Healthpeak Properties, Inc.

Good day, and welcome to the HealthPeak Properties Incorporated fourth quarter conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Andrew Johns, Vice President, Corporate Finance, and Investor Relations. Please go ahead, sir.

Thank you, and welcome to HealthPeaks' fourth quarter and full year 2020 financial results conference call. Today's conference call will contain certain forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, our forward-looking statements are subject to risks and uncertainties that may cause actual results different materially from our expectations. The discussion of risks and risk factors is included in our press release in detail in our filings with the SEC. Do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures will be discussed on this call. In the exhibit at the 8K we filed with the SEC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. The exhibit is also available on our website at www.healthpeak.com. I will now turn the call over to our Chief Executive Officer, Tom Herzog.

Thank you, Andrew, and good morning, everyone. With me today are Scott Brinker, our President and Chief Investment Officer, and Pete Scott, our Chief Financial Officer. Also here and available for the Q&A portion of our call are Tom Clerch, our Chief Development and Operating Officer, and Trem McHenry, our Chief Legal Officer and General Counsel. With the vaccination gaining more traction every day, it seems we can finally see the light at the end of the tunnel. Yet our intense effort executing through COVID will most certainly continue for a while yet. Despite the enormous challenges of 2020 for HealthPeak, I believe we will exit the pandemic in a stronger place than where we started. More on that shortly, but first let me temporarily digress. Around a year ago, the first confirmed case of COVID-19 was identified in the United States and then spread insidiously across the country. Like so many companies at the time, our executive team and board were busy determining how best to navigate the imminent crisis with consideration to its then uncertain penetration and duration on human beings and on the market. At the time, we identified five priorities. First, to protect the health of our teammates, residents, and tenants without overriding consideration to expense. Second, to guard our balance sheet, liquidity, and credit ratings to ensure we remained rock solid on the other side of the crisis. Third, to communicate frequently and openly with our investors, analysts, and rating agencies as best we could with the facts we had at the time. Fourth, in a post-COVID world, we considered key societal and market trends and determined that all of our classes of real estate would remain vital after the pandemic was resolved. And fifth, we aim to take advantage of any opportunities that might result from disruptions caused by the pandemic. Initially, we thought it possible there may arise distressed buying opportunities, but that never did transpire in our desired asset classes of anchored MOBs and purpose-built life science. And in fact, we saw cap rates compress rather than rise. Fortunately, that positively impacted our gross asset values for these portfolios. Execution on these five priorities turned out to be critical in guiding our path through the fog. And relative to our priority of identifying opportunities created by the crisis, we decided to test the market to determine if it might be feasible to lighten up or even exit our rental senior housing business without undue incremental pollution. That was a half a year ago. So after six months of hard work on this plan, yesterday we announced that during the fourth quarter and year-to-date 2021, we closed on $2.5 billion of shop and triple net sales, with the remaining $1.5 billion under binding and non-binding contracts. In aggregate, this $4 billion of rental senior housing sales is right on top of the estimate we provided in our Q3 earnings call. We're now very far along to a full exit of rental senior housing with some work left to do. Accordingly, we will soon be able to focus our team entirely on growing and operating our biotech-centric life science and our primarily on-campus MLB portfolios, which together will soon represent 85% of our company. And additionally, we continue to hold a relatively smaller portfolio of high-quality and high-yielding CCRCs. And a fundamental tenet to our strategy, we believe all three of these businesses represent irreplaceable, high barrier to entry portfolios that are impossible to replicate and provide a strong growth trajectory based on demographic tailwinds. Additionally, our land bank and densification opportunities aggregate to $7 billion plus, which will keep us busy for around a decade without the need to purchase any additional land. But inevitably, I'm sure we will do that too. In our purpose-built life science business, available land in the three hotbed markets is scarce, and competition from office conversions is typically cost-prohibitive. And even if such conversions are completed, they do not provide the same heavy lab-use ability as purpose-built life science. In addition to our 10 million square feet of operating life science properties, we have another 5-plus million square feet available through our land bank and densification pipelines. which represents $6 billion plus of embedded accretive development spend. The majority of this consists of low-rise properties in the heart of some of the strongest life science locations in San Francisco and San Diego. Some of these assets were developed 25-plus years ago by our pioneering predecessor, Slough Estates. But current market conditions and land use regulations allow for much higher FARs. This represents an enormous gem within our portfolio, and we will unlock this value over time. In our on-campus and affiliated MOB business, we currently own and operate 23 million square feet, and future growth typically requires invitations from hospitals and health systems. Fortunately, we have a number of strong and time-tested relationships that will allow continued future development and acquisition growth, plus we have a number of land bank opportunities. And in CCRCs, we have 15 communities, each with an average of 500 units located on 50-acre parcels of infill land. Such campuses have high barriers to entry, given the typical 8- to 10-year development concept of stabilization period and heavy infrastructure required to operate. And, of course, we do like the high yield produced by this asset class, which I think is quite attractive, given the quality of the cash flows. Our 15 campuses also provide future densification opportunities, aggregating to more than a half a billion dollars. Additionally, from time to time, certain not-for-profit owners, sometimes capital constrained, may choose to exit, and we will be natural buyers if the properties meet our criteria. With consideration to all of this, it is important to note that we believe rental senior housing will continue to be a vital and growing business that serves an important need within the healthcare continuum. But we concluded that for HealthPeak, our more focused portfolio mix will create a strong and unique investment opportunity, and one that cannot be synthetically replicated through investment in pure play read alternatives, given our platform, irreplaceable portfolios, and embedded growth opportunities. Moving on to our dividend. Yesterday, we announced that we have adjusted our dividend in Q1 to 30 cents per share. or $1.20 per share annualized. Our full year 2020 dividend payout ratio came in at 102%, and in Q4 was 106%. But we held off adjusting in prior quarters to wait for sufficient visibility into our future portfolio mix and related cash flows. We estimate the $1.20 per share annualized dividend will represent a 2021 payout ratio in the high 80s to low 90s, but result in a stabilized payout ratio of around 80%, which will be our target going forward. Stabilized earnings will follow the completion of our shop and triple net sales, ultimate reinvestment of our sales proceeds in core life science and MLB assets, and reaching the COVID inflection point for our CCRC operations. The 30 cent quarterly dividend currently represents an approximate 4% yield on our share price. and on a stabilized basis will provide incremental positive cash flow of around $150 million per year for reinvestment into our creative development and densification activities. Finally, before turning the call over to Scott, I would like to inform you that Barbette Rogers will be leaving HealthPeak in late February for investor relations leadership role with a mixed-use REIT in Maryland, which is closer to her extended family on the East Coast. Your contributions have been immense, and your hard work, dedication, and great attitude will be missed by the entire team, and me in particular. Andrew Johns, who most of you know well, will have his responsibilities expanded to include leadership of our investor relations department, in addition to his continued strategic contributions to our FP&A team. With that, let me turn it over to Scott.

Thank you, Tom. I'll begin with a life science leadership update, followed by operating results for each business segment, and close with transactions. I'm pleased to announce that Scott Bone and Mike Doris have been named co-heads of Life Science, continuing to report up to me. They have been on the ground in San Francisco and San Diego, respectively, for the past decade for HealthBeak. They will now take on broader responsibilities, including expanded roles in our development and acquisition strategy and P&L responsibilities. Staying with life science, we reported same-store cash NOI growth of 7.8% for the fourth quarter. An outstanding result driven by strong leasing, mark-to-market on renewals, and rent collections at 99-plus percent. Sector fundamentals are strong, and we're capturing more than our fair share of the demand. Our full-year cash NOI growth was 6.2%, exceeding the high end of our pre-COVID outlook by 120 basis points, and driven by the same factors as above. We executed 300,000 square feet of leases in the fourth quarter, including renewals at a 13% cash mark to market. For the full year, we executed 1.6 million square feet, which was 180% of our pre-COVID expectations. Leasing was particularly strong on early renewals and our development pipeline. We continue to excel by growing with our existing biotech heavy tenant base. So far in 2021, we signed 115,000 square feet of leases, and the pipeline is significant, with an additional 360,000 square feet under letters of intent. There is strong demand in all three of our core markets. Turning to medical office, we reported same-store cash NOI growth of 1.2% and 2.1% for the fourth quarter and full year, respectively. Performance was driven by contractual rent escalators and 5.1% cash mark to market on renewals, partially offset by COVID-related reductions in parking income. Also, the addition of our small hospital portfolio to the pool, which Pete will discuss, reduced same-store results in the fourth quarter by 40 basis points. Fourth quarter and full-year rent collections exceeded 99%. During the course of 2020, we commenced leases on approximately 3 million square feet, slightly above our pre-COVID expectations. We ended the year with 90.4% occupancy, down 30 basis points from the prior quarter. The small decline was driven by moving recently completed development and redevelopment projects into the operating portfolio. In addition, we signed nearly 700,000 square feet of leases that will commence in 2021, and our leasing pipeline is solid, with 560,000 square feet under letters of intent. Turning to CCRCs, they continue to outperform rental senior housing. Occupancy declined 100 basis points from September to December. The occupancy decline was a bit below our outlook, driven by the intensity of the third wave of the virus. CCRC performance did improve throughout the quarter, with occupancy being flat in December. And the momentum carried through to January, with occupancy up 20 basis points over the prior month. Notably, new entrance fee contracts in the fourth quarter increased nearly 100% in comparison to the low point in the second quarter. New entrance fees are still 30% below the prior year, but clearly heading in a positive direction. We're also pleased to report that all of our CCRCs have received or been scheduled for the first dose of the vaccine and are open to in-person tours, move-ins, and visits with family. Moving to the shop portfolio, all of which is held for sale, Occupancy was down 170 basis points from September to December toward the low end of our outlook range. Shop occupancy fell an additional 230 basis points in January, driven by the third wave of the virus. Turning to our development pipeline, in the fourth quarter, we signed leases totaling 175,000 square feet at the shore, expanding our relationship with two existing tenants. Phases two and three at the shore are now 91% pre-leased, with occupancy expected in 4Q21 and 1Q22 respectively. The economics on the new leases were above our underwriting as life science rents in the Bay Area remained strong. Growing with our existing biotech-heavy tenant base is a competitive advantage for owners who lack the scale to accommodate the growth of their tenants. As an example, 75% of the leases we signed at the Cove and the Shore, or 1.1 million square feet of space, was signed with existing HealthPeak tenants who were looking to grow. During the fourth quarter, we delivered 173,000 square feet of life science development, including the final building at phase one of the shore and the final building at the Ridgeview campus in San Diego. Both developments were 100% leased upon delivery. In medical office, we continue to execute on our proprietary HCA development program, delivering a 42,000 square foot building in the fourth quarter. The project is located on the campus of the Oak Hill Hospital in Florida, and was 65% leased to HCA upon delivery. In total, our $1 billion active development pipeline was 68% pre-leased at year end. Upon delivery and stabilization, these projects will generate significant earnings and NAV accretion. Moving to transactions, we're finding strategic ways to recycle capital into our core segments through both acquisitions and new development. In December, we closed on the previously announced off-market Cambridge Discovery Park acquisition, for $664 million at a 5% stabilized cash yield and 6.5% gap yield. This 600,000-square-foot campus enhances our number one market share in the dynamic and growing West Cambridge Submarket, which is highly convenient to Aloha Station, Route 2, and the Minuteman Bikeway. The campus also provides a future densification opportunity. Also in December, we acquired an off-market 5.4-acre land parcel on our Medical City Dallas campus for $33.5 million. The land currently houses a behavioral facility that is leased to HCA. Over the next few years, we expect the parcel to be developed into an inpatient and outpatient tower to accommodate HCA's growth on this world-class campus. In early February, we acquired an off-market $13 million MOB on the campus of HCA's Centennial Medical Center, a leading hospital in Nashville. The stabilized cash yield is 6%. We already own more than 600,000 square feet of highly successful MOBs on the campus, plus a large new development that delivers in 4K21. This campus is one of the trophies in our MOB portfolio. In senior housing, we've made tremendous progress on the previously announced sale of approximately $4 billion of shop and triple net assets. We've now closed on 12 separate transactions, generating gross proceeds of approximately $2.5 billion. There was wide variance by portfolio in price per unit and cap rate, given the highly disparate asset quality. Importantly, overall pricing is in line with previous disclosures. The larger SHOP sales include a 32-property Sunrise portfolio, a 12-property Atria portfolio, and a 16-property portfolio operated primarily by Atria and Capital Senior Living. If we look at the entire portfolio of SHOP sales, both completed and under contract, the cap rate on annualized fourth quarter NOI is roughly 3%, excluding CARES Act revenue. The blended cap rate on pre-COVID NOI is approximately 6%. The larger triple net sales include the 10-property AGES portfolio, the 8-property HRA portfolio, and the 24-property Brookdale portfolio, in which we were relieved of funding a $30 million remaining CapEx obligation. The blended cap rate on the aggregate triple net portfolio, including assets currently under contract, is approximately 8% on rent and in the low 5% range on property level trailing three-month EBITDA, excluding CARES Act revenue. In the aggregate, we have provided $620 million in first mortgage seller financing to date, with approximately $250 million of that amount expected to be repaid in the next few weeks. The seller financing is in the 65% loan-to-value range, with terms ranging from one year to three years and escalating rates to encourage early repayment. We've signed purchase agreements or letters of intent on all of our remaining shop and triple net properties, representing an additional $1.5 billion in gross proceeds. These remaining asset sales do not include any material amounts of seller financing. Upon completion of the sales, our only remaining exposure to rental senior housing would be our sovereign wealth joint venture, a small handful of legacy loans, and the short-term seller financing. With the significant asset sale proceeds, we're in great shape to continue executing on a pipeline of strategic acquisitions and new development. As an example, we are essentially out of space in South San Francisco and San Diego, so we're looking closely at our land bank and densification opportunities, and we're seeing opportunities in medical office. We expect to share more news on these activities shortly. And now over to Pete.

Thanks, Scott. I'll start today with a review of our financial results, provide an update on our recent balance sheet activity, and finish with 2021 guidance. Starting with our financial results, for the fourth quarter, we reported FFOs adjusted of 41 cents per share and blended same-store growth of 4.2%. For the full year, we reported FFOs adjusted of $1.64 per share and blended same-store growth of 3.8%. Our earnings and same-store growth numbers continue to be fueled by an irreplaceable life science portfolio located in the three hotbed markets of San Francisco, San Diego, and Boston that is in the midst of a virtuous cycle and shows no signs of abating. A differentiated medical office portfolio that is 84% on campus 97% affiliated, and continues to outperform, producing consistent and reliable results. We've experienced headwinds in our CCRC portfolio, but we are encouraged by the successful rollout of the COVID vaccine, which should be a catalyst for improving results in the near term. There are a few reporting items I would like to mention. First, during the fourth quarter, all remaining TripleNet and SHOP assets were sold were classified as held for sale. As a result, in accordance with GAAP, these segments are now characterized as discontinued operations. On pages 37 to 39 of the supplemental, we have provided detailed operating results for our discontinued operations, including a reconciliation that ties back to our income statement. Second, we moved the sovereign wealth shop joint venture which we expect to have approximately $10 to $20 million of pro rata annual NOI 2021 into the other non-reportable segment. Third, we moved our small hospital portfolio into the medical office segment. As a reminder, once our near-term hospital purchase options are exercised, we have only $15 million of total annual NOI. All of these changes are effective for the fourth quarter. In our supplemental on page 40, we have included a pro forma table showing what our same store results would have been before the aforementioned changes. For the full year, our pro forma blended same store growth was positive 1%. Turning to our balance sheet, when we announced our intention to exit the shop and triple net segments, we outlined a clear plan of what we intended to do in the near term with the $4 billion of expected proceeds. At a high level, that plan included approximately $1 billion of identified acquisitions, including Cambridge Discovery Park, the Midwest MOB portfolio, and the South San Francisco land acquisition. We discussed some amount of short-term seller financing to expedite sales. We now expect total seller financing of approximately $300 to $400 million after incorporating an approximate $250 million repayment we expect shortly. And the balance of the proceeds would be utilized for the repayment of near-return debt and unidentified acquisitions to the extent we are able to match funds. Accordingly, in January, we announced the repurchase of $1.45 billion of bonds maturing in 2023 and 2024. In late January, through a tender offering, we closed on the repurchase of $782 million of these bonds. In late February, we will repurchase the remaining $668 million balance. With additional senior housing proceeds expected on the horizon, during the first quarter, we will likely repay another $400 to $500 million of bonds. Pro forma all of our anticipated debt repayment activity our net debt to EBITDA is expected to temporarily drop to approximately 5.0 times. This use of proceeds plan provides us with significant benefits, including, first, it is our intent to not sit on dead cash, since it would be significantly diluted. The debt repayment allows us to put cash to work immediately. Second, the debt repayment materially enhances our already strong credit profile, by improving our weighted average tenor to approximately 7.5 years and eliminating bond maturities until 2025. Third, it provides our investments team with the time necessary to reinvest the proceeds into accretive, portfolio-enhancing acquisitions funded with new long-term debt, bringing our leverage to approximately 5.5 times. Turning to our 2021 guidance, As a result of where our portfolio mix stands today, we are in a position to provide earnings guidance for 2021. Before I get into the details, I did want to spend a moment level setting our approach to guidance this year. First, the near-term outlook for life science and medical office, which equals 85% of our portfolio NOI, remains as robust as it has ever been. We are seeing increased leasing demand, positive mark-to-markets, and continued lease-up of our development and redevelopment projects. The other 15% of our portfolio NOI, primarily our CCRCs, remains challenged, but with positive trends starting to take hold with the rollout of the COVID vaccine. Second, there are several important variables that are extremely difficult to predict, which is why we are guiding to a wider earnings range. These variables include timing of our senior housing sales, the reinvestment of sale proceeds into acquisitions, and the inflection point of CCRCs and our shop, JV. Third, we have made the important decision to operate going forward with less leverage than we have in the past. Our target net debt to EBITDA is now 5.5 times compared to the near six times we consistently operated at pre-COVID. The impact of this is moderately reduced earnings relative to what may be in your models. So with that as a backdrop, our 2021 guidance is as follows. FFO is adjusted, ranging from $1.50 per share to $1.60 per share. Blended same-store NOI, ranging from 1.5% to 3%. The components of blended same-store NOI growth are life science, which is 50% of the pool ranging from four to 5% medical office, which is 47% of the pool ranging from one and a half to two and a half percent CCRC, which is only 3% of the pool ranging from minus 15 to minus 30%. In 2021, our full year same store pool for CCRC consists of just two sunrise assets. Furthermore, A large negative decline is primarily from the significant rolldown of CARES Act grants. The 13-property LCS portfolio will enter our quarterly pool starting in the second quarter and enter our full-year pool in 2022. Let me provide more color on the range of potential guidance outcomes. Please refer to page 41 of the supplemental if you would like to follow along. The low end of guidance assumes a more prolonged impact from COVID, resulting in an inflection point in CCRCs during the third quarter and no additional acquisitions beyond what we have already announced. The high end of guidance assumes an accelerated COVID recovery, resulting in an inflection point in CCRCs during the second quarter and a full redeployment of $1.5 billion of senior housing proceeds into accretive acquisitions. The major earnings variances from the low end to high end of guidance include $10 million of earnings or approximately two pennies a share from our same-store portfolio, $35 million of earnings or approximately six to seven pennies a share from our LCS CCRC portfolio and our sovereign wealth shop, JV, and $10 million of earnings or approximately two pennies a share from the timing of accretive acquisition. Our assumption on the high end is we invest over $1 billion into unidentified acquisitions in the second half of the year at a 5% cash yield funded entirely with debt, taking our net debt to EBITDA back to target. In closing, our 2021 guidance is based on our best information and estimates as of today. I would caution against drawing too many conclusions from the midpoint of our range as there are many puts and takes that could cause us to tighten, increase, or reduce the range as circumstances dictate during the course of the year. With that, operator, please open the line for any questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. So that everyone may have a chance to participate, we ask that participants limit their questions to one and one related follow-up. If you have additional questions, please re-queue. At this time, we'll pause momentarily to assemble our roster. And the first question will come from Nick Ulica with Scotiabank. Please go ahead.

Thanks. I guess this first question on the acquisitions, maybe you could just talk a little bit more about what you're seeing in the market right now and I guess as well why you think it's more of a back half of the year story in terms of getting acquisitions done.

Hey, Nick. Scott speaking here. I'll take that one. Tom, I have something to add. Over the last quarter, we've closed about a billion dollars of really strategic acquisitions in both life science and medical office, virtually all of it off-market. We added to two of our most successful medical office campuses with Medical City Dallas as well as Centennial in Nashville, and then, of course, the big acquisition in West Cambridge to solidify our number one market share in and then we took down some land in South San Francisco to really position us as the market leader in that important sub-market really indefinitely. So we're being pretty selective about what we're acquiring, even though we do have a significant amount of proceeds from these asset sales and more coming, and we are seeing attractive opportunities. With a focus, of course, on medical office and life science, we may find one or two CCRCs, as Tom mentioned in his prepared remarks, But by paying down the debt, we've really got flexibility to wait and make sure that we find something that's particularly attractive. The team has been pretty focused on executing the senior housing sales between what's closed and what's in process. It's almost 30 separate transactions. I mean, it's an astounding number. Virtually all of that done internally, you know, without relying on third-party advisors. So, you know, the team's been running pretty hard on the dispositions, but I will say that the The pipeline is significant and it is attractive and it's strategic. There is some development, including activating land bank opportunities that we're looking closely at. But we do expect there will be some acquisitions. But we usually prefer to wait until those are closed before we actually talk about them in detail. Tom, anything you'd add to that?

You know, one thing I would add is, Nick, As we look at the sale transactions, the billion and a half that we have lined out through binding and non-binding contracts, we also do have some acquisitions that could be back-to-back with that. So that may be something you see announcements on as we go forward. But we'll wait until we get a little bit closer until we close those to make final announcements.

OK, thanks. And just to follow up on the development spend that you have in the guidance this year, it looks like that's actually more than what's left on terms of cost to complete the project. So are you starting new projects? And are any of them going to be in your lab pipeline for development or redevelopment?

Yeah, I'll start with that one, and then Brinker can add. Nick, the answer is absolutely yes. We have some opportunities in San Francisco and San Diego that we do see some near-term potential. So I think you'll probably hear something from us in the fairly near term on some opportunities that we'll come forward with. So, yeah, correct observation on your point and those comments.

Okay. All right. Thanks, guys.

Thanks, Nick.

The next question will come from Juan Santabria with BMO Capital Markets. Please go ahead.

Hi. Thanks for the time, guys, and good morning. Just curious on the acquisition pipeline, seems like you guys don't want to get ahead of yourselves, which is understandable. But if you could just give us a flavor for the makeup of that, the split between life science and MLBs, which seems to be the focus. And Tom, I believe you commented on some cap rate compression. So if you can just give us a sense of where cap rates are today across those two asset classes for the quality of product you're looking for.

Yeah, Scott, why don't you go ahead and start on that one?

Yeah, I'd say cap rates for medical offices stayed in the 5% to 5.5% range for quality products. We've been able to find some more one-off, one-at-a-time acquisitions that are a bit better than that, but Any reasonably sized portfolio is probably going to be in that 5% to 5.5% range. Life science, it depends on the sub-market, of course, but there have been some pretty sizable portfolio trades in the core markets that are more in the mid-4s for good quality product. Of course, those are big portfolios that maybe trade a bit better than an individual asset, but certainly there's a lot of interest in that sector. So cap rates certainly haven't gone up over the past 12 months. They've probably come down. a little bit, which obviously benefits the incumbent players with big portfolios. In terms of the mix of the acquisition pipeline, it really is a combination of one-off acquisitions, like the ones we announced with Medical City Dallas and Centennial, where we know an existing sub-market or campus extremely well, and maybe there's one or two buildings that we don't own, and we're proactive in trying to capture that last remaining asset on a particular campus. And then there are some portfolios that we're looking at, but I don't want to say more than that in terms of the mix between the two business segments until we actually get them done.

Okay, and then just my follow-up, just with regards to the land bank intensification, which you guys tried to highlight, and I think is an attractive growth opportunity, just any sense of how much you guys could put to work and and what you're thinking of in terms of returns for that capital, just to help us kind of benchmark or put guideposts around what you could do over the next couple of years?

You know, Juan, fair question, because we've talked about a very large number of $7 billion-plus of embedded opportunities. And as we look at it, this is a decade-long pursuit or maybe even longer. And so what we do over the next couple of years, I think you're definitely going to see some activity both in execution of land bank opportunities and in some densification opportunities. We'll be coming forward with more of that information soon, but we're going to hold off for just a bit until we complete the analysis, bring it through our board, and then make announcements, perhaps at some of the upcoming couple of conferences that we have coming.

Very nice. Thanks, guys.

Thank you, Juan.

The next question will come from Nick Joseph with Citi. Please go ahead.

Thanks. Hopefully we'll get that for our conference in a few weeks. Just on the short-term seller financing for the $300 million to $400 million, so after the near-term repayment, if you could give some more details on the rate, I guess expected timing of repayment, if it's cash or accrued, and then just comments on the credit of the borrowers.

Yeah, the interest rate on average, Nick, is around 4%. Some are a bit higher, some are a bit lower. The LTVs tend to be in the 60% to 65% range, which we thought was a reasonable amount of equity standing behind the loan. Obviously, we're getting a first mortgage to secure the loans. The term tends to be in the one to three-year range, and we did have the rates escalate over time to encourage repayment. So we put out about $620 million to date on $2.5 billion of sales. We do think about $250 million of that gets paid back in the next few weeks, leaving us with plus or minus $300 million to $400 million remaining. And of the $1.5 billion of asset sales that are left and under contract, there's really not any material amount of seller financing. There'll be a bit, but nothing significant. So actually at the end of the day, The net amount of seller financing that we're providing is a lot less than what we thought we might have to. And we really did provide it so that we could get to a commitment in a closing sooner than later because some of the portfolios are just more challenging to finance. So I'm pretty pleased with how it came out.

That's really helpful. And then is it just secured by the properties or are there any guarantees from the borrowers?

Just the typical recourse carve-out guarantees. Great. Thank you.

Thanks, Nick. The next question will come from Rich Anderson with SMBC. Please go ahead. Pardon me, Mr. Anderson. Your line is open. The next question will come from Jordan Sadler with KeyBank Capital Markets. Please go ahead.

Thanks, guys. Just keying in on the remaining asset sales, if you would, maybe a little bit more color around sort of the timing and the pricing.

Yeah, hey, Jordan. It's Scott. I'll take that. Of the billion five... The vast majority of it that's remaining is shop. Most of our big triple nets have now been sold with Brookdale, HRA, and Aegis. So there's really just a small handful of triple nets left. We are under contract, either binding or non-binding, with every asset that remains in the portfolio. It's pretty astounding. More than half of that is a PSA, and the balance is an offer letter. And the makeup of the buyer pool, it's diverse because it's more than 15 separate transactions per A few are bigger, a couple hundred million plus, and then a bunch of smaller transactions. So it's a pretty diversified pool of assets, so the buyer pool is naturally diverse. But there are two common characteristics. One is it's a counterparty that we know pretty well, so it's a lot of repeat buyers, which gives us good confidence. And then the other category is very well-capitalized buyers who seem particularly motivated to get into the sector. and obviously playing the five to seven year IRR turnaround opportunity. And that's a good fit for the private equity groups that have been the predominant buyers. So we're far down the path. We're making good progress. If everything went well, I think we could close all of it by the end of the second quarter. But transactions are always somewhat uncertain, even in a great environment and still a pretty choppy environment for senior housing. So anything could happen. But certainly feel good about the progress made to date and the quality of the buyer pool that exists.

When you, when you sort of think about the, when we think about the pricing, obviously there's been, you know, pretty meaningful degradation and cashflow sequentially on the shop side.

Um, so are we looking at cap rates, you know, continuing to fall versus what was quoted on the last sale or just sort of holding the line? Yeah. When we, um, announced the likely pricing on the portfolio sales at the last earnings call. The pricing has really remained consistent with that. So it's about a blended 3% cap rate on run rate NOI for shop and around 8% cap rate on the rent for triple net. And there's really no change. So the portfolios that have closed to date in shop, they had a touch higher cap cap rate than what remains, but the blended pricing is pretty much right in line with what we talked about three months ago. And, you know, over the last three months, you had some really good news with multiple vaccines that seem to be highly effective. And then you had a pretty brutal third wave. So I guess the two sort of offset one another in the transaction market that we didn't have any really, certainly no material changes in pricing. That's helpful. Okay.

Just on the seller financing, did you guys say what the rates were or maybe what the total interest income expectation is from seller financing that's baked into guidance?

The blended interest rate in year one is about 4%. That's paid in cash. Some are a bit higher, some are a bit lower. And then we have rates that escalate every 6 to 12 months, usually by 25 or 50 basis points.

And then Jordan, it's Pete here. And the other item section within our guidance page, we do include interest income. And so that does have the interest income from the seller financing embedded within the guidance.

Okay. I saw that. Is that all? It's a hundred percent to 23, 28 million. That's all from the. Correct. Yeah. 300 million. Cause I didn't tie it back. I was, I was unsure. Like it's a 300 million dollar financing, 28 million. I thought that rate was a little bit high, but maybe.

Yeah, Jordan, there's a couple other legacy loans in there. It's not entirely seller financing that makes up that full amount. There's a couple others, about $100 million of other financings that are not part of this seller financing that are in place. So it's the combination of those two that makes up the full interest income. Thanks, guys. Thanks, Jordan.

The next question will come from Rich Anderson with SMBC. Please go ahead, sir.

Hey, sorry about that. A little tech glitch. I'm putting a cell rating on this phone, I think. So I was wondering, you know, when I think about the long term of the portfolio, you know, primarily life science and medical office, if you've done any sort of work to see how they kind of behave together. In other words, like, you know, you can marry life science and medical office as an asset class and maybe there's some crossover interaction between the two, but how do they behave from a standard deviation of growth perspective? I would think medical office being sort of the counter to life science, which probably has a higher degree of volatility in earnings. Have you given a look back to that to see how you might behave as this new organization going forward from that standpoint, like an algorithmic type of approach?

You know, the algorithmic part, we haven't done that type of a calculation, but Rich, I would say this. MOVs for the last decade plus have produced, in the on-campus affiliated type product, have produced 2% to 3% same-store growth literally every year. So it's a very, very stable product. Somewhat immune to new supply because it requires that invitation from hospitals and health institutions in order to be able to grow those portfolios. And then with the specialists, that reside in those properties, it produces a very consistent result. Whereas life science has been subject to some more cycles, but biology-based drugs have become so explosive in recent years for the whole variety of reasons that we all know that the demand has been very strong and they're not producing any more new land in these hotbed markets. So it does feel to us like there's going to be a nice runway of continued strong demand without a lot of new supply. So we feel that there's going to be strong returns on that front. But, of course, that is more volatile than MOBs. We like the fact that that produces some diversification between those two asset classes. Then, of course, CCRCs, which is only about 10% of our business, is very different, produces a high yield, high barrier to entry, irreplaceable product, eight to ten year development period for new product. And then the entrance fee concept creates a very different, in the IL environment, produces a very different type of portfolio to match off against for other two businesses. So we like the way the three come together, but as far as running algorithmic math, I'm not even sure it would be all that useful because the biotech business has growing so rapidly over the last 8 to 10 years that it seems that some of the longer historic past would probably end up in a distorted result.

Okay, fair enough. And then just a quick follow-up. CCRC is not really at all a rounding error when you think about the portfolio in the next few years at least at 10% or 15% of the entirety. Have you given any look at the housing market? Obviously, that has taken off in a lot of markets. And if you're seeing any early signs of people monetizing and finding their way into these facilities, is it starting to crawl a little bit in that direction, or it's just too soon?

Well, we had a strong December and then going into January. Obviously, you've got housing prices that have increased dramatically, low interest rates, some pent-up demand, and this is an IL-based product with a younger senior group. So it does seem like we have some positive momentum coming. At the same time, we have some choppy results remaining from COVID, but we're optimistic at this point. The vaccine, as Scott had mentioned, has been either completed or at least the first shot, or scheduled in each of our different communities. Scott, anything that you would add to that?

I would maybe just add that about two-thirds of our CCRCs are actually located in Florida, where the demographics seem to be particularly attractive for a number of reasons. So that was one of the things that attracted us to the CCRC portfolio in the first place. We did have a pretty strong fourth quarter as Tom mentioned, and the volume of leads and tours, et cetera, seem to be picking up. So things look good, and our entry fee price is at a pretty big discount to the local home values. So, you know, that feels good, too, that it's not really, you know, a luxury product. They're certainly very nice, but it's not like we're trying to attract a price point that's, you know, stretching the average consumer in those local markets.

Okay, great. Thanks for the call, our guys. Thanks, Rich.

The next question will come from Steven Valliquette with Barclays. Please go ahead.

Thanks. Hello, everyone. Thanks for taking the questions. So the first one here, just the same store cash NOI growth and life sciences was obviously pretty strong, exiting 27.8% number in the fourth quarter. In the 2021 guidance, you're incorporating a 4% to 5% growth of that same metric for life sciences. I may have just missed the comment on the delta between those two numbers. Is it just due to a different set of assets included in the same store pool this year versus last year? Or were there some other drivers in there that are worth calling out?

Thanks. Yeah, the pool isn't changing that much. I guess one of the challenges with printing such a strong resolve in 2020 is it just creates a more challenging base to grow off of. But At the beginning of 2020, our guidance was 4% to 5%, and we ended up for the full year at 6.2%. Our guidance again this year is in the 4% to 5% range. We'll see. Hopefully there's some conservatism in that number. We did have a significant number of mark-to-market renewals this year, which really helped. We just don't have as many in 2021. We have very few maturities, and among those that we do, some of the projects are redeveloping So we probably won't have as much of a mark-to-market upside in 2021. We also had incredible rent collections. So congrats to the team in 2020. We had virtually no bad debt. And, of course, we do have some bad debt baked into our guidance for 2021. It could be a source of upside if we're as successful with collections this year.

Okay, great. And then one real quick one here, just the $9 million in CARES Act grants that's included in the 2021 guidance, does that include everything that's been applied for? And is there any chance for additional relief dollars above the $9 million that could stem from additional relief packages this year under the Biden administration? Just curious if there could be something above the $9 million as things progress here. Thanks.

Yeah, hey, Steve, it's Pete. That's everything we've applied for. In fact, we've actually – received a portion of that, around $3 million already, and hopefully we'll receive the balance in the next couple of weeks. So if there's anything above and beyond what we've applied for, perhaps there could be some upside to that, but that is not big within our guidance. Perfect. Okay. All right. Great. Thanks.

Thanks, Dave.

The next question will come from Amanda Switzer with Beard. Please go ahead.

Great, thanks. Good morning, everyone. I wanted to dig into your medical office same-store growth guidance a bit. It's kind of below that stabilized 2% to 3% growth you'd expect. How impactful is hospitals to the addition of the full-year range? And then are you assuming any occupancy increase in your guidance?

Yeah, this is Tom Klarich. How are you doing? The range is a little lower than the normal 2% to 3% we usually quote. That's primarily due to the overhang of the parking degradation we're still seeing. With COVID still with us, there's a lot of limitations on visitations at a lot of our campuses, so that's really the biggest item that's driving that growth down. We continue to see good mark-to-markets and escalators in the portfolio that's driving about 2.7%. Occupancy will be up a little toward the end of the year. And we actually had a pretty good start to the year, so that's positive also. But really it's the parking revenue that's causing that.

Okay, that's helpful. And then as you do shift more of the focus to life science, are there any other markets that look like interesting investment opportunities that have those high barrier to entries where you could increase scale? And I know at least one of your development partners has expanded to New York recently. Okay.

Amanda, that's something we spend a lot of time thinking about. We would never rule it out. There are other opportunities out there. But one of the things that we've used as a central tenet of our investment approach is that we believe strongly in high barrier to entry portfolios. And within the clusters that we operate in San Francisco, San Diego, and Boston, It's very difficult for new participants to come in and compete effectively because biotechs really rely on that cluster concept where all that talent resides and they can grow with a landlord, rip up one lease to form a larger lease in a sister property within our campus. So because we have that huge competitive benefit, we've been more inclined to stay within the three markets that we have this this huge competitive advantage. And we'll keep an eye on the other markets, but for now, we're happy with the three markets that we're focused in.

Makes sense. Thank you for the time.

Thanks, Amanda.

The next question will come from Michael Carroll with RBC Capital Markets. Please go ahead.

Yeah, thanks. Tom, you talked a lot about on this quarter on the strengths within the life science space and the amount of densification opportunities do you have. I mean, is it reasonable to expect that your development activity can accelerate over the next few years compared to the past few years just due to the uptick we're seeing in life science demand?

Michael, very good question. It's something that we've talked a lot about as an executive team and as a board. You know, if you look back at Where we were four, five, six, seven years ago, our development pipeline was much, much smaller and we've expanded it to capture these opportunities and this demand and take advantage of our land bank. With the densification opportunities added to that with a lot of 25 plus year old product built on low rise properties in some of the best markets in San Francisco and San Diego, it definitely provides some highly accretive development and redevelopment possibilities for us. So you could certainly see us grow that. We'll always take into account how much drag we want to add at any point in time. I'm a big believer in the rollover effect taking place and making sure that we've got very clear funding for whatever it is that we add to our portfolio and also look a lot of pre-leasing. And we'll take all those things into account, but we have enough opportunity where I think you could see us expand that over the next several years.

And I know a lot of your intensification opportunities is in San Francisco. I mean, would you be willing to pursue multiple projects at the same time? I mean, obviously, you've had really good success at the shore, and you don't really have much space available, but would you be willing to break ground on multiple projects at the same time in the same market?

Go ahead, Scott. Yeah, Michael, I think it really depends on what the competitive supply outlook is like as well as the demand. I mean, as we look forward over the next two years in our core markets, I mean, in San Francisco, there's plus or minus 3 million square feet underway, but it's 80% released, and that's going out 24 months. So, you know, we can say with pretty high confidence that anyone in the life science sector opening a building over the next 24 months is likely going to have a huge amount of success. San Diego has similar dynamics. It's a bit smaller in terms of the development pipeline. It's just a smaller market, but similar pre-leasing. And Boston is similar to San Francisco as well, a little bit lower. Now, as you look out to 2023 and beyond, it's hard to say. There's a huge potential pipeline, but it's unclear how many of those projects would proceed, when they would proceed, when they would open, and trying to time your project so that it matches up well with the competitive supply that's coming is critically important. So, you know, anytime we pull the trigger on a development, there's a pretty intense deep dive done on the local supply and demand dynamics as well as timing and sub-market location so that we feel really good about the next two years. Beyond that, you know, we just have to continue to assess. I mean, it could go up, it could go down. It just depends on what the dynamics look like at the time.

Okay, great.

Thank you. Thanks, Michael.

The next question will come from Daniel Bernstein with Capital One. Please go ahead.

Hi. I just wanted to follow up on the CCRC, since that's a large kind of variance in your 21 guidance. So I wanted to understand, you know, is there any discounting going on in terms of entrance fees? And maybe if you could talk a little bit more about some of the leading indicators at the CCRCs, whether that's tours, inquiries, et cetera?

Yeah. Hey, Dan. It's Scott. You know, there's no discounting going on. Any change in REVPOR quarter to quarter is impacted as much by the service mix as anything because there is the full continuum of care, obviously. So a change in independent living versus a change in skilled nursing has a pretty dramatic difference on the REVPOR, but we're not discounting the monthly rate or the entry fee. So we've seen continued strength there. In terms of forward-looking indicators, you know, we've grown pretty significantly off of the base in 2Q. Entrance fees in the fourth quarter were up 100% versus 2Q and up about 30% versus the third quarter. So there's good momentum. And now that all of our CCRCs have received or been scheduled for the first dose of the vaccine, That's obviously a good sign. Today, we're entirely open to move-ins and tours and family visitation, but with limits. So it still doesn't feel like the operating environment that would have existed 12 months ago. We think over the next two to three months, it will increasingly return to business as normal as the portfolio is fully vaccinated. So we are starting to see a pickup. It coincides, of course, with the phased reopening of the properties, and we expect that to continue once the vaccine is fully completed at the properties.

Okay. And just a quick follow-up on the CCRCs as well. A large part of the occupancy loss, I think, was on the skilled nursing side. So has there been any stabilization there, any signs that skilled nursing – occupancy within the CCRCs can pick up or recover, or kind of how you're thinking about that recovery?

Right. Yeah, if you look at the independent assisted portion of the CCRCs, the occupancy was down less than 500 basis points between COVID. It's a pretty dramatically better outcome than, say, rental senior housing, which was down more than 1,000 basis points, driven obviously by the length of stay. Skilled nursing was down more than 10,000 basis points. So pretty significant decline. There's obviously a lot of short-term rehab business running through the communities, and that business got decimated early in the pandemic. Even today, our skilled nursing units, and keep in mind that's only 15% of the total units at these buildings, so it's not hugely material, but it does move the needle. We're in the mid-60s as an occupancy percentage when the historical run rate is more in the mid-80s. So we're comfortably above where we were in April and May, but still significantly below a stabilized level and it bounces around. Um, we had started to come back over the summer and then we fell back when the virus took off again. We came back again in October, November, and then in December we fell again as the virus picked up. And of course, once again, now in January into February, it's picking up again. So it really does follow the trend of the virus, which hopefully is a good sign given that the numbers nationally are coming down pretty significantly. and the vaccine rollout seems to be picking up some significant momentum.

Yeah, that's a great call. I appreciate it. I'll hop off. Thank you.

Thanks, Dan. The next question will come from Omoteo Okasanya with Mizuho. Please go ahead.

Hi, yes. Good afternoon, everyone. Again, congrats on the progress with the portfolio transformation. Just noticing on this call, again, a lot of questions around the CCRC. It's going to be 3% of your portfolio going forward. I know you guys have talked on the last earnings call about strategically why you decided to hold on to it, but does anything kind of change your mind after the success you've had with Essendon Senior Housing around how you think about the CCRC, whether holding on to it becomes too much of a distraction given the strong pivot towards life sciences and MOBs going forward?

That's another conversation that we had extensively as an executive came in as a board. And you're right, it only represents 10% of our company. And it is a very different business from life science and MOBs. So it's a fair question. But it also is of great note that these portfolios produce a very strong yield, which, given the quality of the cash flows and the baby boomer growth tailwinds, we feel quite positive about. Again, I'm repeating myself, but they're impossible to replace these portfolios. New supply is almost nonexistent due to the 8- to 10-year development period, and we've got this enormous embedded densification opportunity within our campuses and you almost have to see these to fully appreciate what a high quality CCRC looks like with 500 units sitting on 50 acres of infill land. It has a very different look and feel than what you'd expect if you haven't toured them. So it's so hard to replace. The yields are so high and we have a strong infrastructure in place. It's our view that for 10% of our company, at this type of a yield that it produces another element of nice diversification and one that we think we can build slowly over time, but every time we add one, it's going to be at a very nice yield. So we've continued to conclude that it is a business that we would like to own and maybe grow slowly. It's not going to be a huge part of our company in the future, but one that we think is additive.

Gotcha. And then one other quick question. So kind of post the sales, the portfolio mix is kind of 50% life sciences, 47 MLB, 3% CCRC. By the end of this year, giving development deliveries, assuming you do your $1.5 billion of acquisitions, could you talk about at the end of the year what that mix could look like and on a longer-term basis what the target mix is?

Yeah, so the numbers you just cited, Taylor, are exactly correct. 50% life science and 47% MOBs and 3% CCRCs. But keep in mind that that is just the same store pool as it currently stands because there are only two of the older existing Sunrise assets that sit in our CCRC portfolio or pool for 2021. But of course, in 2022, the whole LCS portfolio will come in. So that mix will look differently. Pete, do you have those numbers handy that you could speak to them for what it looks like 22 and going forward?

Yeah. It'll be a little bit more weighted, as Tom said, towards CCRCs. And we can follow up with some more specifics with you, Ty, offline. Some of it, too, will depend on how the investments come together as well. and where it tracks towards when you look at 2022 and 2023. So if you have to factor in the CCRCs, you'll still see life sciences be our largest segment. You know, where MOBs falls out within that will, as I said, depend largely on the acquisitions that are forthcoming.

Sounds good. Thank you.

Great. Thank you. The next question will come from Lucas Hartwich with Green Streets. Please go ahead.

Thanks. In regard to the sovereign wealth shop, JV, did the plans change on keeping that? And if so, I was just hoping you could provide some color around that decision.

Yeah, so our thinking on that, Lucas, is we have an important partner who also has interests and things that they're thinking about. And so we're going to work with them over the coming few months to see what makes sense for both parties, and then we'll either move forward with that and retain it, or we'll choose to do something different. But stay tuned on that one.

Lucas, are you still there?

Oh, yeah. Sorry, I was on mute.

Thank you. The next question will come from Joshua Dinnerline with Bank of America. Please go ahead.

Yeah, thanks for the question, guys. This one I think is for Pete. You mentioned you're going to have a lower leverage target going forward. I believe you said 5.5 or 6 before. What's driving that decision? I would have assumed kind of getting rid of the senior housing from your portfolio, your less cyclicality involved. So maybe it would have been easier to keep that higher leverage. But just curious in your thoughts.

Yeah. It's a really good question, Josh. You know, as we look at our leverage, we want to be firmly in that BBB plus BAA1 metrics with the rating agencies. And, you know, as we were consistently being at the call high fives around six, it puts a lot of pressure on capital raising. And then you also take into account, we've talked a lot about development and densification opportunities on this call. As we factor that as a major piece of our portfolio and allocation of capital, we felt like it was appropriate to take our leverage down. So we had additional cushion. And I think we learned some lessons with COVID as well as to what can happen pretty quickly in you know, the overall macro environment. And with all those factors combined, we just felt like operating a half a turn less made sense for our portfolio and for the way we want to run the company going forward.

Tom, anything you want to add? Yeah, I mean, let me just add a couple things, Josh. When we look at where we're positioning going forward with what we deem to be a very high-quality portfolio environment, We've got a strong development and densification pipeline, and we want this to be supported by what we think of as a fortress balance sheet. So it just simply plays into the strategy in what we want our REIT to look like as we go forward under our new strategic approach. So it's really that simple.

Okay. Got it. Thanks, guys. Appreciate it.

Thank you.

The next question will come from Todd Stender with Wells Fargo. Please go ahead.

Hi, thanks. And probably for Tom, just because you're on the board as well, but maybe you could just share some thoughts on how the board was evaluating the dividend. I'm sure they factored in management's recommendation regarding timing of asset sales and redeployment of proceeds, but maybe just some color there.

Well, really, Yeah, of course the board takes into account management's recommendations. You're completely right. But from the board perspective, we simply looked at it that we wanted to have a stabilized target payout ratio of 80%. And we thought that that made sense given our life science and MOB-centric portfolio mix, along with the substantial development pipeline and land bank densification opportunity that we had in front of us, We looked at the current dividend yield at 4% and felt that to be a very strong and sufficient yield. And we wanted the $150 million or so of stabilized retained earnings as we went forward for reinvestment into our creative development and densification opportunities. So those were all the different things that we discussed at length over a period of about three quarters as we came to the decision of $1.20 per share.

All right, that's helpful. And then maybe for Pete, do you have a CapEx budget for 2021 you could share just on the existing portfolio?

Yeah, so if you look, we did include a CapEx budget on page 42 of our supplemental with regards to development and redevelopment spend, you know, $700 million revenue-enhancing CapEx of $115 million $140 million, and then our first-gen TIs and some initial capital expenditures from $85 to $110. I will point out that some of the revenue enhancing is up a little bit this year relative to last year. There are two actually important items. One, we're actually doing more spend in MOBs on green initiatives, so there will be a nice return on that. And then two, we did slow down a little bit as well last year, just given the fact that COVID made it difficult to do some revenue-enhancing CapEx at our CCRC. So we're projecting that that picks up again in 2021. And then we also do give some recurring CapEx above on page 42. I won't go through all of those, but it's all lined out in there.

Got it. I see it. Thank you, Pete.

Yeah. Thanks, Tyler. The next question will come from Mike Mueller with J.P. Morgan. Please go ahead.

Yeah, hi. Just have a quick one. I think you mentioned life science spreads were about 13% in the fourth quarter. Can you let us know what they were on the 2021 leases that you've done so far and what's underway? Are the numbers comparable?

Yeah, and most of the leasing to date, it's 115,000 square feet in January is new leasing, so there isn't a great sample size so far. But our mark-to-market across the portfolio is in line with what we achieved in the fourth quarter. So it's in the 10% to 15% range. It does vary by tenant, by lease, by year. So it's going to bounce around a little bit, but it's in that range if you look at the entire portfolio. Now, at the same time, market rents continue to grow in the 5% range, maybe better. And our contractual escalator is more in the 3% to 3.1% range. So if that dynamic continues, obviously we'll continue to have even stronger markets.

Got it. Okay. Thank you. Thanks.

This concludes our question and answer session. I would like to turn the conference back over to Tom Herzog for any closing remarks. Please go ahead.

Yeah, thank you, Operator, and thanks for everybody for joining our call today and your continued interest in HealthPeak, and I hope you all stay safe, and we'll talk to you soon. Thanks much. Bye-bye.

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