Healthcare Trust of America, Inc. Class A

Good day and welcome to the Healthcare Trust of America second quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, press star then two. Please note this event is being recorded. I would now like to turn the conference over to David Gershenson, Chief Account Officer. Please go ahead.

Thank you, and welcome to Healthcare Trust of America's second quarter 2021 earnings call. We filed our earnings release in our financial supplement today after the close. These documents can be found in 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'll 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 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 that are 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 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 Brad Blair, Chairman of Healthcare Trust of America. Brad?

Thank you, David. Good afternoon, and thank you for joining us today for Healthcare Trust of America's second quarter 2021 investor update call. Joining me on the call today is Peter Foss, our newly announced Chief Executive Officer, Robert Milligan, our Chief Financial Officer, and Amanda Houghton, our Executive Vice President of Asset Management. Before we discuss HTA's performance for the quarter, I first wanted to comment on the voluntary resignation of our chairman and CEO, Scott Peters. Scott founded the company in 2006 and directed its progress as we successfully grew to become the largest owner and operator of medical office buildings in the United States. We're extraordinarily proud of the company HTA has become and know that we are all very well positioned to exceed in our next phase as the leader in this evolving sector. All of us on the board thank Scott for his 15 years of service to HTA and wish him well on his future endeavors. As a result of this resignation, as I said, we have appointed Peter Foss as our chief executive officer to lead us during this transitionary period. Peter is an established leader and executive serving over 35 years at GE while leading multiple divisions and spearheading key growth initiatives for the company. He has served on HTA's board since 2015 with the relationships and insights to partner with our strong leadership team as we execute our existing business plans. One final thing to note. As noted in the 8K, the board is currently engaged in a review of several items related to the company's whistleblower line. These reviews are in their early stages, And at this point, we do not anticipate them having any material adverse financial impact on the company's operation. However, we will be unable to provide any additional color on this matter at this time. I'll now turn it over to Peter.

Thank you, Brad, and thanks to all of you who have joined us today in this call. I've been with HTA for over six years now, and I know firsthand the strength of the company and of the management team that I am joining. a company that has balanced short-term performance with investments that will pay off in the long run. In my time here, the company has more than doubled in size and grown earnings over 20 percent, a tremendous performance led by Scott Peters. As we survey the healthcare landscape, HTA is uniquely positioned to be a leader in medical office as broader healthcare continues to grow and shift to an outpatient model that is more convenient and closer to the consumer. We positioned our portfolio with scale and great markets. We have full service capability that are focused on delivering for our tenants. We have a strong balance sheet that allows us to invest. We have demonstrated ability to grow our earnings and our dividends. And most importantly, a strong leadership team that has been critical to this execution. We may certainly look to add talent to meet the opportunity for us. The core is strong. In short, I'm stepping into a company that Scott Peters created that is in great shape with tremendous opportunities in front of us. Our second quarter performance certainly demonstrates that fact with record earnings, tremendous investment pipeline, and the ability to reiterate our guidance and to raise our dividend for the eighth year in a row. Now I'm going to turn it over to Robert and Amanda for our operating performance. Before they do that, I want to make a couple more comments. There's a 77-year-old coming into this. I've been around a lot of years and seen a lot, and I was encouraged yesterday when I saw a 63-year-old Australian win a gold medal. It made me feel a lot younger. But, you know, I come here today. It wasn't my plan to be doing this, but I am honored to be here. I am used to driving organizations focused on growth and employee development, and I couldn't be happier to be able to do this at HTA with an outstanding team, a team that's demonstrated on a continuing basis their ability to drive results As I said before, doubling the size of the business and growing earnings over 20% over the past five years. My role, as I see it, is to assist this team in continuing that level of performance by ensuring an environment that has clear goals and measurements and has the tools available to help focus on the execution of those goals. My job is to help this team to make this team as good as they can be. Thank you very much.

All right. Thanks, Peter. Turning to financial performance, in the second quarter, our performance remained extremely strong, highlighted by steady portfolio performance with same-store NOI growth of 2.1% and continued rent collections, including on our 2020 rent deferrals, of which less than $700,000 is remaining as of today to be paid through September. We had normalized FFO per share at 44 cents, an increase of almost 5% versus 2020. Recurring capital expenditures of $16.6 million, or approximately 13% of NOI, which included almost $2 million spent on energy efficiency projects. As a result of this performance, our normalized FAD grew almost 5% to $81 million and allowed us to announce our eighth annual dividend increase for the third quarter. We also had G&A of $10.9 million, continuing our efficient overhead at less than 10% of NOI. From an investment perspective, we remain focused on growing in our key markets through acquisitions and increasingly development, while funding our growth through the use of our forward equity raised as well as attractively priced dispositions out of non-key markets that we believe have fewer opportunities for growth over the long term. Since our last call, we have seen a significant pickup in opportunities that fit our criteria. As a result, we currently sit with $373 million in 2021 investments that we have either closed or have under exclusive contract, with first-year yields of over 6%. This includes roughly $100 million closed year-to-date as of the second quarter, with the majority of the rest expected to close in the third quarter. We have $110 million of development projects on track for completion in 2021. This includes $50 million related to projects that we substantially completed in the quarter, one with Common Spirit in California and the second with Jackson South Hospital in Miami. We also have a $60 million project going on at HCA's Medical City Heart and Spine Campus in Dallas that we expect to be completed in the third quarter. These projects will add an incremental three to four cents per annum upon full stabilization. We also have seen our development pipeline built with approximately $375 million of projects that are currently in the pre-leasing stage that we expect to begin and start construction on as early as the end of 2021 and into 2022. This pipeline includes five projects totaling more than 850,000 square feet of space located in our markets in Houston, Orlando, and Raleigh, with average stabilized yields over 7%. This includes the $215 million, 485,000 square foot Horizon Tower located on the Texas A&M Innovation Plaza and the Texas Medical Center, the largest medical center in the world. We're also taking advantage of competitive markets for investments by strategically selling non-core assets, including a $67 million sale of the portfolio in rural East Tennessee and Southwest Virginia at very attractive pricing that will lock in double-digit annual returns since our original investment more than 10 years ago and generating a gain on book value of approximately $33 million. We've also entered into an agreement to sell two additional properties, including one that was subject to a tenant purchase option. Although these sales are expected to total approximately $30 million, although may not close until early 2022. On these specifically related to the purchase option, we took an impairment charge of approximately $17 million. Finally, we are currently in discussions to sell additional properties as we look to exit non-key markets. As a result, in total, we expect our dispositions in 21 to total as much as $125 million, with pricing between 5% up to 6.5 attractive levels as we redeploy into our higher growth key markets. To support this growth, we maintain a very strong balance sheet with more than $1.3 billion in liquidity and leverage of just 5.5 times, incorporating the forward equity we have previously raised. As a result of this performance, we're able to update and tighten our earnings guidance for 2021 to $1.74 to $1.78, which incorporates our view that the same store for the year will come back to a range of 2% to 2.5%, with acquisitions that are increasing to $375 to $600 million, while selling between $70 and $125 million of assets and funding the remainder, with already raised capital, which will keep our leverage between 5.5 and 6 times. I'll now turn it to Amanda to discuss our operations.

Thanks, Robert. Our team has remained committed to working with our tenants and health systems as they navigate the COVID pandemic and its impacts on healthcare delivery. We focused on strengthening key relationships and improving building operations and tenant quality while increasing the long-term value of our buildings. During the peak of the COVID pandemic last year, many of our health system partners pushed pause on growth and expansion plans. redirecting focus on the testing and care of the increased patient population affected by the virus. This year, and specifically the second quarter, we've started to see a resumption in prior plans that had been put on hold, as well as new plans for growth. To better position ourselves to provide maximum flexibility and service to our health care partners, we've increased our investment in tenant space, completing 185,000 square feet of speculative move-in-ready space over the last 12 months, with another 100,000 square feet anticipated in the coming 12 months. We've added to our leasing staff, building internal teams in markets like Tampa, Raleigh, Orange County, and Denver, core markets where we expect to continue to grow. From an operational performance perspective, in the second quarter, we were able to achieve same-store NOI growth of 2.1%, with over 1.5% of revenue growth, despite a decline in year-over-year occupancy. We signed 647,000 square feet of leases, including 150,000 square feet of new leases. We had almost half a million square feet of renewals that resulted in 80% retention and rent growth of 2.1%, solid results that are more in line with what we have historically achieved. Our annual escalators for new leases signed in the period were 2.8%, continuing our trend of increasing escalators towards 3% as we continue to roll our leases. PIs remained efficient at $1.45 per square foot per year of term on renewals, but increased to $5.04 per square foot per year of term on new, as we have seen some inflation come through construction costs. One area of success has been in the leasing of both our development and redevelopment projects. During this period, we increased our lease rate of our Cary, North Carolina development to over 97%, a sign of a strength in that market. We are also close to completing more than 70,000 square feet of redevelopment space in Denver and Houston, which will come online in the third quarter. While these do not impact our same store performance, this lease up is critical to our bottom line performance. As we look at the rest of the year and into 2022, we are intently focused on growing our occupancy and believe it will start to turn in the third quarter. Our new leasing activity continues to be strong, and over half of our portfolio vacancy is in core markets that are seeing population growth, especially coming out of COVID. Combined with focused improvements to our space and an expansion of our sales team, we believe we have good opportunities for occupancy growth over the coming quarters and years. On the expense front, we continue to show the benefit of our economies of scale and specialty service offerings. For the quarter, we were able to keep expense increases relatively limited despite increased utilization of our property. Our same-store expenses increased just 2 percent, despite experiencing significant utility pressure in certain jurisdictions and overall pressure in property taxes. I will now turn the call back to Peter.

Thank you, Amanda. I will now open it up for questions.

We will now begin the question-and-answer session. To ask a question, press star then 1 on a touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then two. And the first question comes from John Sanabren with BMO Capital Markets. Please go ahead. Hi.

Good afternoon. I know you probably are limited to what you can say, but I was hoping you could speak to the whistleblower allegations And what gives you the confidence to say in the 8K that you don't expect any material impact or material of adverse impact to financials for the company? Previously, there was allegations of smoothing on the same store results. Is that involved in any way or form?

Yeah, hey, Juan, and good afternoon, and thanks for getting on the call. You know, we can answer that. That absolutely has nothing to do with it, and I think, you know, as we've reviewed everything, you know, it certainly is in the early stages, but we are able to say at this point in time we certainly don't anticipate this to have any material financial effect on anything, but it's not related to the same store, no.

Can you? delve into what it is related to in any fashion?

I don't believe we can at this time. It's too early in the process to start talking about any of the issues that are raised therein, and we just are not at liberty to do that.

And Peter, for you, have you looked at hiring any outside parties to look for a more permanent CEO at this point, given your background isn't necessarily in real estate, granted you have significant leadership experience, and or have you hired any advisors in case the company maybe has to explore other alternatives, including a sale or whatnot?

We have not at this point, but that would be our intention. This is our first day, half day, actually. So certainly we'll go on a search for a more permanent management team, be it internal or external search, but we certainly will bring in some new talent. That's our intention.

Okay. And just a question for Robert. I mean, are you comfortable with the financials you've kind of signed off on, or given the audit committee is involved, Can you speak to your comfort with historic results?

Yeah. You know, I think, Juan, I think that's, you know, a perfectly fair question, you know, and unfortunately we do have to be very specific about what we can say on things. But, no, you know, you're going to see that we're signed off on our financial statements as we release our queue. I think we anticipate that coming out in kind of the normal course of activity. I think everything that we do is obviously reviewed both internally with internal audit as well as external audit, it goes through a very thorough review process. And, you know, I think we are very comfortable with the financial statements that we have out there, which is why we're able to put in the 8K that we anticipate that there's not going to be any material financial impact.

And one last question for me, excuse me. Is Scott entitled to any severance package given it seems like this was for cause?

No, there is not for cause.

It was not for cause? No. Okay. So he will get severance then?

No, he resigned, and he's not entitled to any severance.

Okay. Thank you.

In the interest of time, we ask that all people that are asking a question limit themselves to one question and one follow-up. The next question comes from Nick Joseph with Citi. Please go ahead.

Hey, it's Michael Bellarmine here with Nick. You know, I guess Brad or Peter or both of you, it's not every day we see a founder of 15 years who's got, I think he has over 3 million units, so let's call it over $100 million invested in the company. voluntarily resign and rush you guys to put, I mean, Peter, I admire your dedication to step up at 77 and take this job. But not every day you see someone just walk away from the company they founded and the team they founded. Can you elaborate on his decision to resign and does it have any result of any of the whistleblower complaints that were made?

It's Peter. It is not a result of any whistleblower. It was a personal decision on Scott's part to resign that we can't put any more information on at this point in time. I don't know what else to say. We can't comment on that.

Well, I guess it's just not, I mean, how does someone just step away? Was it the result of any disagreement on the business, the operations, the strategy, the financial conditions, the internal controls, the processes, strategic direction of the company? I mean, you have to give us, I mean, he's a founder with a significant stake in the company. It's not every day that you see that with zero explanation. It could be for personal reasons and then just say that, but that's not even said.

Well, we did say it's for personal reasons. It was Scott's decision, and I can tell you it isn't any of the things you just listed.

And so why no transition, right? A guy can step away and continue to help, you know, so that, Peter, you have an easier job to do. Something doesn't feel right for someone just to step away. You have to accelerate your conference call. There's no transition period. What comfort can you provide shareholders, right? that something's not larger of an issue here?

First of all, it's not $100 million he has in the company, but it's a substantial amount. His decision was a personal decision. We have nothing we can add to that equation. It's unusual that it would occur on such short notice. We weren't prepared for it. We have a succession sort of plan that we've been working on, but there was no way we could jump into that plan at this early stage with this short notice. Again, we're not at liberty to talk anymore about it. We don't know.

We don't have a very good answer for you other than to say, look, we stepped up to continuation of this great company and run it. We love it. But we don't have a good answer for you because we don't know.

Well, I guess can you give some confidence that you'll involve some strategic financial advisors as you evaluate what the best course is? Because perhaps investing in a new CEO, which could cost a lot of money, a lot of people are chasing MLB talent, maybe that's not the right direction to go. Perhaps the right direction could be to explore a sale of the company. So I think your shareholders, especially given how quickly this has transpired, should get from the board of directors some clarity about the process from a CEO search as well as an exploration of potential alternatives, if that is something that you'd even come to mind.

Yes, we will be expanding our communications on that as we proceed down that road. We are going to look internally and externally I don't think we're going to rush to any conclusions. We've got some business at hand we want to continue to take care of. We need to focus on that, most importantly, and we will replace Peter in due course with the appropriate talent and we'll keep you informed as we move along at this stage.

Does that mean you're just going to stay the course and be a standalone company hiring a new CEO? It doesn't sound like you. I mean, there's a ton of money in MLBs. Why wouldn't you take the opportunity today to at least explore when the company doesn't have a CEO in place to see if a combination with another public company or a complete sale to private capital may make more sense at this juncture versus continuing on a state-of-course, stand-alone public company basis.

Well, should in the course of our continuation of the business opportunities we have, that circumstance would be presented to us. We would, as a board, have to consider all those situations. But we don't consider ourselves in any any rush to have to deal with that situation at this time.

Okay. Thank you for the time.

The next question comes from Bikram Malhotra with Morgan Stanley. Please go ahead.

Thanks for taking the question. Maybe just to start, if you can clarify, when did Scott actually resign?

Yeah, the effective date was yesterday, and the notice was about four days before that. Yeah.

29th was the notice. Could you clarify the notice was when? 29th.

29th.

Decker, we have the exact dates, I believe, in the 8K.

Okay, got it. When resignation was tendered on the effective date.

And then I just want to make sure I heard, you said there is no link between the whistleblower complaint and his resignation, correct?

That's correct.

Okay. Okay. So I guess just, you know, you've obviously had a lot of questions on this topic. And my sense is that, well, maybe just first, if you can clarify this, the whistleblower complaint, is that something that the board has been focused on, you know, for, is that just something you got to know very recently? Is there been, has it been a week or so you've been focused on this? Can you just give us a bit more color on the timeline or on the whistleblower complaint?

About two to three weeks now.

Okay. And given you have two to three weeks, you can't even give us a broad sense of, like, what aspect it could be related to high level? Is it, you know, something to do with accounting? Is it something to do with some calculations? Is it something to do with any broad topic? Could you give us a sense of, like, what aspect it could be related to? I ask this only because this is, again – Going back to the prior question, this is so unprecedented and so abrupt that it would help to just give us a bit of and give investors a bit of color.

The investigation started by independent attorneys about two weeks ago. Well, last week really was the first week. And the whistleblower complaints are not financial. So the company is in great shape. That's not a concern.

And I think, Vikram, this is Robert. I think when you look at that, obviously, you know, Peter and Brad can comment around it as it goes to the board. From a financial numbers perspective, you know, there's a number of things that it could be related to. You know, we have the comfort to be able to sign off on our financials. I think we have complete sign-off within the organization about the financials certainty of what we're putting forth and be able to make the statement as something that has been reviewed by all parties that we don't anticipate there's going to be any financial, material financial impact to this. So I think that gives you at least some color as to what it might, that we have that comfort of being able to say that.

Okay. And then just last question. I may have missed this, but Is there a – I think you said there's outside counsel looking into this. Is there a dollar amount that you expect will be spent, and can you give us a rough timeline as to how long you think this will take?

I don't know that we can put a dollar amount on it, but our expectation is it should be four to six weeks.

Okay, great. Thanks so much. I think, Vikram, from a financial perspective, cost is at least what we've been able to see here. Obviously, we've reiterated our financial guidance for the year. I think we have the confidence to continue down that path. I think we have the confidence to put out earnings today. I think we have the confidence, knowing what we know, to continue with the investments that we've seen. to continue to run the business operations. Obviously, we understand you have to ask all these questions related to it. And unfortunately, there's not a lot of additional color we can provide. But we did obviously reiterate our guidance. We do continue to see the operations moving forward. I think we do continue to see investments that are out there. And I think what Michael said was right. MOVs are a great place to be in. The asset value is very high right now. I think it's a very attractive place and we've got a very attractive platform that we've been able to put together.

Okay, that's helpful. I guess, Robert, while I have you, I'll just ask you a quick numbers question. The same store NOI guide I think is modestly lower now at the midpoint. Can you just highlight what drove that?

Yeah, you know, I think as we've been looking at our same sort of growth for the year, you know, we've come into it with slightly lower occupancy coming into the year. I think we've seen extremely strong leasing activity as the health systems come out of COVID and focus more on growth as Amanda talked about. I think some of the timing of actually getting leases signed and move in and thus resulting in occupancy has been a bit delayed. You know, I think everybody's talked about some shortage of materials. I think as we look at contractors, it's been a very tough market in order to get them in order. So there's been some construction delay on things, but I think it's a modest change down, 2% to 2.5%. We came in at 1.6% in the first quarter, driven by higher snow removal, higher utility costs, so there's some expenses in there. And I think now that we're six months into the year, it's just prudent to take it to that area that we think we're going to be in. which I think is still a very good number. I think when you look at our performance over the last two years, we've been able to continue to grow. I think we've been able to continue to move the portfolio performance up. And so, you know, against the backdrop of every other REIT, I think we've viewed our performance as being quite strong.

Okay, great. Thanks so much.

Thank you.

The next question comes from Rich Anderson with SMDC ECAP.

Yeah, I've got two questions, I promise. So you said whistleblower is not financial, but then you say in the AK that there's no financial – I'm confused. Is it or is it not financial matter because you kind of throw out the disclaimer that you don't expect material financial impact but not zero financial impact? I'm confused. I'm just trying to frame what this whistleblower topicality is, if you could say it in general terms, personal, financial, anything like that.

Rich, you know, this is Robert. I think I'll say just a little bit about it. And I do think you're, as appropriate, you know, you're looking at specific text. And everything that, you know, we do within the business obviously could have a financial impact to it. So I think as we look at things, you know, everybody's been able to sign off that we don't anticipate this having a material topic at hand. We don't anticipate it having any sort of material financial impact to the company.

Okay. Second question. I'm curious why the acceleration of the release and the call. You're supposed to report on Thursday night, call on Friday. You know, he gave notice on the 29th and resigned officially on the 2nd. Why – it rings frantic to me. Why not just – If you're going to wait from the 29th to the 3rd, why not wait from the 29th to the 5th? What was the reason for accelerating the call?

Yeah, Rich, it really comes down to the disclosure date. You know, it comes from the date of notice upon receipt. We have a specific SEC requirement, obviously, to put out information in as timely of a manner as possible, but I believe this is within three to four days.

Yeah.

And so, you know, I think when we received the notice on Thursday, that started the clock ticking. And, you know, I think obviously given the questions that are out there, We wanted to make sure that we could, again, put it in the context of a business that's continuing to perform, a business that continued to have opportunities, a business that continues to have, you know, various investment opportunities, you know, including development that is better than we've seen and continues to put out earnings. So, I think the clock was ticking based on the date of the notice period.

I get that. I'm just wondering why Scott wouldn't time it a little bit differently. You know, I understand disclosure issues, but it doesn't seem like there's a whole lot of cooperation here. Just an observation. That's all I got. Thanks.

Thanks, Rich.

The next question comes from Lucas Hartwich with Green Street. Please go ahead.

Thanks. Will the process for a CEO successor be conducted in tandem with the investigation, or does the investigation need to be completed first?

No, it can be conducted in tandem with that. There's no pecking order.

Okay. And then are there any other employees subject to the investigation or former employees, I guess?

Lucas, just to clarify, I don't think we put out any notice of any particular person being subject to the whistleblower. I think the specific disclosure, and this is an important fact, I think the specific disclosure was just that there was something out there and it's being investigated, but that does not imply that it's related to anybody or anything in any specific manner. Great. Thank you.

The next question comes from Mike Mueller with JP Morgan. Please go ahead.

Yeah. Hi. So was the whistleblower directly related to Scott? Because I know you said Scott departed, but is there a separate issue or is this tied to Scott? I guess that's the first question. And the second question is, is this, I guess, whistleblower complaint tied to operations or tenant relationships in any way.

You know, Mike, I think we've got to be specific to what we put out in the 8K. You know, it's just, you know, every company has a whistleblower hotline that's put in place. Every public company certainly does. And these things do come in from time to time. You know, the board does take everything seriously, as is their obligation to do that, and then to, again, investigate it with the appropriate amount of attention. new course. So I think, you know, we put that out as from a specific manner. I think as we look at the disclosures that we put out related to that, I think we just are able to note that, you know, anticipated to have a significant material financial impact.

Yeah. I mean, not that whistleblowers are random, but it just seems like if this was a random event, it wouldn't necessarily be in the same AK with Scott's departure.

Well, you know, I think it's just a matter of disclosure that you have to put out. You know, anytime that there is a significant material event, such as an officer leaving, I think it is incumbent upon companies to disclose anything else that is going on. So I think it's, you know, for the specific reason that that's why the two are together. And I think, you know, specifically in the 8K, tie them together. So I don't think that's what we specifically stated.

Okay, thank you.

The next question comes from Nick Ulico with Scotiabank. Please go ahead.

Thanks. I just wanted to go back to the topic of severance and be clear on this. I think you said that there is no payments whatsoever going to Scott related to the resignation. Is that correct?

You know, I think Nick and Brad and Peter will opine. Scott's employment contract obviously has a number of provisions in it. You know, this, as Brad and Peter have said, this was a resignation by Scott for personal reasons. That is what, you know, that is what we know. I think in due course of the rest of it, it just came in in the last couple days, in due course it's going to play out, and so we don't have a specific estimate if there's going to be a payout or if any.

Okay, yeah, I just wanted to be clear on that, Robert, because if you read through the proxy, you know, there's a resignation without good reason, and then there's a resignation for good reason. And, you know, the resignation for good reason entitles Scott to potentially, you know, $14 million, according to the proxy, whereas the resignation without good reason is only a potential $2 million payment if you decide to enforce the non-compete. So just to be clear, the board hasn't determined yet which, if this is a resignation for good reason or not?

Well, the letter we received had no condition. It was just a resignation without good reason. It was just without a reason. He just didn't answer that question.

Okay. I appreciate that. Thank you. And then I guess just to follow up on that is, are you going to enforce a non-compete?

Those are judgments we'll make here shortly, but I would imagine we would.

Sorry, you imagine you would?

Yes, we imagine we would.

Okay. All right. Thank you. Appreciate it. Thank you.

As a reminder, if you have a question, press star then 1 to join the queue. The next question comes from Michael Gorman from BTIG. Please go ahead.

Yeah, thanks. Good afternoon, and I apologize to beat a dead horse here, but Robert, I want to just go back to one of the questions Mike asked, and I understand the sensitivity, but you did file three 8Ks today, so I just want to make sure I understand, you know, if there's no relationship between the two, you know, it does just look a little bit odd that of the three 8Ks, this was put into that one rather than the disclosure of your financial results or the dividend or anything like that. Is there some technical reason that I'm missing that it was in that specific 8K instead of the other two?

You know, Mike, I think it's a good question. And I think, you know, from an 8K perspective, you know, we just had them kind of all in line together. I think the earnings release covers specifically the earnings release, as we've always had. I think the dividend is consistent with everything else that we put. And then from just an 8K perspective, we put the rest of the matters into that one, as opposed to just doing an omnibus type 8K that would include all sorts of stuff. I think we were trying to just aim for transparency of putting them out there so I think you know in the 8k you know we did not tie them together but I do think it is important to note that you know we are following the obligations that we have just run a disclosure perspective and again as I think both Brad and Peter have said it was a personal resignation for personal reasons it's a disclosure of several just reviews taking place of which at this point we don't anticipate to have any material financial impact so

Yeah, remember that the resignation event required an 8-K filing within a before-day period. So, we prepared that and filed it as a separate 8-K.

Okay, and then I guess maybe if we could just step back for just a second. Can you maybe walk us through, obviously, Scott was founder, CEO, chairman. What are the internal whistleblower procedures at HTA, right? And what determines when it rises to the level or who determines that it rises to the level that it requires outside counsel? When would the chairman and CEO, you know, it sounds like this investigation started a couple of weeks before the resignation date. When in the normal course of a whistleblower does it rise to the chairman and CEO in terms of them being looped in?

Well, Mike, you know, I think from a company set up perspective, and since the company sets it up under Sarbanes-Oxley, you know, every company has a whistleblower. You know, ours specifically gets routed, I think, as we disclose in our whistleblower policy, it gets routed to the chair of the audit committee and the lead independent director. That's what happens every single time. You know, I think that it's determined the direction that it goes from there. Again, these are put in place so that people, every public company has it. So, you know, I think that's the procedure. I think we publish it and it's consistent with most other public companies.

Okay, great. Thank you for the time.

This concludes our question and answer session. I will now turn the conference back over to Peter Foss for any closing remarks.

Thank you very much, and thanks for all of you for joining us today and asking questions.

Operator, do we have any other questions in the queue? We can still take one or two more questions if they're still in there.

We do. We have people who had already asked questions, if that is okay.

We will take the follow-up questions.

Yeah, we'll take them. Sure.

We have John Sanabrin from BMO Capital Markets. Please go ahead.

Hi. Just one follow-up question for me. Curious on why or the strategy or the policy behind involving the audit committee if the whistleblower complaint in Scott's departure is not tied to financial issues?

Well, all whistleblower complaints go through the audit committee. Chair of the audit committee is responsible for managing those.

And they don't all relate to financial matters. It's just the standard policy of how the hotline is set up and the administrator procedures is that's where it goes for proper routing to make sure it gets the proper attention. But certainly not all matters relate to financial matters at all.

Okay. Thank you.

Again, it is star one to join the question queue. Next question is from Lucas Hartwich with Green Street. Please go ahead.

Thanks. Appreciate you taking the follow-up. Can you comment on whether the whistleblower complaint is related to conduct at the company or outside of the company?

I don't think we can, you know, we're not trying to evade it. I just don't think we can answer that question.

Fair enough. Thank you.

Okay.

Any next questions from Nick Joseph with Citi? Please go ahead.

Hey, great. It's Michael Bellarmine. Considering Nick and I both on the first questions were Nick's questions, I had a couple of follow-ups. Just in terms of just sticking on the whistleblower complaints, Were those external to the company, i.e., did external parties call the whistleblower hotline or process, or were they internal matters, internal people?

Michael, I think those are very fair questions. I think many of these things can be anonymous in nature. I think it's just a general setup of whistleblower hotline processes. NYSE requirements, things like that, gives the opportunity for people to both name themselves as well as be anonymous. That's the point of the program from a transparency perspective. So, you know, I don't think, A, we might not even know, and I'll allow Brad to Peter. Robert at the company, I just, you know, we just helped set it up from a SOX perspective. We don't actually receive them or see them, but from just a purely set-up perspective, It can be anybody internal or external to the company, and it can also be very well anonymous. Right.

I should note that it sounds like you've already made some determinations in terms of its severity, at least in account of the financials. It just wasn't clear to me whether you had sort of gone through some of the identification process, and it wasn't clear. It was mentioned that there were several items involved. And so I wasn't sure if we were dealing with multiple whistleblower complaints or if it's multiple to one issue to which the company and the audit committee have their independent legal counsel reviewing.

Yeah, there are multiple complaints. They don't necessarily tie together, you know, and we don't know in case necessarily who the complainant was. We're in the process of researching that and investigating.

All right. And the last question I have just goes back to Scott. So it sounds like he tendered his resignation, you know, to the board, I guess, last week on Thursday. I guess prior to that, had there been any conversations with Scott about potential changes in his role? He obviously is chairman, CEO, and president. Was he at all involved in any of these investigations as his time as CEO? Just anything that predated that Thursday in terms of just discussions. And then if you can just say, did he completely leave, i.e., was completely cut off on Thursday, and there's been no communications between the parties since. I just wanted to get clarification on that.

No communication since his notice, correct.

And then on the first part in terms of what predated him giving you a notice, it's just trying to get a little bit of color about what type of relationship there was between the founder, chairman, president and CEO and the rest of the board prior to giving notice that he was walking out the door with with his bags, basically.

Well, this is Peter. I think Brad would agree. We had no, you know, pre-knowledge that anything was going to happen. He's been a great friend and we were really surprised. I mean, in fact, we were here last week and worked with Scott for two days just going over some business plans and so on, and it was good discussions. And then we left here Wednesday, and his notice came on Thursday. So. And then just with you. It doesn't help you much, it doesn't help us much.

Yeah, no, no, and look, I appreciate the candor. You've had a few days to process. We all have had, we've had a few hours, and so there's multiple stages of grief as you know, and so I don't know what stage we're at now after 50 minutes, but it is – you don't see it. And I don't want the – all of us are wondering what the next chapter could be, both for the company, for Scott individually, and how it all sort of plays out. And I know we've sort of beaten this whole trying to tie – The whistleblower complaints, which I recognize are quite, you know, this happens all the time at all public companies. And in most, you know, in many cases, you know, they're investigated, they're dealt with, and it doesn't rise. But that's the point of these hotlines, to be able to provide opportunities for anybody who feels that they want to have something just looked into that they don't think is right. Had Scott – had this gotten to Scott's desk, i.e., was Scott involved in any of these complaints by the time – again, if you're saying he was business as usual last Wednesday, was he involved in these things?

No. He can't be involved in the investigation of these, nor can he receive them or know who they're from.

Was he aware of them?

Anonymous.

No, but was he aware that there was – I guess that's what we're just trying to find out. Was he aware that there was processes and that some – he may not know what it was, but he may have – I guess at what point did he know that there was whistleblower complaints that the company had retained independent counsel, that the audit committee had retained independent counsel, that this was going to have to be disclosed to the market because it had reached to that point where you've engaged counsel and doing reviews. You wouldn't disclose it otherwise. Right.

I think there's one thing, just a clarification around disclosure on it. You know, I think if you go through things and, you know, as you pointed out, these things come in all the time. Various levels, serious, various levels, who knows what, just because it is open to everybody by design, as you pointed out. And so I think most times they go through just a normal review process and to the point that you – you get through it, whether it's right, wrong, or indifferent, they're generally not disclosable. And I think that's where we said we go in and anticipate that, you know, at this time there would have been anything from a financial perspective that would be material enough to disclose. However, unfortunately, given the timing of these things, you know, it's important and required that we disclose if anything else that's going on. So, you know, I think that's where we say we don't anticipate there would have been a financial disclosure on this, but that's That's what we've got.

I think at this time we should probably terminate the call. We appreciate the questions.

And I want to make sure we reiterate what Robert had said before, that we're still keeping our guidance. The business plan is fully intact. And we just raised our dividend. So we're moving forward and looking forward to continued growth and great results.

Thank you all.

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