Healthcare Realty Trust Inc (HR) 2017 Q4 法說會逐字稿

Good morning, and welcome to the Healthcare Trust of America Fourth Quarter 2017 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Caroline Chiodo, Senior Vice President of Finance. Please go ahead.

Thank you, and welcome to Healthcare Trust of America's 2017 Fourth Quarter Earnings 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 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 the call, we will make forward-looking statements. These forward-looking statements are based on 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 that are beyond our control or ability to predict. Although we believe 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?

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

HTA starts 2018 as the leading owner and operator of medical office buildings in the United States, which we believe is and will continue to be one of the most attractive real estate asset classes for the next 5 to 10 years. As a company, we have a best-in-class portfolio of over 24 million square feet invested in assets both on-campus, where we have the largest on-campus portfolio in the country; and off-campus in core critical locations where health care is positioned to grow. We are concentrated in 20 to 25 key growth markets and now have 10 markets of approximately 1 million or more square feet and 16 markets with 500,000 square feet or more. Given this concentration and scale, HTA can continue to leverage our full-service asset management platform that provides property management, building services, leasing, construction and development services to our tenants.

In addition, we also have a strong and stable cash flow. We are diversified by market, where our top 10 markets make up less than 50% of our ABR, and by tenant, where no single tenant makes up more than 4.4%. We also have limited near-term lease expirations, with an average of less than 10% per year through 2022.

We continue to maintain a fortress balance sheet with low leverage at 5.9x net debt-to-EBITDA and significant liquidity of almost $1.2 billion at year-end, including $100 million of cash and $75 million of equity raised on a forward basis in October with proceeds that will -- and can be drawn down over the next 3 to 6 months.

And finally, a track record of bottom line growth, where our consistent same-store growth and investment activities have allowed us to grow normalized FFO per share by 60% since the first quarter of 2012, the year we first became public.

2017 was a significant and transformational year not just for HTA, but also for the broader outpatient medical real estate sector. From a health care perspective, several strategic transactions were announced, each with a goal of providing health care on a more cost-effective and outpatient basis to capture the coming demand for increased health care services. These included Aetna-CVS, UnitedHealthcare-DaVita's (sic) [UnitedHealth-DaVita's] physician network and multiple health systems announcing mergers and acquisitions. All of these are changing the landscape for health care delivery over the next 10 to 20 years.

The medical office sector had its biggest year in a decade, with 5 deals greater than $500 million in total size. These deals have been completed by both public REITs and private investors, demonstrating the strong institutional interest for the medical office sector. Despite this, the sector continues to remain very fragmented, with less than 20% owned institutionally and about 11% owned by public REITs. So while it was a very big year, the opportunities for growth remain significant, especially as the industry continues to evolve and change over the next 20 years.

HTA is the best-positioned health care REIT to take advantage of these trends as a result of our actions and performances this past year. Some of our key achievements of 2017 include investments of over $2.7 billion, acquiring 6.8 million square feet of high-quality medical office buildings that increased our overall portfolio quality and scale in our key markets. Approximately 76% of these assets were located on or adjacent to hospital campuses and 90% of the buildings were located in HTA's existing key markets.

We demonstrated ability to grow yield on these investments, increasing the yield on our 2,000 acquisitions from a going-in 5 yield to 5.2 at year-end and as a result of increased occupancy, completed developments and operating synergies, which are now at the high end of our $5 million to $7 million annualized range. In addition, our leasing and construction teams have saved an additional $1 million to $2 million by performing services through our platform, which equates to an additional 10 to 20 basis points of yield if these savings hit our NOI.

Dispositions of $85 million of noncore assets, including MOBs in Milwaukee, Long Beach and Waxahachie, Texas, taking advantage of the strong demand for MOBs while reducing our exposure to noncore markets where we have limited operational advantage and where we see few opportunities for continued growth.

Same-store growth of 2.9% for the year, including 2.8% in the fourth quarter. We have continued to focus on multiple levels for growth, including increased uses of HTA's building services within each of our key markets where we have scale. I would note, if we had excluded our Forest Park campus in Dallas as a redevelopment property, our same-store growth would have been 3.4% for the fourth quarter and almost 4% for the year. We have also increased the velocity and economics in our leasing where our rent spreads increased over 2% in the back half of 2017, retention increased back to 80% -- 86% in quarter 4 and potential new leases under LOI have increased significantly, which bodes well for 2018 revenue in the back part of the year.

We also maintained G&A and capital efficiency at less than 5% of total revenue, which is a key to our long-term cash flow performance. And we completed all these activities while improving and strengthening our balance sheet, raising $1.9 billion of equity and over $2 billion of debt, lowering interest cost while extending maturities and ending the year with low leverage and significant liquidity. We have the most stable and diverse set of cash flows in the health care REIT sector and a clean and distinct balance sheet.

As we look ahead, we believe 2018 will be a year of execution for Healthcare Trust of America as we leverage our asset management platform, benefit from increased scale in key markets and remain disciplined in external growth where opportunities would present themselves relative to our cost of capital. We expect our same-store growth to continue to trend in the 2% to 3% range. One of the biggest opportunities is in our Forest Park assets in Dallas, where we have 100,000 square feet of vacancy, and expect HCA to announce its intentions for the hospital opening in the coming quarters.

As of today, we have over 40,000 square feet of new leases under LOI, including from the hospital itself, at base rents more than 20% above our portfolio average. Leasing up of these assets will position us for strong revenue growth as they start to pay cash rent.

Finally, we have seen the cost of capital of health care REITs adjust significantly in 2018 as the 10-year Treasury has moved up. At the same time, private market pricing has remained strong as private capital continues to increase its interest in the MOB sector. It is our intention to remain disciplined through this market ebb and flow, mostly sit on the sidelines until our equity or until MOB pricing adjusts itself accordingly. Certain development opportunities or smaller one-off acquisitions in our key markets may still be accretive and make sense, and we will take advantage of those where we should.

In addition, we will continue to dispose of assets while private market pricing remains strong and likely utilize our outstanding liquidity to pay down debt in this rising rate environment. While these capital allocation decisions do have an effect on our year-over-year earnings, we think that they are the right steps in the current environment and will create dry powder for future growth and long-term shareholder value. Regardless, our portfolio and platform should continue to perform and allow us to continue to grow cash flow NOI on a quarterly basis as we look into 2018.

I will now turn the call over to Amanda Houghton.

Thank you, Scott. Since 2010, we have focused on creating a full-service operating platform that has a local market expertise and can utilize scale to drive tenant retention, cost efficiencies and profitable and consistent growth for shareholders. This focus on platform allowed us to perform in 2017 through multiple levers while seamlessly integrating a significant number of new properties to our platform during the year. With over 22 million square feet under management, HTA's full-service asset management capabilities and scale in key markets position us for continued performance in 2018.

Our same-store NOI growth for the fourth quarter was 2.8% and 2.9% for the full year. This was despite a 30 basis point decrease in occupancy year-over-year in the quarter due primarily to continued roll-off of Forest Park hospital leases. Same-store NOI in the fourth quarter, excluding Forest Park, would have been closer to 3.4% and 4% for the full year.

Base revenue was up 1% for the period, slightly below prior quarters due to the reduction in occupancy, combined with several onetime items in base revenue in Q4 of 2016. Again, excluding Forest Park, our revenue growth would have been closer to 2%.

Our property management platform continued to generate bottom line results, primarily by expanding our margins by more than 150 basis points, mostly through lower expenses, which were down $2.2 million on a year-over-year basis. These savings were primarily from full year property tax true-ups in the fourth quarter of 2016 and also through additional profitable utilization of our in-house property management and building services team performing additional work in-house at rates lower than those charged by third parties. We see this as a continued opportunity as we utilize our new-found scale in certain markets in 2018.

Turning now to leasing. Our activity has picked up in the second half of 2017 and should result in higher rental growth in the latter part of 2018. In particular, we gained 30 basis points of leased rate on a sequential basis in our same-store pool, ending the quarter at 91.6% and have seen very strong activity at Forest Park, where we have 100,000 square feet of vacancy in a market with less than 5% vacancy. We now have nearly half of the vacancy at Forest Park under signed LOI and are excited for HCA's pending announcements on their intended use on this campus.

From a metric perspective, in the fourth quarter, we leased 671,000 square feet of space or 2.8% of our portfolio. This includes 169,000 square feet of new leasing and 502,000 square feet of renewals. Retention for the quarter ticked back up to 86% while our re-leasing spreads remained strong, up 2.7% for both new and renewal leases and 1.7% for just renewals. Excluding the renewal of one large tenant outside of our key markets, our renewal re-leasing spreads would have been closer to 3.5%. This is the second consecutive quarter where we have seen our re-leasing spreads increase above our historical flat to 1% range and a trend we expect to continue into 2018.

Our concessions also remained very low with less than 1 month of free rent per year of term and $2.27 of TI per year of term, both on a blended basis of new and renewal leases. Our leasing teams take into consideration many different metrics when evaluating deal terms, giving consideration not only to rental rates and re-leasing spreads, but also valuing heavily the free rent concessions and impact to the overall buildings as aspects to consider.

As we have previously mentioned, it is our desire to enter into market-based rates that reflect our institutional management and superior positioning in many of our markets. And we believe that it is this philosophy that has helped HTA generate some of the highest and most consistent performance amongst our health care REIT peers while establishing and maintaining lasting relationships with our tenant base.

Turning to our 2017 investments. I am pleased with the way that our team has integrated these assets onto our platform, with minimal disruption to tenants or building operations. By the end of the year, we were providing property management services to 95% of our 2017 investments and building maintenance services to approximately 2/3 of our acquired multi-tenanted properties. Importantly, we generated total savings of these acquired properties of over $1.5 million in the quarter, a $6 million annualized rate and squarely within the $5 million to $7 million we had originally projected only 6 months into our ownership.

On top of that, within our 2017 investment pool, our leasing team executed leases on approximately 95,000 square feet of space, which would have resulted in us paying third-party brokerage leasing commissions equal to another 1% of acquired cash NOI, additional synergies that aren't readily apparent in our NOI and yield metrics.

As we turn to 2018, our platform is operating well but has the opportunity to operate even better as we utilize our increased scale and expertise in our key markets.

With that, I will now turn the call over to Robert to discuss the financials for the period.

Thanks, Amanda. I'm happy to report that we started 2018 with a very strong balance sheet, with leverage of 5.9x net debt-to-EBITDA and $1.2 billion of liquidity, including $100 million of cash, important as we have seen the 10-year increase in public REIT equities prices decline. Our position is primarily the result of actions we took in the fourth quarter, including equity issuance and dispositions, which were consistent with our philosophy of maintaining low leverage.

In October, we issued $200 million of equity for our ATM at a gross price of $29.60. We took $125 million immediately and issued the remaining $75 million on a forward basis, which we will take down over the next 3 to 6 months unless extended. This forward was raised at the same $29.60 and is subject to small carry interest costs in the payment of dividends. We also disposed of $80 million of noncore MOBs in the fourth quarter.

We had originally intended to reinvest the proceeds into MOBs located in our key markets. However, private buyers have stepped into the market aggressively, reinforcing the high 4% cap rate valuations for high-quality MOBs, well below our current cost of capital. Given changes in market conditions, we now expect to use these proceeds as well as any additional funds from continued dispositions, to primarily repay debt, including the $96 million in Duke seller notes coming due in June of 2018, which bears 4% interest rate; and fund development and targeted one-off acquisitions in our key markets at yields that remain attractive. Although this is dilutive from an earnings perspective, this should put our balance sheet in a strong position as the markets correct.

Turning to the earnings for the period. Fourth quarter normalized FFO per diluted share was $0.42, up 2.4% from the fourth quarter of 2016. Our normalized funds available for distribution increased 39% to $72.6 million compared to the prior year. We no longer report this on a per share basis as we believe this is a liquidity measurement, but our dividend payout ratio remains in the low 80% range. As Amanda noted, our same-store cash NOI growth was 2.8% despite the year-over-year impact from Forest Park. And our leasing metrics continue to tick up, with retention at 86% and re-leasing spreads on new and renewal leases at 2.7%. As importantly, we are increasing rates without spending significant amounts in tenant improvement dollars, which tend to offset any additional NOI that can be generated. We expect continued stability in this performance as our lease rollover remains limited, with an average of less than 10% rollover per year to 2022.

G&A for the quarter was $8.2 million, which is less than 5% of revenue and approximately 45 basis points of gross asset value, significantly lower than our direct peers and in line with the larger diversified health care REITs. We are efficient with our overhead and infrastructure overall, especially given the operational focus of our business.

During the fourth quarter, we had $14 million of recurring capital expenditures, including building capital, tenant improvements and an internal and external leasing commission. This is approximately 12% of NOI and approximately 10% of NOI for the entire second half of 2017, a level we expect to see in 2018.

Finally, our 2017 acquisitions ended the period yielding 5.2%, on pace to reach the mid-5% range as the final developments come online, our new leasing continues and we reach full potential on the cost synergies.

Looking at 2018, we expect continued performance by our existing platform, with same-store growth on assets acquired before 2017 to be between 2% to 3% on a cash basis, with rental revenue growth accelerating in the back half of the year. Our GAAP same-store growth will be slightly lower as straight-line revenue is reduced. G&A should run between $8.5 million and $9 million per quarter as changes to our stock-based compensation increases expenses during the year. As Scott mentioned, we now expect to utilize our excess liquidity and any disposition proceeds primarily to pay down debt. This should get us down to 5.5x debt-to-EBITDA by the end of the year and position us well with the rating agencies as we advance discussions around our position as the most stable and defensive health care REIT in the sector.

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

Thank you, Robert. Thank you, Amanda, and we'll open it up now for questions.

(Operator Instructions) The first question comes from Michael Knott with Green Street Advisors.

Scott, I think you touched on this a little bit in your prepared remarks, but I just was hoping you could give a little bit more color on your thoughts on some of the potential changes that are out there in the health care delivery system and any threats longer term you might see toward medical office real estate, whether it's the Amazon and Berkshire consortium or some of the other industry events you talked about. Just any more color there would be helpful on how you guys are thinking about positioning your portfolio for the long run in light of some of those things.

Well, I think there are changes going on, and I think they're going to accelerate over the next 5, 10 years. I think the mergers are going to continue. I think buyers of medical office and buyers of health care are going to have to be far more disciplined in what they buy, where they buy, truly understand the integration of the health care merger potential on the impact of a hospital location or on a core community location that you may have picked. So I think that continues. And as you know, we're not a high proponent of secondary markets because there are secondary markets in the United States that are probably overbuilt from a bed perspective. I think growing communities and health care systems that are continuing to attract patients and continuing to improve their on-campus locations, they are going to be fine. I think that the recent changes in folks trying to get into health care, the CVS, for example, that might actually improve the usage of health care. We're still, I think, tremendously underutilized from a long-term perspective. A lot of outpatient is still extremely busy. It takes a long time to get into a specialist. And even these emergency, where you go for the urgent care, they typically don't medicate you. They refer you on to your -- to someone who can. And the whole key here is if we can continue to get utilization, it's probably going to lead to increased or more productive outpatient usage. And I think that's good for us long term. So I think there's a couple trends that are very good. But again, I think that the health care system, the mergers, are going to make it more important for discipline on where you buy.

Okay. And then I appreciate the comments on how you're all thinking about your cost of capital and what you're going to be doing. It sounds like pretty clear that you're going to be probably buying far less. Maybe you can touch on disposition plans. And then it sounds like a 5.5x debt-to-EBITDA is your target for the end of '18, but is that your updated, current, final target for the balance sheet?

Well, let's work backwards. I think the acquisition environment right now is challenging, and I think it could stay challenging for a while. This is really the first time that REITs, I think, for quite some time have seen raising interest rates and private equity markets not necessarily showing that change. So I think as a public REIT, this is the time to be extremely patient, disciplined and let the process play its way out. That's the definition of being a public REIT: acquire when it's accretive, be patient when it's not. We've got an advantage, and I think this advantage is in tough times, companies get to articulate some of the advantages that they have. And one of the advantages, I think, we have is that we're in core markets and we have critical mass in 16 markets with over 500,000 square feet. We're able to find one-offs, and I think some of these one-offs are -- is it 50 million to 75 million? Probably over a period of time. They'll still be accretive because we've got relationships. We can bring that 50 basis points from our asset management platform in place. And I think we'll use those opportunities to recycle some assets. We do have some secondary markets that, frankly, aren't going to be long-term markets for us, and we'll go ahead and recycle that. So we'll try to be extremely specific in how we utilize our equity from an acquisition perspective and be very opportunistic from a disposition perspective.

Okay. And Robert, was the 5.5x, just real quick, was that sort of the long-term target as well as year-end '18?

Yes. I think, historically, we've run the company pretty lowly levered. I think, historically, 5.5 to 6 has been the range. I think in market environments like now, I think it's prudent for us to work it lower, so that we continue to have dry powder as really the markets kind of correct themselves, whether that's asset prices moving or our cost of capital moving.

I think the question about acquisitions, we look back at last year and the opportunity to do the Duke transaction for us, add those assets -- the high-quality assets in our markets, continue to focus on the synergies that are just beginning to play out in our platform over the next couple -- 12, 24, 36 months. It's positioned us, I think, extremely well for what we see -- where we see ourselves right now, which is focus internally on cash NOI and focus internally on generating the revenue from your existing portfolio.

Yes. Last one for me and then I'll hop back in the queue. Can you just talk about the competitive dynamics at your Mission Viejo campus here, now that Welltower is going to be building on Simon's mall there, adjacent to the hospital?

Yes, we think that's great. One of the things is it brings additional focus to perhaps the best quality real estate or one of the top quality real estate locations in the country. I think that location equals anything in Seattle, anything in Boston. We have a fee simple interest right there, about 20 feet from the front of the hospital. Our opportunity to reposition some of that asset with the health care system is very fortuitous for us and rents will be able to be moved. So when we bought it, we recognized the quality of the location and we recognize the -- what we think is the true long-term value of going ahead and moving that through some redevelopment. And with the Duke opportunity, we have the expertise in-house. Amanda's utilizing that to work with the health care system. And so we look at that as a tremendous value creation for shareholders over the next 2 to 4 years.

The next question comes from Rich Anderson with Mizuho Securities.

So Scott, you mentioned kind of sitting on the sidelines. It makes obvious sense. But on the disposition side, I mean, how much more do you think you guys could do from a disposition sort of volume standpoint? What in your portfolio do you see as stuff you'd kind of obviously like to get away from as long as pricing remains strong and you have an opportunity to do that?

Well, one of the things that is surprising me to some extent is there's a huge interest right now in 1031 exchanges out in the marketplace. I continue to get calls from people who have articulated assets that we perhaps have owned or assets that were part of the Duke portfolio that people have underwritten in some form. And there's a big demand for 1031 in the marketplace currently. And of course, that's the private side of the equation. From a perspective of what we would call assets that we don't want to hold long term, I still think there's $100 million to $200 million. Would we do $75 million to $100 million this year? I think that's a reasonable recycle. Well, we'd put the proceeds back into the core markets that we like and be able to do it on an accretive basis. I think much more than that probably then gets into a little more challenging envelope of finding somewhere to put those proceeds or, as Robert said, just continue to pay down debt. But it's probably $100 million to $200 million that we would say over the next 18 months we would like to recycle.

What about -- there's a price for everything, I suppose, right? So what...

There really is a price for everything.

So even assets you're not necessarily anxious to part ways with, if someone just gave you an offer you couldn't refuse, would you be willing to go there, pay a special dividend, kind of go that route? Is that even on the table? Or are you kind of stuck at that number for now?

No. I think, Rich, we've always said that everything is for sale. If someone wanted to respect HTA with the appropriate price, this would be our last conference call. So that is something that is a very consistent philosophy from the directors all the way down to management. There are -- and if there were opportunities or if someone puts something in front of us that said this cap rate for this asset or this location is something that really represents, in our view, a onetime opportunity for shareholders to maximize value, we would do that. I think regardless of the place you're in on the ebb and flow of the market cycles, you do what is in the best interest of shareholders. And if you don't want to buy it again, Rich, then that's probably a good indication that you probably should sell it.

Okay. Amanda, maybe we could just go to the same-store profile. I got your comments and we all know the expense control process that you guys go through. But down 6.2% on expenses this quarter seems strangely timed in a sense that taxes, payroll, insurance, utilities are generally up everywhere, away from you. How are you able to even get that much of a decline this quarter considering the forces are generally up for basically every other REIT?

So I think that what you're seeing this quarter are a couple of things. So last quarter, we talked about our ability to bring the property management and engineering of the Duke portfolio into our portfolio and onto our in-house platform. I think in the fourth quarter, you're seeing a lot of the benefits of that. In the fourth quarter, we did some true-ups as it relate to the third quarter and fourth quarter in-housing. So it's kind of amplified the effect of our in-housing. I mean, with the in-house services, obviously, when we're not paying a third party, we get that markup and bring it to the bottom line and we get the savings there. But one of the other things in the dynamics that you're seeing in the fourth quarter is bundled expense savings. And I think you're just now starting to see that in the fourth quarter. I think that will continue to play out in 2018. So expense savings for us, I mean, we're looking at several different things whenever we're going to bundle services. Utilities is a big one that we focused on last quarter as we doubled the size of our portfolio in certain markets. For Texas, as an example, we are able to double our kilowatt hour buying power. We negotiated rates 23 below -- 23% below what we had in place, and that equated to about $400,000 a year on savings. You're seeing that start to play out in the fourth quarter. And I think you'll see that continue into 2018.

Rich, one of the things that we're seeing, and you mentioned it a little bit, is there is, I think, wage pressure out there. I think there's also -- we're seeing construction pressure. I know that part of our process of capital in TIs and so forth, I mean, the labor market is much more competitive than it was 2 or 3 years ago, perhaps even a year ago. But it amplifies the benefits that I think you're going to see from Healthcare Trust of America's asset management platform. We're able now, instead of calling that third party who's extremely busy, who's raising rates, who's pushing through some inflationary pressures in their third-party services, we're doing that in-house. So we're getting the benefit in our platform of that continued pressure because we're still providing it at the costs that are basically internal to us. So those are one of the things that we're starting to see in markets where it's so beneficial to be able to have the HVAC, the electrical, the utility engineer. It's so important to have the property manager that is able to realize, "Don't call the third party, let's have our folks do it," and then we pass it through at market rates.

Rich, just the last thing -- just one last other thing on there, just from a 6% down. If you'll recall, and Amanda mentioned it briefly, last year in the fourth quarter, we did have some large 2016 property tax bills come through, primarily in Texas, which bills at the end of the year. We saw big increases in there. So last year was a bit artificially high because we had a full year tax true-up in the prior year comparability.

Yes. I remember that from Amanda's comments. And lastly, what percentage -- is your -- just as a reminder, what percentage of your portfolio is net lease versus some sort of operating lease?

Overall, it's about 2/3 are structured as net lease and about 1/3 as some sort of a gross or modified gross-type lease.

The next question comes from Karin Ford with MUFG.

Just was wondering if you guys were seeing any signs that new supply might be picking up in any of your submarkets? And are you seeing any shadow supply out there?

I don't think we're seeing shadow supply. I do think that there is a process going on right now with some of the more, what I would say, high-volume health care systems or the higher volume hospital campuses where some of the health care systems are looking to add space. We've had -- as we've talked about here a couple of times, we've had 3 or 4 or 5, and I think there's probably 5 opportunities directly related to health care systems on campuses where we own stuff, where they want to either redevelop something that's older that we have or that they're in and put something in that place that's either larger and in the case, for example, in Raleigh, they want to add square feet. So that would actually be an expansion of space for us. Actually, rents would move up, newer building, expansion of space, to fit a need. So I do think that you are seeing the -- what you would expect, which is this real estate is core critical. There are -- there's only so much space when they're around campuses and the health care systems are wanting to maximize and manage their outpatient costs as they look ahead for the next 10 or 15 years. So you're seeing some, but I don't think we're seeing any just RFPs out there that are just for 40% or 50% occupied buildings.

Okay, great. And then turning to capital allocation. As you guys are balancing your desire to add more developments onto your platform with required returns out there, are you seeing any changes in competition from well-funded private developers out there? Or basically, are yields on high credit developments still being priced very close to acquisition cap rates? And will you play in that pond if they are?

I think you're -- I think acquisition cap rates and development in our RFPs are being very consistently similar to what they have been. They're priced tightly. There's credit attached to it. Health care systems are not -- they're not ignorant of the fact that they're bringing the occupancy. If there's a ground lease attached to it, they recognize that they have the land. So that's a very competitive situation. I think when you have an example where you're fee simple next to a health care system and that system needs some redevelopment or needs a new building, there's opportunity to get that 50, 75 basis points of development spread. It's a win-win for both parties. So we would like to be able to take advantage of obviously the second one, where we can get that 50, 75 basis points. We're not actively nor is our development program, as we've refined it here over the last 6 months, we're not looking to go out for RFPs. We're not looking to do surgery centers. We're not looking to do other types of assets that have greater yields but aren't down the straight and narrow of what we want, which is medical office, with our relationships on-campus or in or on our core critical locations.

And should we expect any development starts in 2018?

We're in the process, I think, that we think that you'll see some from us. We're actively, and when I say actively, both parties are moving toward some agreement on several of these. And so I think that as we move through the second and third quarter, you'll hear us talk about a couple of ones that have materialized, and we've got the lease signed and everything is moving forward.

Great. Last one from me. There was some talk out of the Trump administration about removing Medicare reimbursement for facility fees. Do you think that would change leasing economics at hospital-affiliated MOBs?

I think this continues to be somewhat of a trend. I think as we look at the desires of the health systems, all the health systems we talk to, their conversation is that reimbursement is ultimately going to change over the next 10 years. And from a location perspective, they need to be closest to the patients that are the most attractive, generally the private pay patients in different areas. And so I think as long as you're owning assets and operating assets in those locations, you're really their access point to an attractive patient population base. That's how we look at it, that's how the health systems we're talking about looking at it -- look at it. Now do the health systems ever want reimbursement to go down? Obviously, no, at any of their locations. But I think the ones that we talk to, say, over the next 10 years, it's all going to compress to similar pricing and regardless of the location.

The next question comes from Tayo Okusanya with Jefferies.

Just a couple from me. The first one is trying to understand the triple net versus the gross lease portfolio. Could you talk a little bit about occupancy in each of those portfolios? And how potentially you could drive up overall portfolio lease rates?

Well, I think from an overall perspective, as we're looking at our total portfolio occupancy, we see ourselves right now close to 92%. I think as we've talked about it, we could push that up to 93%, 94%. We're still sitting with triple net lease -- single tenant net lease buildings about 1/3 of our portfolio. So that would put our multi-tenanted portfolio really at that 90%, 91%, 92% range. And I think as we look at it, that's where we're trying to drive our occupancy. From a couple of assets specifically, we talked a lot about Forest Park as an opportunity, as we are sitting there with 100,000 square feet of vacancy right now. We showed a lot of investors the asset, really because it's so well located, so nicely built. It's really just been the uncertainty around what HCA is doing with the hospital. So as we look to drive occupancy up, that's something specific we look at as a key lever. And the rest of the portfolio is where we think we can get that up to that 93%, 94% range over time.

Tayo, I think one of the things that we're into right now is a strategic process over the next 12 months is we've got some spaces that are large, 10,000 square feet at White Plains, that we don't want to break up. We've got 10,000 square feet in Hawaii that is now under discussion for a large user. So Robert talked about Forest Park. I mean, as we look at our portfolio and as we look at 2019 and we look at our leasing objectives, we've got probably 7 assets that as we focus on those assets and focus on maximizing the utilization of those assets, those -- that's going to get us to the 93%, 94%. And I think that's where you'll see us as we go through the next 18 months.

Got you. Okay, that's helpful. And second of all, just given, again, the economics for acquisitions don't make a lot of sense right now and you guys now have the development platform at Duke, would we expect increased development starts? Or are you just kind of focused on completing what's currently in the pipeline?

Well, I -- our focus, if you want to say, what are our priorities? And our priority -- #1 priority is to continue to move our same-store growth and our asset management platform to produce the results we think that we underwrote when we acquired the Duke portfolio. I think we are still a long way aways from getting the utilization out of that combination. I can't -- I've talked to folks and said, would we do that again? And we would do that 100 times out of 100 times. It increased our core critical nature in markets. It now makes us much more efficient from an engineering and -- perspective in these markets. And really, this is the first year that we're getting to focus on that. So that's #1 priority, get the internal core basics of Healthcare Trust of America's platform operating to 90%, 95% efficiency, and that's going to take 12, 18, 24 months. But the ability to focus on that is our #1 priority. #2 would be to continue the relationships we have and utilize the development opportunities that we have -- that we had, but that this acquisition now allows us direct contact with folks that can relate directly to the health care system and the real estate folks and get transactions done. So from a priority perspective, I don't think it increases our development desire. I think it just means that we're going to put the 2 priorities in the proper perspective and execute over the next 18 months.

Okay, that's helpful. Last one from me. I don't know whether you addressed this, I may have missed it. But the increase in TIs and the leasing commissions during the fourth quarter, could you just talk a little bit about what drove that?

Yes. It was really kind of one specific renewal that we looked at from a TI perspective. I think across the board, we continue to see most TIs, we're very consistent about how we're applying our TIs and allocating it. This was mostly related to one large renewal where we had -- it's the tenant that had been in there for, really, 10 to 15 years and hadn't had any TIs during that time period. So to keep this large tenant, we're going to reconfigure the space a bit. So it's really driven by one specific tenant more so than a broader trend, I'd say.

The next question comes from Kevin Egan with Morgan Stanley.

I just had a question in regards to the same-store revenue. I guess, just what kind of drove the 1.5%? And then do you see that normalizing over the course of 2018?

Well, I think as we look at it, certainly from a revenue growth perspective, we have our typical rent bumps that we have that have been averaging about 2.3%. It's been offset from some -- really some drops in occupancy. We talked a lot about Forest Park. Really, that's been the main driver of a lot of the revenue loss there. We talked about the 100,000 square feet of vacancy we have there. As we see that progressing into -- really throughout the rest of 2018, as we fill that building up, we probably see that revenue growth trend really reversing and accelerating as we get to the back half of the year.

And I think that's one of the priorities. The earlier question, what are your priorities from an asset management perspective and a leasing perspective? We're seeing lease spreads now. And one of the goals of our management team in 2018 is to focus on revenue growth. And Forest Park, it's hit us the last 12 months, but HCA now getting ready to open up is going to remove that constraint. We don't take anything out of our numbers, which is, I think, unique in this sector for MOBs or for the other folks who take development out or take certain assets that are non-occupied out. We haven't done that, and we're not going to do that. So the results we show is company-wide. So the opportunity to grow revenue, continue to get lease spreads, I think, as we move through 2018 is better than we saw in 2017.

Okay. And I guess, just in terms of the synergies, I think it was in the last call you said you're expecting probably towards the high end of $5 million to $7 million by 1Q '18. I was just curious, where are you at today? And I guess, how much do you see left on that?

Yes. In the fourth quarter, we were about $1.5 million of realized synergies, so that annualizes that to $6 million per year. So we feel pretty good about we're -- reaching the high end of it.

Okay. And then just last one for me. Just any update on the leasing progress of some of the unstabilized developments?

Yes. We really have, from an overall perspective, we've got 2 of the developments that have -- were not pretty much 100% pre-leased, one in Philadelphia and one in Illinois. We continue to see a lot of interest there. Working with the health system to take a lot of space sometimes just takes some time to work through that process. So we're encouraged by the interest and our ability to lease it ourselves.

Yes. The one in Philadelphia, for example, that's really going to be health care system driven. It's a great building built by Duke. It's 50% -- 70% occupied. But functionally, that is going to be equation where the health care system is going to expand over the next 12, 18 months, with plans to take that space. Really not an ability on our part, functionally, to probably change that because you want that use in that location, and that's what they built it for. And the relationship with Duke -- with the health care system, you don't want to interfere with that. So that's going to come online, I think, over the next 6 to 12 to 18 months. And again, great asset. It will be full. But that's another thing that we would not have done, frankly, if we were -- if it was today facing us because it was only 50% pre-leased. And our goal is that if it's going to be utilized our equity, and it's going to utilize our development team, we want 75% to 80% pre-leased. So when you get it completed, you're there at 80%, 85%, 90%. So that's sort of a -- if there's a uniqueness, I would say that, that's a distinction between what we would be doing going forward and what was done under the Duke platform in the past.

The next question comes from Todd Stender with Wells Fargo.

If acquisition cap rates just start penciling out right now, I just wanted to hear your thoughts on what the Duke portfolio and their capabilities have opened up for you guys? So I wondered if we're going to hear more about construction projects from you guys throughout this year.

Well, I -- the Duke opportunity changed the whole complexion of our relationships and the ability for us to be relevant in our markets. That is something that you can't put on a piece of paper. The opportunity to meet with these health care systems now, being the largest owner of medical office, but also the largest owner of on-campus medical office, so not only are we prominent in locations, but we're prominent in the locations that traditionally has been considered the highest quality, which is on-campus. So we're going to take advantage of those opportunities. I think this is a phase for Healthcare Trust of America, which is, in some extent, it's expanding our brand. And our brand is that we have the integrated ability to be able to do everything from property management, services to assets, efficiency with tenants and then also work with systems on the development side. And it's -- we're in a very, very good position from a company to be in 17 markets -- or 16 markets with 500,000 square feet, 9 markets with 1 million square feet. It's a good process that we get to take through 2018.

And then just for modeling purposes, what are some fair acquisition and maybe total investment numbers we could put in our model for this year?

Well, I think, one, the focus would be we would like to redeploy those disposition proceeds that we get. So if we do somewhere between $75 million and $100 million of dispositions, I think that it's very functionally, for us, able to find those opportunities to be accretive from that capital allocation. On top of that, are there going to be opportunities -- one-off opportunities with relationships where even today we're trading at maybe an implied 6 or 5.8 or something, we can get that to 6.25, 6.5, 6.75. I think we'll see that because there are just decisions that people make -- there are OP units that sometimes people want to take, and they'll take it because it's tax efficient for them. So I think we'll be -- we'll have an opportunity to be -- to do that where it's appropriate. But I don't think you'll see us utilize any significant capital in situations that we see ourselves right now. We'll be very, very patient.

Okay. And Robert, just regards to the forward equity agreement, I wondered, did you -- did I hear that right in your prepared remarks, you can potentially delay the proceeds or does the other party? What's your flexibility there?

Yes. We issue it with a counterparty on the forward basis. And so as the terms currently stand, we'll have to draw it down by the second quarter this year. But obviously, anything with a counterparty, there's the ability to modify and extend as long as it's agreeable, so...

The next question comes from John Kim with BMO Capital Markets.

You talked about Forest Park being a drag on the same-store results this quarter and some leasing progress you've done recently. But can you just remind us on the capital spend that you're putting in for the redevelopment and also when will it contribute to same-store results?

Well, for example, if you took out Forest Park, I think Amanda mentioned that our same-store numbers and so forth are much higher.

About a 50 basis point increase in our NOI.

So that is a big one, but HCA now appears to be moving forward. We've had some LOIs that are in place for Forest Park, but those are traditional leasing numbers. So it's not capital that's -- we're not redeveloping our fee simple assets that are -- or the one that is attached to the Forest Park or the one that stands right beside it. Those are already built out and predominantly built out. So we're not going to see any unusual capital that's required as those lease up.

And when will it start contributing? Because it sounds like the expense growth will be higher this year than last year, so anything else...

I think you'll start seeing, I think, actual cash probably at the end of this year. I mean, traditionally, if we start seeing what we expect, which will be in the second quarter, they tend to seem to indicate that they want it opened in the early part of '19. So to be open, you've got to have folks in and being in place. And so there'll be the traditional leases. We're seeing a lot of interest in the 7- and 10-year lease terms, larger physician groups that are wanting to locate there. So those are complexities or those are characteristics that say they're going to be larger spaces, it's going to probably show the cash coming in fourth quarter, end of this year. And that's what we've kind of looked at from our internal processes.

Okay. And then you quoted the acquisition yield on your 2017 acquisitions at 5.2%, and I know most of that is Duke. But do you have the Duke portion broken out?

Given kind of all the moving pieces with the Duke portfolio, obviously, when we did the acquisition, it was one number. There was a certain amount of ROFRs at different prices. So really, the way we look at the acquisitions for the full year is, as we stated, on a blended basis. We bought it on a 5, and we've really seen that move up to a 5.2. Most of that incremental yield really has been across the board. It's kind of hard to disaggregate things in a market where you have multiple acquisitions. And now we're running it with one management company. So that's how we look at it and that's how we've been operating it.

Okay. And then, Robert, there was a $9 million impairment taken during the quarter. Is that related to an asset you're planning to sell? Or can you just elaborate on that?

Yes. It's related to a couple of assets that we're looking to sell, actually small assets. This is kind of a question we've gotten. There are a couple of assets that we're looking to sell, so call it $15 million assets we expect to sell for $8 million or something like that. So it's not a big portion on an overall basis.

And these are in very, very secondary markets, acquired very early in HTA's process and actually acquired prior to our public listing. And they were part of a larger portfolio. So we're -- what we're doing is, I think, what every company should do is go through -- get focus now. We're very disciplined on our key markets. And we want to move into the next 12, 24, 36 months with very distinct locations that investors and shareholders know exactly where we're investing in and can feel comfortable. If they like the locations we're in, then they're going to continue to like the acquisitions that we make.

And Scott, just going back to your prepared remarks about the challenging acquisition environment and the cost of capital rising, can you just discuss where you think transaction volume will be in the MOB space this first half of the year? And if the public REITs are being priced out, is there risk of cap rate expansion?

I think that the acquisition environment in the first 3, 6 months is going to probably be surprisingly active. I think there's a big demand and continues to be a demand for this quality of real estate. And there are private buyers that have put their feet into the MOB space in the last 18 months and want to fill out their platform and may take the opportunity to do that. I think that over the longer term, MOBs are -- they look so much like what office used to look like in their performance in good economies and bad economies. We know how they perform in bad economies, which was very good. I think folks will be very surprised about how they perform in a good economy. I think that if you've got a great location and you've got great tenants, which we do from a health care sector, you'll be able to keep a very steady spread -- on re-leasing spreads, you'll be able to keep your escalators. If you have a platform like we have that is able to service the assets, you'll be able to generate additional revenue from that opportunity. And so I think that it will be challenging for a while. And as I've said, you need to make sure that you don't do things at the wrong time. What do you do when you don't know what to do? You do nothing. And so in this particular case, we'll continue to say we really like the portfolio we have. We like the cities that we are in. And we're so fortunate to be able to execute on that transaction last year when the opportunity presented itself.

Is there anything new or potentially surprising as far as who might be out there buying MOBs today as far as private equity, pension funds, foreign capital sources?

Well, I would say that my surprise would be that I -- the pension funds seem to be, in my view, very aggressive in their requirement for yield from a passive perspective. From what we've understood and some things that we've seen, I have been surprised that the -- again, the pension side of the issue doesn't seem to have -- if interest rates are going up, I'm not sure that someone has told them or their view is it's an opportunity to get into this stable asset class with a very consistent yield. And leverage probably has always been low for them, so it may not have been a -- that may not have been a component. But there is activity from that side of the equation that continues to be in the space.

The next question comes from Jonathan Hughes with Raymond James.

Just 2 for me. Just an extension on Rich's earlier question. But doesn't the expense savings opportunity diminish as the external growth slows? Meaning, the expense comp in 2019 for moving properties in-house will be less favorable?

I think that we've got -- we're probably in the third inning right now of our synergies that we expect to see from our in-housing. As I mentioned with Rich, I think bundling services for us is the biggest opportunity that we see on a go-forward basis. And that's probably going to play out over the next 18 to 24 months as we really start to get a handle on our bigger size in certain markets and the ability to bundle services now in those markets. As I mentioned, we started with utilities. We've seen significant savings there in a couple of markets that we've already rebid. We still have several markets to go. And this quarter, we're doing a national rebidding RFP process on landscaping, trash and elevators. So I think that there's continued opportunity for savings. And that -- and you'll see that play out over the next couple of years.

Okay, fair enough. And then, I guess that kind of leads to my next question. Do you have any intentions to expand the property management platform on a third-party basis to generate some fee income, increase scale and offset that lower external growth, and at the same time, maybe create a captive acquisition pipeline down the road?

Well, I think that that's the long term. If you're the dominant owner of medical office and you have a platform that's operating in an efficient -- in the most efficient way that it can, I think that's a natural extrapolation into the health care systems. I don't think the future of health care and the future of health care systems is to operate real estate. I think the pressures in the health care environment alone, one, is that they're not going to own the assets. And I think you're starting to see that and health care systems are starting to realize they have better uses for the proceeds. Second, they're going to move down the path of, okay, is it logical for us to run a real estate team and utilize the services that if someone else does it better, why don't we let someone else do it better? From HTA's perspective, I think that, that's a major focus of, number one, making sure that we are extremely proficient and experts on what we do in our markets. And then when you do have an opportunity to extend that relationship with the health care system who owns assets, who does not want to necessarily manage those assets, you don't want to fail at that. You want to make sure that, that is a very successful process and that you're providing them with what they expect. It's not unlike the senior housing side of the equation 20 years ago, it's not like -- unlike the retail side of the equation 20 years ago. You're going to see -- and we expect to take advantage of in markets, and that's really our overall theory about being -- having critical mass in select markets that are continuing to grow and focusing on health care systems in that relationship. You don't want to be in 60 cities. You want to be in 20 to 25. You want to have that critical mass, and you want that relevancy with the health care system. And when they recognize that you can do something well, they may reach out and have you do it.

Okay. So maybe longer-term opportunities, not near term.

Yes. In the near term, we're focused on what we can do for us because the greatest focus of our attention and the greatest reward for shareholders right now is with the assets that we currently own.

The next question comes from Chad Vanacore with Stifel.

Just a couple of quick questions. Scott, you mentioned the challenging acquisition environment. So any thoughts on what catalysts might reverse that trend?

Well, obviously, if interest rates would move up significantly further than 3%, 3.5%, I think that, ultimately, the private and public real estate market would adjust, depending on one's view of where that's going to turn out and are we moving down that path of just higher and higher interest rates? Functionally, I think that we're probably in a range -- we're going to get into a range. Everything seems to overshoot and then come back in whatever direction it goes into. But I look at where historically -- again, I go back to the office consistency of performance for investors. And this is the first time over the last -- at least the last 10 years, 11 years that we've been in the medical office space, that there are large opportunities to get invested in this space. We used to have -- the first question I used to get in 2012 was, how are you going to grow? That was when we were $2 billion. And we said, you know what? There will be opportunities, and we'll take advantage of those opportunities. And second question is, would the health care systems monetize? Well, yes, they did. The example last year was physicians. They monetized, and health care systems took note and health care systems are continuing to look at that opportunity. So I think this -- longer term, I'm not sure you're going to see a big change in cap rates for medical office if, in fact, interest rates stay in a consistent range that we've seen them in, in the last 6 months.

All right. Then just turning to the ATM. You expect $75 million drawn in 2Q. Should we think about a little additional to delever through the year? Or would you prefer to leave that to asset recycling and dispositions?

Yes. You would not and should not expect us to be utilizing equity from an ATM or issuing equity in this environment. We have plenty of opportunity to utilize any redeployment of sales to reduce debt. But we think that right now, we should let our equity stay where it is and continue to focus on cash NOI quarter-by-quarter.

The next question comes from Daniel Bernstein with Capital One Securities.

Since nobody's asked it, I might as well. What's your philosophy on buying back stock and philosophy on pushing the dividend that you get when you may be trading at a little bit of a -- where there's a private versus public disconnect in the valuation of your stock?

Well, I think from a dividend perspective, we're very fortunate. We're continuing to -- our cash NOI drops to our bottom line. That's one of the things that we're extremely proud of, in fact, one of the things that I pointed out in my prepared remarks. It does no good to generate same-store cash NOI when it goes nowhere, and it's also no benefit when you don't continue to cover your dividend. I think in both cases, we've done an extremely good job of that. We started out in 2012 the most upside down that you could be. I think we were like 120, and now we're down to 80. So we focused on that. So it will be a consistent application of discipline from a dividend perspective. So that's an opportunity for us to just continue to be consistent. From a stock buyback perspective, we're not, nor do I think we are, a company that buys back stock. We shouldn't be. We have an extremely strong balance sheet. We have an extremely strong performance from an NOI perspective. We're not, what I think, in any danger of -- or in any way not performing to a very high standard. Right now you see in the marketplace just an ebb and flow. Now if something happened that was extremely dislocated, which you go back to, unfortunately, world events where things go completely haywire, I do think all REITs, as a matter of fact, have really done a tremendous job on their balance sheet. Back at certain other times, REITs have not been able to take advantage of that. But from a perspective of traditionally, we would not be looking to buy back stock.

Okay. It would have to be a complete market dislocation, like no...

It would. I mean, I've used the case, if we woke up tomorrow and we were 30% off, guess what? I think I would go home sell my house for whatever it was, sell everything I had and I will buy HTA stock. But that is a complete aberration of what you would expect to happen. But we would have the ability to do that, which is a nice position to be in.

Okay, okay. And then I was looking at your geography map. You don't really have that much exposure on the West Coast. I know you want to be -- have concentrations in certain metro areas, but you don't have a lot of exposure on the West Coast. And I just wondered if you could talk about whether that's by design or whether you would have desire to be in some of those cities like Seattle, Portland, San Francisco and just if maybe you can give a little color on that.

We like -- we've talked about the Northwest. I think we were slow. We focused in Boston. We focused on the East Coast. I think that there's opportunities in certain markets in this country that are showing growth. Individually, we've talked to folks about 3 or 4 markets. We like Philadelphia, and the Duke transaction helped us get there. We like Charlotte, and it helped us get there. We have an opportunity that -- Michigan, we talked about that earlier here on the call. That's with Providence. That gives us an opportunity on the West Coast. Part of the acquisitions in 2017 expanded our reach there. We now have our in-house asset management platform on the West Coast. So the opportunity to do that, frankly, is there for us. What's not there for us right now, of course, is our cost of capital. If we were back 6 months or 9 months, you would see us having a presence in a couple of locations on the West Coast. It would have been accretive and it would have been something that would have been what we thought a very good transaction. But as discipline is required, we have moved away from those opportunities, and we'll see if those opportunities present themselves again when it's appropriate to be able to do that.

Okay. So you're not just shunning the markets, it's just a matter of time if you get the right opportunity?

Yes. We spend time in those markets. And for example, we had a couple of assets in Seattle that we went after that we liked. And one of our competitors took 50 basis points off it. And we said, well, we're not going to go and go that low. So we'll make those decisions, but we like certain markets. And we'll continue to generate relationships and take advantage of it when we can.

Okay. One last quick question. I don't know if it will be a quick answer, but a quick question. You talked some about the changes in the health care landscape the next 10, 20 years and the mergers that are going on in the hospital system. Has it changed your philosophy on what you want to acquire, buildings that have more surgery center focus than office, multi-tenant versus single tenant, on-campus versus off? I was just -- just understanding if the system's changing over the next 5 to 10 years, how is your portfolio potentially going to change the next 5, 10 years or what you want to focus on in acquisitions?

Well, I think that we like -- we're very specific. And a couple of years ago, we started talking about gateway cities. And I think as you see this economic growth go on in the United States, it's going to be pronounced as far as what locations are going to truly get the benefit of this economic growth. So number one, that's the macro position that we have, is that we like 35 cities. I mean, I could sit down and give you the 35. They're not 100. They're not 75. They're 35 cities where we would like to say these locations with these health care systems with these characteristics, we think, from an investment perspective are going to do really well the next 10 to 15 years. From a particular investment, I think that, number one, on-campus across the street, that continues to be a very favorable location. It certainly is something that is very standard in the MOB space, but there's also going to be the academic university concentration. I think that's going to be the most surprising aspect over the next 10 years is the combination or the merger relationships by the large 15 or 20 universities in this country with the major health care systems from a training perspective, research perspective, grant perspective, all those things that lead health care and make this country the dominant provider of health care. So we want to move in and have relationships with that. And I know some of our peers have continued to talk about it. But I think if you look at the execution of MOBs with universities, we are second to none from that opportunity and that execution perspective. So that's one aspect of what we haven't talked about much that we would -- that we continue to spend some time at to develop. And then the third, the community core location, that's going to happen because as outpatient demands continue, as population centers get more difficult to -- the biggest difficulty in most of these gateway cities is transportation. And the transportation is an issue and health care systems want their future patients or they want that outpatient to have to travel the least amount of distance or have the most access to their locations. In most of these cities, we're seeing that, that's not downtown, and we're seeing that it's out in the communities and, in some cases, not on hospital campus. So I think you'll see us continue to focus on those 3 specific aspects from an acquisition perspective.

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

Well, I want to thank everybody for joining us, and we look forward to 2018 and appreciate everybody on the call.

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