally, all these options allow us for significant flexibility going into 2017.

From an operating perspective, 2016 we grew our same-store cash NOI by 2.9% led by a 2.4% increase in base rent, accounting for 2.7% NOI growth with the remaining 20 basis points of growth coming from our 80 basis points in margin expansion. Within the space, we have uniquely been able to lower our operating expenses each of the last several years.

While we are proud of this performance, this is understandably raised questions from investors and analysts seeking additional details. To aid in this question we have published a more detailed annual look at our expenses for properties we have owned for the last three years on our website. As you can see, we have lowered expenses across the board with totals averaging 2% per year. Robert can discuss this more in detail.

As we move forward we remain focused on margin expansion opportunities and believe these can continue as we move forward in our key markets, generate critical mass, integrate our 2016 acquisitions, and continue to add properties in our Gateway cities.

Our total occupancy remained relatively flat, ending at 91.9%. Tenant retention came in at 80% across 1.4 million square feet, or 9% of our portfolio that expired in 2016. This is despite the net loss of 60,000 square feet of space from the resolution of the Forest Park Dallas bankruptcy which occurred in third-quarter of 2016.

Now I would like to provide you with a quick update on the Forest Park MOBs. As you know, we own three medical office buildings. One on Frisco campus and two on the Dallas campus. Both owned fee simple without any ground lease restrictions.

At Frisco we own one 90,000 square foot, fee simple MOB attached to the hospital located in the middle of the Frisco square development. HTA acquired the Frisco hospital in the first quarter of last year and our MOB has remained full, with 96% currently leased on long-term leases. With the transition we entered into new or replacement leases on 45,000 square feet of space and should be fully physically occupied by the end of the second quarter, an extremely good result for shareholders.

At the Dallas campus, where we have two fee simple MOBs totaling almost 200,000 square feet, during the second quarter last year HTA and medical city subsidy invested $135 million to purchase the Dallas campus. HTA is still in process of determining the appropriate specialty and the appropriate brand for this new campus given its proximity to the main medical city campus across the street. At the end of 2016 this campus -- these MOBs were [76]% leased which included 66,000 square feet of new or replacement leases that were signed in the third- and fourth-quarter of this year.

For 2017 we have 23% or 46,000 square feet of the campus rolling. However, as in Frisco, during this transition we find our leasing pipeline is full with over 100,000 square feet of unique proposals issued and outstanding as of today. Given the critical location the pipeline consists of a majority of non-HTA or HCA affiliated physicians. Again, very good for our MOBs.

Not all of these will close but the activity is strong, leading us to anticipate that we will see the campus 75% to 90% leased in the next 6, 12, 14 months. Again, a very strong result for shareholders.

While this hospital disruption was clearly not part of our underwriting, this leasing performance demonstrates several key factors in our acquisition discipline. Location and physical quality are key, and owning buildings free of land lease encumbrances allows for complete control in leasing decisions when unexpected situations arise. Again, a very fortunate and profitable process for investors.

Turning to acquisitions, we invested over $700 million in 55 MOBs within our core Gateway markets such as Connecticut, Mission Viejo, and Texas, totaling 2.5 million square feet, representing just under $284 per square foot, average cap rate north of 6%.

Our disposition program focuses on noncore, non-MOB asset sales. We sold six noncore senior care facilities for $40 million generating net gains of approximately $9 million, allowing us to reinvest these proceeds in more attractive MOB assets.

Finally, as we look to 2017 we remain positive on the sector and our business, and we continue to raise the bar on our execution.

Our rent rollover in 2017 is around 11%, an increase from the 6% to 8% we have averaged since listing. We expect tenant retention will remain in the mid-80s for the rest of the year. Given the increased rent rollover and it's potential impact on the timing of cash rent commencements of expected new leasing, we expect our same-store growth to be in the 2% to 3% range for this year.

From a cash perspective, our GAAP same-store NOI growth will likely remain steady at 2% given the impact of straight line rent. From an acquisition standpoint, we will remain disciplined and look to invest within our key markets where we can drive additional synergies and critical mass across our operating platform to drive performance.

As we have discussed, we are well capitalized and positioned to provide quality medical office solutions for our tenants and consistent performance for our shareholders who have come to rely on the stability and consistency of our performance.

I will now turn the call over to Robert Milligan.

Thanks, Scott.

We had a very consistent 2016, highlighted by solid operating performance, investments in key markets, and strengthened investment grade balance sheet.

From an earnings perspective fourth quarter normalized FFO per diluted share was $0.41, an increase of 5.1% per diluted share compared to the fourth-quarter 2015. Overall normalized FFO increased over 17% to $59.5 million as compared to the prior year. The increase in year-over-year normalized FFO was primarily driven by our same-store cash NOI growth of 2.1%, and NOI derived from the strong investment activity over the last several years.

For the year, our normalized FFO per diluted share was an HTA record of 1.61 per share, a 5% increase over 2015. Total normalized FFO increased 15% to $225 million.

From an operating perspective we grew our same-store cash NOI by 2.9% for both fourth quarter and the full year. In the fourth quarter, which includes all properties acquired through the third-quarter of 2015, our NOI growth was driven by a 2.6% increase in base revenue which falls entirely to the bottom line.

Our expenses for the comparative period actually increased based on higher utility spending and some late full-year 2016 property tax increases. However, since we true up our expenses and recoveries quarterly from a GAAP perspective the impact on overall NOI was relatively small.

Occupancy in our same-store portfolio remained around 92% demonstrating the continued stickiness of our tenants and actually increased 20 basis points from the end of the third quarter. Tenant retention that period was 80%, although releasing spreads increased around 1%. Tenant improvements increased slightly on a per square foot basis to $2 per year of term on renewals and $4 per year of term on new leases.

Physician consolidation is driving larger space requirements and allowing us to refresh older smaller spaces with new capital. Pre rent remains very low, at less than one month per year of term.

For the full year our same-store cash NOI, which includes properties acquired through the end of 2014, also increased 2.9%. This was driven by a 2.4% increase in base revenue and a $500,000 improvement in operating margins as we drove expenses 1.1% percent lower. Our expense savings and operating efficiencies have been unique in the medical office sector.

For this reason, we published a full three-year look on our operating expenses and impact on recoveries. This includes property that we owned at the end of 2013 and continue to hold in our operating portfolio today. As you can see we have driven cost efficiencies across the board reducing expenses by $3.6 million or approximately 2% per annum in each of the last two years.

We've accomplished this in a few ways. First, we've internalized third-party property management in many markets. This is mostly seen in the reduction of our external management fees as we move the properties in-house. As we move forward we will continue to generate savings as we buy properties, then take them over from the developers and third-party property managers that often times stay in place for a short period post-acquisition.

Second, we have established operating standards for our portfolio that are more efficient than local owners generally have. This includes standard preventative maintenance and continued monitoring and configuration of our building systems to gain efficiencies that can be seen in the reductions in our maintenance and utilities costs.

Third, as we focus on acquiring and gaining critical mass in key markets, this allows us to achieve economies of scale across our platform, extending our property management company and engineers to cover additional properties as we grow in the markets. Accordingly we realize efficiencies and maintenance and administration line items.

Fourth, we use our national platform to continuously lower costs across all markets including in telecom, insurance, and other such supplies. And lastly, we've invested capital to modernize our buildings and improve their energy efficiency.

Overall we've invested over $13 million in this type of capital since we listed to improve energy manage system, HVAC upgrades, more efficient and longer lasting LED lightings, and building envelope sealing. These increase our building utility efficiencies.

Overall these savings we're achieving not only improve our margins in the short term but also benefit our tenants by reducing the costs that are required to pay under their leases and ultimately allow us to be competitive in our markets by giving us more potential for growth in our rental rates.

As Scott touched on earlier, during the past year we acquired over $700 million of medical office buildings located in key markets, totaling 2.5 million square feet, the largest year for us since we listed in 2012. We were able to achieve this growth given ready access to the capital markets which allowed us to invest while simultaneously raising attractive, long-term capital and actually lowering our leverage for the year. Despite growing our medical office portfolio by more than 20%, our balance sheet is in great shape as a direct result of this capital market execution.

We have low leverage, a 29% debt to market cap, and 5.7 times adjusted debt to EBITDA, higher liquidity, and fewer near term debt maturities than we started the year with. Our debt is now very well-laddered, with less than $100 million coming due before 2019, with an average overall maturity schedule of six years.

G&A for the period was $7.1 million for the quarter, up slightly from $7.3 million last quarter. For the year, G&A totaled $28.8 million. Increase in both periods were primarily related to increases in non-cash stock compensation issued in 2017 along with management contracts.

During the quarter, G&A remained very low as a percentage of total revenues, coming in for the year around 6.2%, down sequentially from 2015 and 2014, and what appears to be over 200 basis points lower than our direct peers. In addition, we have done this without development to offload our corporate overhead.

I will now turn it back to Scott for final remarks.

Thank you, Robert.

And operator, we can open up for questions.

(Operator Instructions) Our first question comes from Michael Knott of Green Street Advisors. Please go ahead.

Hey, guys. Just wondering if you can comment on any thoughts that you are seeing in the marketplace, leasing marketplace, among systems, et cetera, about any uncertainty related to Affordable Care potential repeal.

Good morning. Good afternoon for the East Coast.

Right now, based on our leasing, from what we are seeing, we have not. I have not seen, and I don't think any of our leasing folks in our markets have indicated that they have seen anything substantial or even a deal, perhaps, that has been pulled back based upon what we're seeing or the uncertainty that we're seeing in the Affordable Care Act.

I think there is a consensus among folks that we talk to that the modifications that will come out of the changes in Washington will be somewhat minor, meaning that everybody will tend to be covered. Perhaps more usage, which was a problem issue with the Affordable Care Act as it moved through the last year and a half.

More folks using it, lower premiums, higher credits, healthcare systems getting more early usage in the year versus late. And I think again there's a consensus that the change is going to be far more consistent with what we have than anything that would be a substantial and complete start from scratch.

Okay. That's helpful. Thanks. Scott, on the comment that the mid-80s% tenant retention for 2017. That is a bit of a relief, just given that the lease expiries are a little bit higher this year than they've been before.

Just wanted to know if you can give a little more color on the 2% to 3% commentary on same-store NOI growth for cash basis. Sounds like it could be a little lumpy. Do you expect any quarters where it would be below 2, but round up to 2, or do you think it will be inside of that 2% to 3% range? Just any more color on that would be helpful.

Sure. We've been very consistent. In fact, we've been consistent to a fault over the last three or four years. And that consistency has really been in huge, large part based upon the three core fundamentals associated with getting to that same-store growth.

A big part of that, as you remember, we've talked about the last couple of years, is the low rollover that we've had from a portfolio perspective. This year we do have a little more rollover, which I think is good and bad.

The good news is that we get to I think, have an opportunity to move some rent. We get to have an opportunity to expand some spaces for folks that have wanted additional space. I look for that renewal rollover rate to be in the mid-80s.

We're already, as a company, I would say, 85% to 90% already engaged with, not engaged with, but have spoken to and pretty clear intentions for folks that are renewing in 2017. So we're pretty comfortable with where we're at.

I think that to sum up your view of the ebbs and flows, there may be a little more ebb and flow in our same-store growth, 2.5 to 3.5, but I wouldn't condition that there would be one whole percent, or it wouldn't drop below two. We're just very consistent from a portfolio perspective, especially as we continue to see the activity at Forest Park. That would actually be a benefit for us if that accelerated more than what we've conservatively put into our numbers.

Last one from me and I will jump back in the queue, but I know you guys have talked over the last couple years about 93% to 94% range on occupancy as a target, if I recall correctly. Just curious if you have any updated thoughts there and maybe what the top range for multi-tenant would be, embedded in whatever range you are talking about today, our target goal.

I continue to feel that you look at some of our peers, they're in the mid-90s, and I think that that's a huge compliment to them. A strongly positioned asset or a community core asset that is a campus with synergies to it fundamentally should be in that mid 90, 94, 95% range. We see it in our stronger assets. We certainly see it in our stronger markets.

Our multi-tenanted assets -- we've been pushing rates and we have been reducing concessions which toward the end of last year, that push fundamentally probably cost us a little bit of occupancy. There is that -- there is a correlation between how aggressive you want to move certain people versus what type of occupancy you want to get.

Our goal as a company, and our goal as an asset management platform, is to be in that 94% to 95% range, and I think we're going to continue to strive for that. We're up to about 92%. We would be better -- we would be much better than that if, again, the Forest Park transition hadn't hit us at the middle of 2016 at Frisco.

It continues to transition because the folks that were there before are not necessarily the folks that want to be there moving forward. That's the transition that goes on with an asset such as that. So I look for us to continue to gain momentum and continue to move that occupancy, but I think it is a matter of being disciplined and ensuring that you are getting the right rates, the right concessions.

Every lease we look at, we're really looking at returns. What are we getting from our invested dollars? We want to make sure that we're maximizing shareholder return, not just giving away capital in order to get a carried interest or someone paying us back for three or four years from incremental over GIs that you might give them.

So we're still confident that we can continue to move up over the next two to three years.

Thanks. I guess Amanda has got her work cut out for her. Thanks.

the next question comes from Jonathan Hughes of Raymond James. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. And thanks for the disclosure on the expense savings, Robert. I found that very helpful.

So a few weeks ago the HCA mentioned they were seeing some increased competition for their outpatient properties and some movement of physicians from one center to another. Are you guys seeing any similar trends within your portfolio? And then are there any specific markets that concern you in terms of new supply deliveries over the next 12 to 18 months?

I think that there is still that competition within the marketplace. We're a strong believer that the paradigm of the past 15 years in medical office, and in healthcare systems, and in physician practices is not the focus of the future.

Technology is having such a huge play, and insurance companies are continuing to pushy efficiencies in pricing. You saw it with the hip and knee folks now being able to move off campus. You see it in the major gateway cities where accessibility to the patient is becoming extremely critical to the healthcare system. Most cases in large gateway cities that have a lot of infrastructure, the hospital is the last place that folks want to get to.

So there is that continued movement, and I think that you are going to see that continued movement as we see what the healthcare systems of the United States looks like over the next 10 years. So I think that HCA is probably seeing those types of trends continuing to move.

Competition or markets that we're concerned with -- Phoenix has done a much better job from a market perspective. I have perhaps mentioned in the past that I have felt that Phoenix was a slower market to either have adapted to the Affordable Care Act or to have perhaps had physician practices start to consolidate. Phoenix is still, like Miami in Florida, there are sole practitioners, there are two or three folks that still manage.

We're seeing that trend now change. We're seeing more activity in our Phoenix markets. We've had larger spaces that have been looked to be leased. We've had bigger expansion from existing practices. So we like the Phoenix market better than we have in the past.

There are some markets we would like to get into. I think the markets we're in we like to be in. We like the fact that we like Indy, we like Columbus.

We probably would be very selective in secondary markets in the Midwest. I don't see a continued population inflow in secondary markets in the Midwest. Maybe in Texas you see secondary markets and you continue to see inflow of population and continue to see inflow of millennials, but you're not seeing that in some of the cities -- like there were opportunities in Akron and Cleveland and Youngstown, and even Cincinnati. You look at and you might say "I need to be very selective."

But we like the Gateway cities. We have looked at several. I think in 2017 we will continue to start investing in and getting critical mass in certain locations that we're excited about.

Okay. Any west coast markets on your radar given? Given some limited exposure there now, it seems like Seattle, San Francisco might fit the mold of wealthy boomers in growing cities that are attractive to millennials.

Well, we've been vocal. It's interesting. Three, four years knew, one listened to us, and now people actually listen.

But we like Seattle. We wanted to get to Seattle, but Seattle went to a sub 5 based on some of our peer competition. We actually got outbid, and it actually run into one of our peers on a couple of assets. They went lower than what we were prepared to do. They've got some substance there and maybe that was their decision process.

San Francisco, another expensive market. We got a 575 in Mission Viejo that I think is every bit as good as critical real estate as anything that you would find in those two markets we just talked about. So we got 100 basis points probably better than you would have gotten some other stuff, and we got it fee simple with no ground lease restrictions.

So putting $175 million out in that type of location, we would like to duplicate that, but you've got to be very selective, I think, where you go and what you pay because ultimately it is a ten-year return game. The value you pay and the same-store growth you get, the capital you need to put into the asset, the restrictions you may or may not have on the campus, the campus's energy or synergies that are associated with who they're attracting to campus, that all plays out on your returns.

As we've mentioned and we continue to mention, our goal is to continue over the next 10 years to have the type of performance that we've had over the last 10, and it starts with what you pay and continues with what capital you put in and getting good and strong returns for that capital, and then continuing to get the same-store growth on your leases, especially when they roll over.

So we like the West Coast. I think you -- it's all discretionary. Where will you get the best value for the dollar that you're putting out?

I'll just ask one more and jump off, but could you give us some color on maybe the pipeline of deals you are looking at in terms of size, cap rates, who are the sellers? And then if any of these have circled back from before the election, and maybe they fell through after November?

We're starting to see a little more activity. My perception had been over the last five years I would say that the end of December and the first part of January, a lot was done at the end of last year. And I think last year was a very, very productive year from a sales perspective and an acquisition perspective for folks in the MOB space.

So we have seen more, now that it's February, middle of February. We certainly have seen some opportunities. We're very focused on markets that we're in. If there's five acquisitions out there, there's probably maybe only two of those that probably fit the market that we're in, fit the discipline that we want, and a lot of our stuff that we're finding is really relationships that are coming over a period of one or two years.

I do think it is going to be a very strong year, or a strong year ago gain for MOB space given everything, if it stays relative, if interest rates go significantly higher, I think that that would put a detriment -- there will be a pause because folks should figure out if that pause is going to relate to cap rates. But I think MOB continues to be a very sought after place for investment dollars vis-a-vis office, or vis-a-vis just the stability you can get with the macroeconomic trends that we continue to see in our leasing pipeline.

Okay. Cap rates kind of low 6 range, still not seeing any movement there?

I'm not sure that cap rates have moved much. I think that you saw some transactions at the end of last year that frankly were startling. If you looked at a couple of the larger transactions, then would you say, all right, how do I look at this vis-a-vis some other transactions that might be available? You would think that cap rates will stay in that 5 to 7 range, 5 to 6.5 range. I think you might even get sub 5s.

We've seen in that certain situations where folks are getting benefits they feel comfortable with from that particular asset or that particular market or where they're trying to continue to group and get a critical mass. So we haven't seen cap rates move yet.

Again, if you look at where things are and so forth, if things stay about where they are, I wouldn't expect that you would see a lot of movement. In fact, you might actually see some continued movement down in certain markets where the strength of the medical space or the strength of the healthcare systems are producing very strong same-store growth on your leasing.

Okay. That's it for me. Thanks guys. Appreciate it.

The next question comes from Tayo Okusanya of Jefferies. Please go ahead.

Yes, good afternoon, everyone. Congrats on the good quarter.

Question. You did make some comments just in general about your acquisition outlook. Based on those comments, is it fair to extrapolate that you think acquisition volume in 2017 could be similar to 2016? Or I shouldn't go that far?

I think that -- first and foremost I don't think you should go that far this early. It's very hard -- it's always been our policy that guidance is a very hard thing.

I think that anyone that can see six months or nine months or 12 months down the road as it relates to the utilization of capital, that's a difficult thing to do. And I think it puts a management team in a box in some situations, because the expectation is different than the execution. And there are decisions that are made that might not be made if one isn't pushed into that corner.

We've always said, and I think our balance sheet represents that we want to move into a year, and every year we've done this, 2015, 2016, 2017, we've actually been less levered moving into the next year than the year before.

In 2016 we did something that I thought was extremely prudent. We bought assets but we matched it with equity, and then at the same time we turned out debt, which has now pushed us off. One of our weaknesses moving into 2016, I felt, was the length of some of our maturities.

As we moved into this time last year, the 10-year was supposed to move up to three, and the marks, the bond markets were a little expensive. So we were patient, and then we were able to take some execution midyear. And I think that was very good for us.

I would say, Tayo, that we have flexibility in our balance sheet to be able to execute on very good opportunities in our markets that are going to add synergies to our platform. You add that with our dividend, you add that with our growth in our same-store, you get a very solid representation of what HTA's baseline is. And then we'll make decisions, then we'll make the execution options to say, is the market looking for us to make good investments and continue to keep the company extremely balanced from our equity perspective.

So again, I like where we are. I think we have options to continue to provide good earnings for shareholders, but I think that we're not in any corner, and I wouldn't want to put us in any corner with some outlandish expectation since we're so early in the year.

Got you. That's helpful. And then could you just talk a little bit about your tenant improvements and leasing costs for renewal spaces? It did go up in 4Q versus 3Q? Could you just talk a little bit about would caused that increase, whether it's mix or something of that nature?

And then could you also give us your tenant improvement and leasing costs for new leases? And we'll get a general sense of how that's been trending, as well.

From a tenant improvement on renewal cost, you know, we tend to see the larger tenant improvement really going to the larger tenants that in many cases are expanding and reconfiguring suites, where you're going from two or three smaller suites consolidated to make a larger suite. We've had a couple of examples of those deals get signed.

On the positive front you get a larger tenant, you get a refreshed space, somebody that's really going to anchor the building for a longer period of time, but it does take a little bit more dollars to knock the walls down and things like that. That's generally where we've seen some of the tenant improvement dollars increase slightly on that.

From a new leasing perspective, TIs, I will pull that up here in a second, but we have seen the new leasing really be pretty consistent. It's tended to be in the $4 to $5 per square foot per year of term. That hasn't changed materially over the last two or three years. I think it has fluctuated between $4 and $5 per year of term, depending on the location and depending on really kind of the consolidation of this space, kind of a similar concept.

Got you. That's helpful. Thank you.

The next question comes from Rich Anderson of Mizuho securities.

Are you guys going to still expense acquisition costs with the FASB pronouncement guidance: starting in 2018 REITs are no longer obligated or should be doing that, they should be capitalizing those costs? Are you going to start that prematurely or are you going to wait until 2018 to do that?

Rich, we're evaluating that right now. Obviously it came out kind of late in the year, but we'll see would most REITs are doing and make a decision on that standpoint.

Okay. That's good enough. Scott, you talked a little bit about occupancy potential out of your portfolio. HR on their call today said -- I don't know if they used the term functional vacancy, but for the multi-tenant side, people are below 90% there just because of the granular nature of the asset class. Do you disagree with that? Do you think multi-tenant, despite its moving parts, can also exist in the 90%s, and are you there now within that side of your portfolio?

Three questions, and I'll give you three pretty forthright answers.

One, I think that I do disagree with that general concept. I think that an occupancy within a multi-tenanted building that is on a campus, community core campus, or a multi-tenanted building that's on a great campus next to a hospital. What we're seeing is we're seeing a lot of energy in those buildings.

If you do have someone move out, you have someone backfilling. If you have someone moving out, you have someone expanding. We were just talking about one of our buildings here in Phoenix where someone wants to take expansion space of 1500 square feet and we've got someone backfilling that immediately, and that building is 98% occupied. And it's one of our best buildings here in Phoenix.

We have that example in Raleigh where we have some space that does that. Again I think it's the critical core -- nature of the building. Now, some buildings that are on campus, there's just not the activity that allows that to happen. And I think that's perhaps what they're referring to is there's some cases where the campus isn't being enough synergies being generated, but I don't think that that is a -- necessarily a function of the MOB space. So I would like to think that our multi-tenanted building bought right, tenanted right, in the right locations can continue to be in that mid-90% range on a consistent basis.

Are they there now?

We're not quite there now, no. I think we're consistent to where they are. Robert might know the actual number.

We're -- our multi-tenant is close to 89% when you look at it and compare it to the single-tenant buildings. When we look at it, to Scott's comments, if you take out really two or three campuses or locations or things like that on a multi-tenanted side, the vast majority of multi-tenanted buildings are in that 93%, 94% occupancy. I think we've got a handful of locations that kind drag that down.

I think that's our view. The strong buildings, as we look across our portfolio certainly are in the 95%.

And I think, Rich, to take it a step farther, and I think Robert hit it right on the head. And Amanda is doing this and we're doing this as part of our budgeting process, is that if a building isn't in the 90%s, that's something that management should understand why.

Whether it's an issue with location, whether it's an issue with type of tenancy, whether it's an issue with price. What is it, because you should try to get those buildings, those campuses into the 90&s. Robert is right. Where we have a strong presence, strong assets, strong synergies, strong tenants, predominantly we're in the 90%s.

And just a couple -- one, two-part tore close out. I do, of course, appreciate the expense breakout. I think universally helpful for everyone, just a couple of questions.

First on the administrative bucket, that number was one that caught may eye the most. What is in administrative? Is that like offsite property management? Is that what that would be?

That's typically our internal property manager costs that are in there. As we've talked about before, you really get that -- drive that lower a couple of different ways. First of all as we expand within the market, this is a concept you hit on last time, we're able to allocate a single property manager further, or a group of property managers further across multiple assets, which then makes it a more cost effective solution certainly for us and for tenants. That's really what goes into that administrative bucket is primarily the property management costs.

Okay. And a then the last question, you mentioned $13 million investment that you made over the past three years to improve technology and how the buildings run and all that sort of stuff. Those are capitalized costs, though, is that correct?

That's correct.

And that goes back a little further. I think we looked at the total capital spending really back to when we listed. So it does go back a little further but that's upgrading HVAC units, it's putting energy management systems in, all things that we as buyers, institutional owners, when we buy assets, they're not often really managed by institutional -- other institutional owners.

So there is that ability to put in the right kind of capital to drive that efficiency That's one of the things that we kind of stress. We talk about difference between a three-year look and a two-year look. The process we go through in the three-year look really shows that as we put things on our platform and our standards, and we put the right investment into them, you see the operating cost efficiencies. And really what we look to do is as we buy additional properties, they go through that same process as well. That's where we see that additional benefit, from a yield and from an acquisition.

the only thing I would say, you kind of get a same-store benefit for a capitalized cost. So it's not a big number, but does it muddy it.

Rich, you're absolutely right. We look at our capital. You would expect that's a pretty good predictor of what you should see from an NOI growth perspective. If it doesn't get a return on that, we shouldn't be spending the money.

Okay. Thanks. Good quarter.

Thank you.

The next question comes from Todd Stender from Wells Fargo.

My questions are geared towards the leasing activity. I wanted to get a little more color on Q4 leases that didn't renew. Maybe you could break them out, how much was on campus versus off campus, and then if we could look at the leases that did renew, the mix of on-campus to off-campus.

I'm going to give that one to Robert, Todd.

Todd, you are going to have to make me look that up. If I can get back to you on that one, I don't have that readily at hand.

But just in general.

I think conceptually, on a general basis, we've certainly seen pretty consistent leasing kind of both on campus and off campus from a renewal standpoint. I think certain things we've done on an off-campus basis we've seen the ability to push rents more. So I think we have looked at some of the space and said if it's an active core critical outpatient location, sometimes it's better to let those guys expire, and we can push the rate that's either somebody is going to consolidate and a take more space, or we can free that space up to bring in somebody that's willing to pay a little bit more money there.

That's helpful. As you guys move towards -- maybe it's more or incrementally more community core locations, just to get a sense of that renewal.

I like the questions. We'll find the answers.

That sounds good. And then just -- how about in size? For awhile we were talking about moving from smaller to larger footprints, maybe for less tenants in a multi-tenant building, but they're taking bigger footprints. Any more signs pointing to that the people looking at post-election, as the ACA is renewed or reviewed, I should say?

We've looked at that question because it came up in a discussion I was having probably two weeks ago. It was on a panel. The peers were standing there. The consensus was that the average space is about 4,000 to 5,000 square feet.

We came back and I was curious to see if the average space on campus and off campus was consistent to the comment that was made that on campus was about 4500 square feet. And does it seem that when we looked at our portfolio that the consistent space seems to be on-campus and off-campus about 4,000 to 5,000 square feet. Now, I will say that in our pipeline today, and in our pipeline in the last 90 days, there has been an inproportionate amount of larger spaces. I'm talking about three, four, six deals of 10,000 square feet. But those seem to be an aberration of would traditionally goes through the rest of the 96 leases that we do.

So we have seen some larger spaces in some of our assets being taken. Vegas was a large space. We had some in Texas taken. We had here in Phoenix taken with a large space. But if you looked at them all, and we did, the average would be that 4,000 to 5,000 square feet, and it would be consistent on campus or off campus.

That's helpful. Thanks, Scott. And last question. When you are looking at releasing spreads, I think they're around 1% recently, how do you see that trending over the next couple of quarters? Where do you see that going for this year?

Well, I would say conservatively and cautiously that we would be -- our baseline is probably the same. It's performed well for us over the last couple of years. I know that Amanda and I have had some conversations. Amanda actually was the one that brought it up. We talked probably three weeks ago about as we move through the year, do we want to become more aggressive with our leasing spreads.

Again, that gets back to occupancy, it gets back to looking at specific buildings. It gets back to looking at how it affects certain of your larger tenants and so forth.

So her view and feeling was that there are opportunities in locations that we have that seem to be saying the amount of reduction in free rent and in the amount of reduction in TI dollars, that you could move rents a little more if you were going to be a little more consistent with that number, because you either move the spreads a little more, keep it at $4 and keep it at a month's free rent, or you can remove that to some extent. So I think we might be more aggressive towards the middle of the year and our leasing spreads.

Great. Thank you.

the next question comes from Chad Vanacore of Stifel.

Good morning and good afternoon.

good morning.

All right. So Robert, in your prepared remarks, you might have covered this, but I was just going to see what was really driving the increase in OpEx in 4Q. That's a bit unusual for you guys. And how should we be thinking about that expense savings in 2017.

For the year we were successful in driving expenses lower. In Q4 what we saw on a year-over-year basis was we did have some kind of late full-year property tax bills coming in. Came in with some increases on that, that you recognize the full expense in the period that you get them.

Since they're so late in the year you get a full-year impact on it. That was the main driver of expenses. I think what I would also point out along with that, though, is that really didn't have that much of an impact on our same-store NOI, though.

From a conceptual perspective, we always get the tenant recoveries of our expenses averages about 67% across the board. In this case, given where the tax increases were coming through, all of that becomes a tenant recovery responsibility. So from -- which is something that we really true up every quarter.

So even though those expenses did come up there was really no impact to NOI on that just because we do think those expenses are recoveries that are contractual should be trued up on a quarterly basis. But that expense was largely driven by property taxes.

okay. And then how about the fairly large impairment in the quarter? What was that from?

So the impairment, we have an $8 million asset that was under contract. We entered into a contract to sell it. We've actually closed it now in February. We sold it for $5 million.

It's a small asset. It's one that was just noncore to our markets or close to where we have the rest of the buildings, and it was an opportunity, frankly to sell it at a very low cap rate and just move our attention elsewhere.

Got you. Then just one last one from me. You disposed of some more senior care facilities. I think Scott said six properties, but I'm not sure if that was for the whole year or that was year to date as well. But can you tell us what type of care the assets provided and around what cap rate you sold them?

The six assets that we sold were for the year. The two that we sold in the fourth quarter we sold for primarily skilled nursing and we sold them for about a seven cap back to the operator.

That's it for me. Thanks.

The next question comes from Karin Ford of MUFG securities.

Hi, good morning. Just a clarification. You have talked around a lot of this. Just to make sure I understand it, the 2% to 3% same store NOI growth expectation for this year compares -- it is a little lower than the 3% you have done in years past. The reduced expectation is due to the churn associated with the higher rollover this year, maybe a little higher expense growth, maybe both? Could you just sort of outline that for me?

Sure. I think our 2% to 3% has always been 2% to 3%. It's 2.5% to 3.5%. I think that we're very comfortable with the consistency that we're going to have and that we've demonstrated.

I think the additional roll obviously gives you a little more variance in the ability to move things, and I think we've been very consistent with people in the past, and the 2% to 3%, really that and the Forest Park transition, I don't expect, frankly, to see much change in our numbers going forward, but I think that's a pretty good range for folks to look at and say, okay, here's where I can expect that they will be going forward this year.

Do you have an estimate as to how much -- how big the impact is of the downtime at Forest Park, how much of a drag that is on same-store NOI this year?

It's going to be small. We lost about 30 bps of occupancy across the portfolio as a result of that. And so as we re-tenant apt that space and bring people back in, I think that's the total impact to that. It certainly didn't impact us in fourth quarter as we had offsets elsewhere to that as we were able to grow the occupancy. I think in the back half of the year, if the leasing pipeline comes to fruition, like it seems like, it might actually be a benefit.

Okay. Great. Last question. I know you guys aren't developers, but any opportunities for redevelopment or expansion in the portfolio that might start this year?

No, I think right now we haven't seen a lot of development going on, frankly. Again, I thought it was a pretty quiet last 90 days in the MOB space as an overall view of what's going on. People were trying to figure out, they were exhausted in 2016 and wanted to figure out 2017.

We continue to talk to some of our healthcare systems where they want maybe a renovated space, or they want some opportunity with a location that we have with something on it, and we'll continue to take advantage of that where it makes sense. As you said, we're not developers, and we pretty much focus attention on our leasing, our acquisitions and our asset management program.

Sounds good. Thank you.

The next question comes from Vikram Malhotra of Morgan Stanley.

Thanks, guys, and thank you for the additional disclosure. Just wondering if you were to sort of publish the same thing in a couple of years, where do you think the cash margins would go from here?

I think from a margin perspective it's interesting. And this is one of the things we were trying to demonstrate with this disclosure, is typically when we buy assets, their margin is not at the same level where we're able to operate across the portfolio.

So I think as we continue to grow, we're buying assets that I'm going to say typically come in at a 65% margin, and we're able to grow them up to 67%, 68% margin over time. So I think from a baseline perspective you should see us continue to grow the margin opportunity -- 20, 30 bps a year is what we typically looked at.

Vikram, I think the key question that we have to look at as a management team is key markets, critical mass, continue to buy acquisitions where our infrastructure is in place. We've talked in the past that we feel that where we're located right now in the markets that we're in, we can add a substantial amount of acquisitions.

We added $700 million last year and didn't move much of our needle. It didn't change. In fact, it improved our margins, and I think if we continue to pick the right assets in the right locations, without trying to be everywhere, or move into new markets with one-off assets.

I think we can continue to move that number. I think it's incumbent for management and it's incumbent for our asset management team to focus in those areas that are going to bring the synergies to our platform. Because our platform is not fully built out. I guess the short way of saying it is that our platform in the markets we're in right now have additional volume that they can handle without additional cost. That's really where we're focused on, and that's where our discipline needs to present itself.

On the 2% to 3% same-store NOI, I'm wondering, is there any, this year or going forward do you think there will be more of a divergence between on-campus and then what you are defining as core community versus non?

I think what we're going to do is continue for more disclosures. I think the disclosures that Robert did this time with the expenses was very good. One of the questions we got earlier from Todd was very good, which was what get some more detail on off campus and on campus, because I frankly am not afraid of the analysis. My view is, as it was ten years ago when I started this company, that medical office was great place to build a company from.

I also believe strongly that the focus of our healthcare system as it continues to expand generated by technology is going to move and continue to move more and more services to patients into the outpatient locations which are not the hospital. Because the hospital by itself is the most expensive place you can be as a physician or a healthcare system and populations don't grow around hospitals. They grow in suburbs. They grow in locations that have infrastructure that really services the millennials, the families that are growing in those locations.

So I like the community core campuses. You heard -- that's all you heard about five years ago when the Affordable Care Act was introduced, then it kind of went away.

I think there are limitations on campus. I think that the ground lease, you heard us talk about the ground lease restrictions. If a campus does not have a lot of energy to it and there's ground lease restrictions then the healthcare system doesn't want competition. If they're not actively looking for more physicians, then your space sits. And you as a landlord don't have a lot of opportunity to change that.

So we like the ability to be able to be a buyer of three types of specific assets in the medical office building space. We like the on-campus across the street but we want to be very careful. If I have a chance to buy a building across the street without a ground lease versus a building next to the hospital with a ground lease, the longer term value in the building across the street if it's the same sort of energy, the same sort of tenant, the same sort of synergies within that location will always be better because I have a better ability to move the folks into that building that want to be there. And then the community core, competition, health care systems, being in locations, generating synergies, accessing patients, that also moves rent.

So we like the fact that we can be in those two spaces plus the academic university setting which is, of course, the forefront of healthcare as it moves forward over the next 15, 20 years. So we like the three spaces, and I think the more we can disclose about the opportunities and the profitability of these assets, the more investors will see that it's really about the cash that is generated at the building over the long term versus the fact that it just happens to be on campus.

I'm not a buyer of a secondary market building on a campus because the population inherently is not growing.

That's fair. So it sounds like just from in that 2% to 3%, and if you look out there's not a material difference between what you are modeling, on-campus versus community core.

I will tell you this. If you look at us and HR, and I mentioned this before, and HR has made a big point, and I think it's their business philosophy. And I think it's a great philosophy because, as I've said, each of the three of us in the space right now have distinctive business models. And that's perfect for investors to look at. It is great for them to analyze it and distinguish how they want to invest in and would they want to invest in.

They're on campus. That's would they've said. We're a mixture, 76 and 23 and so forth. Over the last four years same-store growth, even Steven.

But my acquisition costs have been less, and my capital that I have spent has been less. And my returns have been greater. And so if the buildings are going to be consistent, and again I think the opportunity we are seeing better pricing in the community core.

And I think we are going to continue to see that because hospitals, by definition, are expensive. And insurance companies, by definition, want it cheaper, more efficient, and more productive, and patients want accessibility.

So we like where we're at. I think the returns are going to show themselves over the next five, ten years, and I think they will be very favorable.

Great. Thank you.

The next question comes from John Kim of BMO Capital. Please go ahead.

Thank you. Just a follow-up on the same-store reconciliation and Rich's question on administration costs. I would have thought as management fees went down if you took more management in-house, that number would have gone up. I'm wondering if there was any reallocation of those costs into G&A.

No. I think that's an easy short answer. I think the management cost is really third-party management fees. Our ability to run the properties is wholly dependent on the amount of scale that we get in a market. So as we've grown scale and we've become more efficient, you've seen them both move down.

An a example, we have a billion dollar investment now in a 110-mile radius in Boston, White Plains, Albany, and Hartford. And a lot of that investment has come over the last 18 months. We actually have less dollars being spent from a G&A perspective, property management perspective, in those areas today than we did when we had half the amount of investment in those locations.

The ability to maximize and utilize scale has always been, and I think always will be, a huge opportunity for folks, for businesses that get critical mass.

Okay. So it's not the same amount of costs spread out over more assets. It's actual dollar amount.

Yes, if you buy three assets in there within the appropriate radius, we've let people go. I mean, you don't need three of them. You need one of them. That's a plus-plus savings. We look at that, and we take that very seriously as we go through our acquisition and our asset management process.

And this is Amanda. Just to add one other bit of color, I mean, the earlier administrative charges, those included third-party property management, salary, and office costs. So the administrative line just isn't HTA property management, salaries, and office costs. Those are -- the third-party costs are sort of transition to HTA costs, and we're able to operate and run those offices more effectively and efficiently, and I think that's why you see some of that reduction over time.

Okay. Thanks for clarifying. On the CapEx, the recurring CapEx as the percentage of rent has been increasing year-over-year. I'm wondering how much of that is really market-driven and not really lease-driven or part of your control, because we're seeing this with some of your competitors as well.

I'm sorry, could you clarify?

Oh, so basically the tenant improvement costs, is that really market-driven? Do you see that basically increasing?

I think -- again, I think that the -- our experience in our marks has been that we have been able to, over the last 30 months, continue to move down the amount of dollars that we spend in return for executing a lease.

That's either in one of three areas. It's either, one, the TI that we spend associated with that, per year, or the free rent that is associated with that. There are -- if you have a critical mass within a market, and if you have strategic locations, you're not necessarily competing against market.

And I think that because you can't necessarily compete against a desperate landlord, and we don't compete against desperate landlords. We have lost. In fact, we lost some square feet on the East Coast to a -- large user moved from us because the landlord had just bought a building out of bankruptcy, and they were giving away what we felt was completely unreasonable concessions.

We've backfilled that since then. And, in fact, we came out in a more positive position from a net rent perspective, but you can't necessarily chase market.

You really need to look at your asset and the synergies and the need of that group or that health care system to be in your building, and your building generates a market. I think the sense is --when we look at our lesion we make decisions that says, well, if we lease it for this set of criteria to this tenant at this amount of square feet, then you have to be consistent with the next tenant with that same consistent square feet regardless of necessarily whether or not that person or that group can go somewhere two miles down the road cheaper.

So I think that it's very important, and we've talked about this. We don't buy buildings with 1% growth rates in leases, because it is really hard to put a 3% growth rate in the first lease that rolls over, because that physician group doesn't want to be the first one paying 3%, and the building may not have been sold or leased that under philosophy. So we look at that, when we buy assets, because we have run into situations where you just get yourself into a very unattractive situation with a group of tenants, and you don't want to do that.

On that subject, have you provided the annual lease escalators on both in-place rents and also leases signed during the quarter?

Yes, the in-place leases -- let's see, for the full year, we averaged -- the new leases averaged 2.8% contractual escalators in there, which is above where we remain in that 2.3% to 2.4% range. So we continue to push the escalators.

Okay. I think the common theme that's been discussed throughout this call is the consistency of the growth that you have. So I'm just wondering why don't you provide full-year guidance?

We fundamentally -- as I mentioned, guidance, we have given it in regards to where we think 2 to 3% is something that sector itself should provide. We look at our portfolio and we've been very consistent with what we can provide and how we handle it. But as a company we made the decision early on that giving guidance again sets management up or sets investors up for perhaps a divergence of expectations or make bad decisions.

I think you make the decisions, you run a company on a day to day, month to month, quarter to quarter basis, and you don't make it necessarily run based upon things that you can't anticipate or don't know about six months from now or nine months from now. So I think you could look at us, and I think the past execution is a tremendous precursor of future execution, especially since we've been at this poor 10 years as a company, and now five years as a public company.

Appreciate the color. Thank you.

Our last question is a follow-up from Michael Knott of Green Street Advisors.

Hey, guys. Just a quick clarification on your external growth and acquisition stance for 2017. How would you summarize that in one sentence?

I think it would be consistent, I think last year was an unusually good year, good execution, strong balance sheet performance, great asset acquisitions. Historically we've been in that 200 to 300 range. I think that would be a consistent thing for us to say. We want to add good assets in our markets, and we will run into them because that's what we see. And our balance sheet is positioned in order to give us that flexibility.

Okay. And then you have talked about this quite a bit with regard to fee simple versus leasehold, but the table that's at the bottom of page 14 of your supplemental -- Do you feel like there would be differences in performance between -- and maybe terms of occupancy, for example, between the fee simple and the other three categories of leasehold interest?

Yes. Yes, I think as we generally see it, and we're talking about the multi-tenanted campuses, for instance, that might be under 90% occupancy. Those are all campuses for the large part that are under ground lease restrictions.

I give you a specific example, because this ground lease issue that we bring up and continue to talk about is perhaps a figment of our imagination.

But we had a Frisco asset that went through a transition, as everyone knows, and HCA bought the hospital, and that building is located downtown Frisco, great location, and we didn't have a ground lease. And if we would have had a ground lease, we would not have been able to execute approximately 25,000 square feet of new leases that are now in that building, because they're not necessarily associated with HCA. And HCA necessarily would not have approved them if they would have had a ground lease restriction on that building.

Forest Park, we have entered into several leases in the exact same situation where -- again the rule of business is that if a healthcare system looking out for themselves, and they look out for themselves. They want folks with privileges. They want folks that refer only to them. They want folks that they do business with and unfortunately the world is not made up of everyone getting along and everyone necessarily wanting to be in that position.

So I find, and it's consistent across our portfolio, that there is a distinction between when I have to have send a ground lease to someone to approve it, I mean, a lease to someone to approve it in regards to a ground lease, versus being able to make a decision that says, yes, I'll lease you that space, because it's a great rate, and you're a great use for that building, and it improves the value of my asset.

Okay. Thanks. And thanks for the expense disclosure. And as you guys think about further enhancements to the recurring supplemental I would suggest tables on leasing costs per foot per year, releasing spreads, maybe more detail on multi-tenant, MOB performance, versus a single-tenant arrangements MOB occupancy, et cetera. Thanks a lot.

You're welcome.

And this concludes our question-and-answer session. I would like to turn the conference back over to Scott Peters for any closing remarks.

I would like to thank everybody for participating. A good quarter for HTA, and we look forward to another year in 2017 of being able to execute and bring performance and drive shareholder value. Thank you, everybody, again.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.