Greetings, welcome to the Physicians Realty Trust earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Page, SVP, General Counsel. Please go ahead. Thank you. Good morning, and welcome to the Physicians Realty Trust first quarter 2023 earnings conference call and webcast. Joining me today are John Thomas, Chief Executive Officer; Jeff Theiler, Chief Financial Officer; Deeni Taylor, Chief Investment Officer; Mark Theine, Executive Vice President, Asset Management; John W. Lucey, Chief Accounting and Administrative Officer; and Laurie P. Becker, Senior Vice President, Controller. During this call, John Thomas will provide a summary of the company's activities and performance for the first quarter of 2023 and our year-to-date performance, as well as our strategic focus for the remainder of the year. Jeff Theiler will provide our financial results for the first quarter of 2023, and Mark Theine will provide a summary of our operations for the first quarter. Today's call will contain forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. They reflect the views of management regarding current expectations and projections about future events and are based on information currently available to us. Our forward-looking statements are not guarantees of future performance and involve numerous risks and uncertainties. You should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data, and methods that may be incorrect or imprecise. Therefore, we do not guarantee that the transactions and events described will happen as described or that they will happen at all. For a more detailed description of risks and other important factors that could cause actual results to differ from those contained in any forward-looking statements, please refer to our filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to the company's President and CEO, John Thomas. John? Thank you, Brad. Physicians Realty Trust provides real estate capital to healthcare providers that specialize in outpatient medical services. We provide this capital in a number of ways. We acquire outpatient medical real estate designed to facilitate surgery, oncology, and other specialty services required by patients in high demand and the physician-patient encounters ancillary to these medical services. We finance the development of these types of buildings. We finance the transformation of buildings that may have become out of date as is, but provide a low-cost option for transforming to host these medical services and meet the demands of our growing and aging U.S. population. Our facilities and providers we partner with around the country provide access to care for the entire population in the markets where we are located, not just the finite and small percentage of seniors that can pay for and want senior housing. For years, the fundamental case for owning outpatient medical facilities has been strong, but is now stronger than ever. First, healthcare providers benefit from undeniable demographic tailwinds currently, and that will dramatically increase demand for services in both the near and long term. Second, due to Medicare's progressive payment system and Part C modernization, providers are incentivized to provide care at the lowest possible cost, consistent with the clinical science available at the time to treat the patient safely and effectively. Third, current expense pressures are temporary and correctable. These pressures are caused by the unique combination of real-time inflation and backward-looking payer revenue rates that are set based on past costs rather than current or future expected costs. Each of these factors incentivizes health systems to move patients out of the inpatient hospital setting and into newer, lower-cost outpatient sites of care as a means of improving their margin on services provided. These trends have been known and visible for years and have only accelerated in the post-COVID world. Time and time again, buildings hosting outpatient medical services have proven to be resilient in an essential class of real estate. When one of our clients chooses to reduce their space at the end of their lease, it's not due to a desire to work from home. It results a slowing demand or a consequence of a rapid rise in interest rates. Rather, our non-renewals are driven by unique and specific situations like physician retirements or a change in practice ownership. These are not structural trends or challenges. Our real estate is necessary for physicians and health systems to deliver their mission to meet ever-increasing demand. Unlike other real estate asset classes faced with declining demand for space, revenue from outpatient medical services grew 8% in 2022. In comparison, inpatient revenues experienced no growth. High construction costs and limited supply growth have allowed us to meaningfully increase rental rates in most markets, and we expect to see that trend continue. The opportunity for new acquisition investments remains low for now as private investors make short-term wagers on medical office cap rates returning to 2020 levels, even at the cost of negative leverage. We believe that patience is a virtue, and we will benefit from outsized growth and acquisition opportunities with our dry powder when market cap rates and the long-term cost of capital reach equilibrium. We do see a growing number of opportunities to finance new outpatient medical investments. Our active pipeline in discussions now exceeds $300 million. We're proud of the two projects we started this past quarter, including our first on-balance-sheet development, and expect to start several new projects later this year. We're excited to share that we've executed contractual commitments related to a $40 million medical office development located in the high-growth Atlanta suburb of Buford, Georgia. The 97,000 sq ft outpatient medical facility, which includes an ambulatory surgery center, is 100% pre-leased on 10-year Triple Net lease terms with 91% leased directly to Northside Hospital, an investment-grade quality health system. The site also allows for an additional 100,000 sq ft medical facility in the future, where we will have the development rights to build. Northside Hospital and affiliated physicians have executed leases based on a 6.2% yield on cost to deliver the project, with 3% risk escalators on all lease agreements. Physicians that will lease space and provide services in the building have contributed 44% of the capital to develop this building. This investment increases our long-standing partnership with Northside Hospital and is a direct reflection of DOC's strong relationships with health systems who want to work with a long-term partner who knows healthcare first. Before our next earnings call, we will celebrate the 10th anniversary of our initial public offering. We appreciate your support, the support of all the families that work for and with DOC, and the investment-grade credit and high quality providers that partner with us to meet the healthcare needs in the communities we serve. We look forward to the next 10 years and beyond. We believe we have the highest occupancy, the best balance sheet and the best strategy for outsized growth well into the next 10 years and beyond. Quarter 1 was uneventful until we lost George Chapman, who passed away unexpectedly and well before his time. George made Health Care REIT the powerhouse that it is today. I can't count the number of senior executives and professionals at public and private REITs and otherwise that owe their careers to George's inspiration and mentorship. I can name at least 3 public REIT CEOs who are stewards and direct beneficiaries of George's leadership. More important than all the financial and business success, George was motivated most by his love for his family, Toledo, the arts, Cornell and The University of Toledo, and taking care of seniors and advancing access to healthcare services for all, regardless of their ability to pay. I believe George is looking down on all of us, asking us how we are going to work to expand access to care to all, expanding senior housing to more, and providing professional opportunities to the youth of Toledo and everywhere to meet these objectives. George, we miss you. We at DOC are committed to your passion and mission. Jeff will now share comments on our financial results of Q1 2023, and Mark will discuss our operating results. Jeff? Thank you, John. In the 1st quarter of 2023, the company generated Normalized Funds From Operations of $60.3 million, or $0.24 per share. Our Normalized Funds Available for Distribution were $59.7 million, an increase of 3% over the comparable quarter of last year, and our FAD per share was $0.24. The portfolio showed consistent operations with same-store NOI across our entire MOB portfolio, increasing at 1.0%. This is below our long-term expectations for the portfolio. As we've discussed over the past two quarters, we anticipate this metric returning to our long-term expectations in the back half of the year as our repositioning properties start to roll back online. Our renewal spreads for the full MOB portfolio were negative 0.7%, as one renewal had an outsized effect on an otherwise strong period of leasing. Despite this, we still anticipate averaging positive mid-single-digit leasing spreads over the entire year, in line with our previous guidance. Across the portfolio, we continue to see evidence that our existing rents are under the current market rates, which allows for additional pricing power on new and renewal leases. Additionally, the historic rise in construction costs and uncertainty in asset pricing have been significant hurdles for new medical office development, which we believe will enhance our ability to retain tenants. On the acquisitions front, we are starting to deploy capital, but in a careful manner. Our new investments have been concentrated on development projects with healthcare partners that have been in planning for multiple years. Encouragingly, the acquisition pipeline that we are actively negotiating has picked up significantly since the beginning of the year. We believe this will enable us to generate accretive external growth in the second half of the year. In order to reduce debt, existing debt, and allow ourselves to be prepared for these future opportunities, we strengthened the balance sheet with $66 million of equity issued on the ATM in the beginning of the first quarter. We had previously disclosed this activity on our last earnings call. We feel that we are in an excellent position from a capital perspective at 5.3 times consolidated debt to EBITDA. We remain on track for our overall G&A guidance. A quick reminder to our analysts and investors that our G&A is always seasonally higher in the first quarter, and we expect it to moderate going forward. With that, I'll turn it over to Mark to walk through some additional operational details. Mark? Thanks, Jeff. To best capitalize on the opportunity we have within our portfolio, we are occasionally better served by transitioning space from one physician organization to another. These decisions are made to improve the overall financial health and value of our buildings over the long term, but generally have a short-term impact on our NOI. Among other benefits, these strategic efforts have served to dramatically improve the credit profile of our portfolio. This is especially relevant in today's environment, where higher operating expenses are offsetting revenue gains for health systems. DOC's portfolio remains well-insulated from these pressures by the underlying credit quality of our tenants, 67% of which are investment-grade quality. Better yet, 90% of our investment-grade tenants have a credit rating of A minus or higher. This means that these tenants would need to be downgraded several times before they could potentially lose their investment-grade status. Our commitment to credit quality remains unmatched by our peers, and we believe this strategy will pay dividends for our shareholders in any economic environment. MOB same-store NOI growth was 1.0% during the quarter, our 20th consecutive quarter of positive same-store growth. Headline performance in the period was adversely affected by a unique situation at a single location in our portfolio. Specifically, our asset management team was faced with a physician group tenant that had a reduced need for real estate and an in-place plan to consolidate locations. We made the decision to move aggressively to retain at least part of their space in our building as a means of preserving the healthcare ecosystem of the asset, and we are already in discussions with several potential providers to lease space not renewed by this tenant. Overall, this asset represents less than 1% of the same-store pool. Conversely, the 14-building landmark portfolio joined the same-store pool this quarter. As expected from such a high-quality portfolio, occupancy is up 50 basis points since our acquisition, and the portfolio grew cash NOI by 4.1% year-over-year. In total, the portfolio is exceeding our underwriting expectations and is representative of the quality facilities and tenants at the center of DOC's investment criteria. First quarter renewal spreads were impacted by the same scenario I just discussed during our same-store commentary, with headline spreads totaling negative 0.7%. Excluding this one asset, renewal spreads for the quarter were positive 10.1%. In total, our leasing team completed 367,000 sq ft of leasing activity this quarter, including 289,000 sq ft of lease renewals and a 72% retention rate. The great work this quarter by our leasing team to reprice lease renewals at today's fair market value with a 10.1% leasing spread should not be overlooked by one lease. Additionally, this leasing activity offers strong compounding growth for the future as approximately 60% of our leases signed this quarter contain annual rent escalations of 3% or more. Looking back to the 2018 to 2021 time period, only 25% of our leasing activity on average contained annual rent escalations of 3% or more. Despite the short-term impact of a few vacancies in the portfolio, we believe the long-term value opportunity for our portfolio is fully intact as outpatient services drive retention and market pressures continue to increase triple net rental rates. Our team is focused on unlocking the full value of our portfolio through aggressive leasing initiatives, exceptional property management, and smart capital improvement investments. Before turning the call back to JT and opening for questions, I'd like to quickly say congratulations to John Sweet, the founder of DOC, for earning the 2022 Lifetime Achievement Award from Healthcare Real Estate Insights. The award was presented in January at the Revista Medical Real Estate Investment Forum. John has always been known by hospital executives, brokers, developers, and investors for his witty sense of humor, unwavering integrity, and creativity in structuring investment transactions. As we celebrate the company's 10th anniversary this July, we could not be happier to honor John for his career and contributions to the medical office industry, and we recognize his mentorship and friendship to all of us at DOC. Congratulations, John. With that, I'll turn the call back over to JT. Thank you, Mark. Thank you, Jeff. We'll now take questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the questioning queue. You may press star two if you would like to remove your question from the queue. For participants using a speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment please while we pull for questions. Our first question comes from Austin Wurschmidt with KeyBanc Capital Markets Inc. Hey, good morning, everybody. You guys have spoken about sort of stable occupancy previously in the first half and headwinds abating in the back half of the year. Clearly, there was an impact from this one tenant you highlighted in your prepared remarks. I'm just curious how that changes the cadence for occupancy, comps in the first half and, you know, even back half of the year relative to those prior expectations. Hey, good morning, Austin. Mark Theine. As I mentioned in the prepared remarks, our leasing statistics were, you know, outsized by this one tenant. Our portfolio, you know, we're really starting from a position of strength with industry-leading 95% occupancy. You know, over the history of our company, we've always been in that, you know, 95% occupancy range. We are experiencing a, you know, a couple of one or two kind of move-outs and normal churn of the portfolio. You know, long term, our occupancy has always been around 95%, and we've been well served by our Triple Net leases, you know, high occupancy, especially in this inflationary environment. Within the same-store pool, when do you think, you know, full occupancy, you've said is 95%, 96%. When do you think the same-store pool gets back to, you know, within that range? Yeah. Again, we feel, you know, very confident in our comments about the improvements in the back half of the year. You know, really pointing to that. We do have 58,000 sq ft of leases signed that are under construction We expect rent commencement in the back half of the year. As those leases start to come on, you know, we'll recognize them in our occupancy and obviously our rent growth. That'll get us, you know, more in line with our expectations of the 2%-3% same-store growth in the back half of the year. Thanks for that. Then just last one for me on the investment pipeline. You highlighted that acquisitions have picked up since earlier this year. Just curious if you could put a finer point on sort of the size of that pipeline, you know, where bid-ask spreads are today, whether they've narrowed to a level that you think makes sense for you to transact. Yes. Austin, thanks. This is JT. It's still modest on the acquisition front. I mean, we do have some growing pipeline. There's some activity out in the market. There's still private buyers in particular in the low sixes range. We'd like to be higher in the sixes and up into the 7 cap rate, without jeopardizing quality or the credit quality or the quality of the facilities. We'll see some activity pick up and, you know, we kinda expect more to come to market. Working with some health systems, looking at some potential monetizations there, we're excited about that. The real pipeline is on the development front and just working through kind of final documentation and pricing of those transactions. Thanks, John. Our next question comes from Juan Sanabria, BMO Capital Markets. Hi. Just hoping to expound on that last piece about the development funding. It seems like the deals you've done recently are in the low sixes. Is that a good bogey for development capital given your comments about where traditional acquisitions are? How should we think about that development capital? You mentioned $300 million opportunity set going forward. Yeah, Juan, you know, those get priced well in advance of, you know, actual construction starts. You know, the Beaufort project has, you know, with the 3% bumps, the quality of the location, you know, our IRR on that facility is much, you know, closer to the 8.5%-9%. You know, we'd like it to be higher when we start on that particular project, but it's still a fantastic project. The second project is not priced, and we would price it at a different rate today in the current market. At the time we were negotiating through that, you know, MOB purchase acquisition rates were in the low 5s. It's just, you know, it's always a timing thing with that, and we're, you know, looking at different ways to think about that and the long-term commitments we make there. Development starts, the things we're negotiating now are in the high sixes, low sevens from a current yield. Because most projects we do are on a, you know, kind of loan down or more of a construction loan project and those are in the, you know, high sixes to low sevens if we were pricing them today. Great. Then just, curious on, any dispositions you guys have targeted. You had a kind of a small one done in the first quarter. Any other opportunities? If you can give us any color on the cap rate on that small piece that was sold off in the first quarter. Yeah. I'll speak about dispositions and ask Mark to give you more specific details. We don't have a meaningful disposition strategy for this year. Opportunistically, we, you know, we may sell a building here or there. We own almost 300 buildings, you know, there's always a handful in the portfolio that are older, smaller, in different markets where we're not strategically growing. You know, from time to time we may strategically dispose of something, but nothing specific. No material plans. Mark, do you wanna talk about the. Yeah. Juan, the more specifics on just the one small asset we sold in the quarter was. That building was originally acquired in the early life of DOC as part of a 5-building portfolio. This is the one building that was not as strategic, and the existing tenant in the building asked if they could purchase the building from us. The cap rate on that was actually just below a 4. Again, very small building and, you know, what's more representative of our disposition strategy is what we completed last year with Great Falls. You know, we had an amazing exit with a great partner there in Great Falls and redeployed that capital aggressively. Thanks, guys. Thanks, Juan. Our next question comes from Ronald Kamdem with Morgan Stanley. Hi, this is Derrick Metzler on for Ron. Thanks for the question. Curious about the one asset that dragged down same-store NOI. Could you provide any more color on the impact that it had given your comment that it was a relatively small asset? Yeah. This is Mark. I'll take that one again. You know, start with the fact, again, this is our 20th consecutive quarter of positive same-store NOI growth. We don't have a redevelopment or repositioning bucket. We report on all of our properties. As we mentioned last quarter, we know we were expecting same-store to have a little bit of a slower start, but, you know, picking up in the back half of the year. This one building in particular was a 110,000 sq ft cancer center we acquired in 2014 at a 7 cap. You know, for nine years, they paid their rent on time every month. We, through our relationship with them, became aware of their plans to consolidate their office space and really reduce their square footage by about 50%, some of which was admin space, some of which was clinical space. The direct impact from this one tenant on same-store this quarter is 73 basis points of same-store. Our one would've been, you know, 1.73, excluding this building, and it had a 30 basis point impact on our occupancy year-over-year. Just to help kind of contextualize this, you know, a little bit more. $200,000 in our same-store pool out of $82 million of cash NOI moves same-store 25 basis points. It doesn't take a lot of cash flow to really move same-store, you know,%, quarter-over-quarter. Again, what I said before, what gives us confidence in the back half of the year is the lease of sign that are under construction and, will commence in the back half of the year. Our, you know, our target for increasing our occupancy there is really our investment-grade hospital systems that are existing in the buildings, and, we're working closely with them to continue to expand. Understood. Appreciate that. I guess the follow-up is, have you identified any more tenants that are potentially at risk for reducing their space similarly? No, nothing to this size. Great. Thank you. Our next question comes from Michael Carroll with RBC Capital Markets. Yeah, thanks. JT, I wanted to touch on the private investment market. I know last quarter you highlighted that cap rates were in the mid-sixes trending upwards towards 7%. today you highlighted that the private market bid is aggressive and maybe those cap rates are in the low 6% today. are you surprised by the strong private bid and how it has not changed as quickly as you would have expected? It's really trying to understand, you know, how they're, how they're making the math work on those projects and talking to some of those private buyers. They, you know, have some all equity and, you know, with low return expectations. There's not a lot of bank financing. I wouldn't say there's a high volume of those transactions, but there are people out in the market, you know, kind of high 5s, low 6s. I don't think that's reflective of what the current value is. It's more re-reflection of people with buckets of capital. They're willing to take a bet that interest rates decline next year and cap rates go back to the 5s. I think that's kind of the simple math they're doing. Our active acquisition pipeline is in the high 6s, low 7s. We don't have a lot of volume at those numbers, but we do have, you know, good discussions in place. Okay. Your active pipeline right now, you do have sellers that are contemplating on selling, at those high 6 levels? Yeah. Okay. On the Northside development, when was that agreement reached? I guess I was surprised that cap rate was fairly low. I mean, even at that cap rate, is it accreted to you, or is that deal kind of expecting that you need interest rates to drop for that to kind of drive some accretion? No. The, it's got 3% bumps. Again, about half the equity is coming from the physicians that are leasing the building. They've already written those checks. You know, we've got this advanced funding from last year. It was really a, you know, early of last year, mid-spring kind of discussion around the pricing at the time. 6.2 was, you know, much higher than acquisition cap rates at the time. You know, again, the development's not a spot financing production, so it's, if we were pricing it today, it would be higher. Our long-term IRR on that project, Mike, is still in the mid-8s to 9, and, you know, that's without executing, you know, another transaction, changing cap rates or interest rates in the future. We feel good about it. We'd price it higher today if we could. We're still gonna make money on the project. Okay. Why did you elect to do that project, on an on balance sheet development? I know historically you've been more doing these construction loans. I guess why is that project different? There's some unique circumstances with Northside and this location. They own the land, so it's on our ground lease. They have the second building's already de-designed, and we think there's leasing demand to move forward with that project in the next year. That one we will price again based upon kind of current pricing at the time, but. It would be priced differently if we were starting it today. It's Northside asked for us to build it on balance sheet again for some unique circumstances. The tenant base is partly their employees, partly affiliated physicians that aren't employed by them. It's a combination of, you know, healthcare compliance and Northside's own balance sheet, you know, management. We're excited to do it. We're working with RTG the, as the developer on that project, who we partnered with before. They do a great job and have done a great job, you know, getting the building to 100% pre-leasing before we started funding it. This is more of a unique situation. We shouldn't expect future ground-up developments on balance sheet? I think you'll see some, but our preference is the loan down where we're getting a, you know, current construction loan yield and have more optionality on the back end to on potential of an acquisition. You may see it from time to time, but, you know, we're excited to do it and expand our relationship. It's a great market. Atlanta is still, you know, very hot. Okay, great. Thank you. Sure. Our next question comes from Michael Griffin with Citi. Great, thanks. Maybe to start off with the capital allocation kind of strategy, high level, piggybacking off the previous Mike's question. I think you've talked about in the past about, you know, your solid balance sheet, a strategy for outsized growth. I mean, I'm curious maybe if you can elaborate, J.T., on where this growth is coming from. Probably the capital question for Jeff, you know, why put capital out today? Would joint ventures make sense? You talked about the development funding just a minute ago. Any commentary on that would be helpful. Yeah. You know, beginning in the fourth quarter of last year as interest rates were, you know, rising dramatically, and fast and, you know, cap rates on acquisitions was not, you know, keeping up with that and still hasn't really reached equilibrium. You know, we've been very modest on acquisitions, knocking on a lot of doors trying to, you know, continue discussions. We've walked away from opportunities where they were very attractive 18 months ago that aren't attractive, or aren't as attractive today. Many sellers are just holding firm and, you know, hoping that interest rates decline and that cap rates improve, you know, from their perspective, you know, next year. We don't expect a lot of acquisition opportunity this year. The development pipeline, again, those are usually two years of construction projects, and we can get outsized yields there. You do take some capital risk, and you do take some modest development risk, which we don't think we're taking any there because of the, you know, getting to 100% pre-leasing with investment grade, you know, quality tenants like the Northside project. I think those are mitigated over time. That $300 million pipeline we're talking about, much of which won't even price or get started until later in the year. Again, it's a balance and forward-looking projection as best we can about how to, you know, how to price those projects. Jeff? Yeah. A little bit on the capital side. You know, obviously we reduced our leverage a little bit in the face of rising interest rates and to try to build up some capacity and dry powder to take advantage of acquisitions and development opportunities. We, you know, we issued some stock, around $15 per share, so that's kind of a, it's called 6.4%-6.5% implied cap rate. You know, we feel confident that when we redeploy those proceeds, we'll be getting, you know, yields in excess of that. I think we can utilize the capital that we raised accretively in the back half of the year. Again, as JT's talked about, it's a little bit market dependent on how fast we can get that out the door. We feel like we're in a good position to do so. Thanks for that, Jeff. I appreciate the additional disclosure on the release about the ATM issuance. I double-checked with the prior quarter one, it wasn't any new news, so appreciate that. Maybe one for Mark, just on the leasing side of things. I think the lease percentage ticked down, you know, a little bit in the quarter, but it's still pretty high at around 95. I mean, how are you kind of incorporating this into expectations around leasing, occupancy growth this year, and the ultimate impact on same store? Thank you. Definitely take that. On leasing, as you just mentioned, I mean, again, we're starting at 95% occupancy, so very full. You know, one of the things we're doing or actually two things we're doing a little differently right now. One is we're more proactively investing CapEx dollars into some of the vacancies to make sure the spaces are ready, available for lease immediately, that we're not, you know, caught with supply chain challenges, anything like that. We're being very proactive with our CapEx dollars to have spaces that are show ready. Then second, our leasing team this year has done a great job, and I mentioned this on the first, the last earnings call, that we've really increased our online marketing efforts and our broker outreach to enhance communication and really market those vacancies online and with some new virtual reality technology, and online tours. It's definitely a focus of our entire team to improve occupancy throughout the year. Great. Thanks. That's it for me. As an Atlanta native, just wanted to say I'll have to check out the new properties next time I'm back there. Thanks. Yeah, we'd love to take you for a tour and, everybody. Our next question comes from John Pawlowski with Green Street. Good morning. Thanks for the time. I know you touched on the Landmark portfolio briefly in your prepared remarks, so I apologize if I missed this data point, but could you quantify what type of lift the Landmark portfolio had on the same-store NOI growth in the quarter? Yeah. Hey, John, this is Mark again. First, welcome to the DOC call. Great to have you here. We appreciate the support from Green Street recently. You know, Landmark, it's about 1.4 million sq ft out of our 15 million sq ft, 15.2 million sq ft same-store portfolio. You know, while great results there, just based upon the, you know, overall size of the same-store portfolio, it doesn't have a outsized impact on our same-store results. You know, those properties alone right there, 4.1% from the same-store, is a result of some increased occupancy and have done a really good job. The Landmark portfolio itself is 11% of the same-store pool, though. year-over-year, again, 4.1% growth there. Okay. I know, you know, with the portfolio, there's always it is Socratic moving pieces, but instead if you exclude the one property that had a large decline in renewal spreads, it sounds like that was a 70 basis points drag, but Landmark was a positive. It feels like if you exclude those two other pieces, the rest of the same store is kind of, you know, stuck in the low 1% NOI growth range. If you look through the portfolio, is there any other concerning trends that suggest it can take a while longer to get back to that historical growth profile? John, the one thing I would add to what you just said, you're starting to build on it correctly with the, you know, excluding SegMeister. The one thing I'd add is, again, is the 58,000 sq ft of leases that are already signed and under construction. Once those come online on a run rate basis, you know, they'll add to approximately $400,000 of NOI a quarter. That'll continue to help build our same store and, you know, that could be another 40, 50 basis points there just from leases that are already signed. Again, that's on a run rate basis. They'll come online throughout the back half of the year. Not all at the same time, obviously, but throughout the back half of the year. You know, that's what gives us confidence that we'll be rebounding into our more historical range of 2%-3%. Okay. Last one for me just on the development appetite for development. I understand the lag of when deals are priced versus when you're actually committing capital. Just curious, John, why not walk away or reprice the economics of the $41 million construction start if the world changes? Just curious why you're kind of anchoring the pricing a year ago. Yeah. You know, John, there's a, we have a core value called CARE where we, you know, collaborate, communicate, act with integrity, we respect the relationships, and we execute consistently. We built this company for 10 years by being reliable with our health system partners, and we do reprice. We have repriced where we have the opportunity. Again, we are in the high eights on an IRR basis on this transaction. The 6.2 is the first-year yield. It grows 3% a year within, you know, primarily an investment-grade health system. We'll have the opportunity to expand this campus by another 100,000 feet in the near future. We don't see it as a project you walk away from. We see it as a project you work with your partner and get to the finish line where you can. Other projects, we've done exactly what you suggested. We've walked away from purchase options that again, where we had the optionality, and that's kind of the preferential way we like to do the development projects. Each situation, you know, stands on its own merits and circumstances. Yeah. All right. Thanks for the time. I appreciate it. Yep. Our next question comes from Michael Miller with JP Morgan. Yeah, hi. Just a quick one. On the construction loan, the $35 million construction loan, looks like that's tied to a project with a renovation attached to it for a surgery center, and it looks like you're planning to take that out in the back half of the year. I guess, what's the cost of that that you'll be acquiring? Does that effectively just kind of come out of the loan balance? Is that the way to think of it? No, it's a small part of the total project. The ASC, which is the first step of the redevelopment of that location with Emory is, the cap rate's in the high It's closer to an eight, but we're committing capital to redevelop that. The ultimate yield on that's in the 7s. The construction project is a separate loan, and it's priced at 6.75%, 6.8%. We have optionality whether to purchase that building on the back end, and we'll evaluate to John's point a minute ago, we'll evaluate the value of that purchase option at the time of execution or walk away from it or try to reprice it. It's a small piece. The ASC piece, it's a nice yielding but a small $4 million-$5 million acquisition. We've committed capital to renovate and improve that building. Got it. Okay. That clears it up. I appreciate it. Thank you. Our next question comes from Omotayo Okusanya with Credit Suisse. Hi. Yes. Good morning, everyone. In regards to the space you guys are kind of strategically holding back for the kind of quote unquote "right tenant," could you just kind of talk us through a little bit about kind of what that total square footage is, what kind of rent you're ultimately kind of expecting on that space and kind of, you know, the kind of earnings contribution once all that's kind of leased up and kind of what's the internal timing around or internal targets around some of that stuff? Hey, Tayo. One clarification. You said, you know, kind of holding out or non-renewing space to hold out for a better tenant. That's really not exactly what we do. We non-renew space because we have a better tenant in hand, and that's the perfect example is the 55,000 sq ft of leases that are under construction. It just takes a period of time, you know, to build out that space for the incoming tenant. We don't count that as leased, you know, occupied space until the rent commences, you know, as appropriate, you know, accounting. That particular location or those 55,000 feet is 50 basis points of same-store. Yeah. $200. Yes. Yeah. pretty meaningful contribution and gets us back to 95% actual leased space when those commence. On the building that where we had the, you know, repositioning this quarter, we already have an active lease pipeline. Again, those discussions have been in place for a while, and Amy Hall and her team have done a great job of building a list of tenants to backfill and lease that space at market rates. we think that building will get back to kind of high occupancy in second half of this year, first half of next year. it'll start contributing again momentarily. Okay. Then just like target economics for the I mean, when you're gonna re-lease the space, Is the goal you want, you know, 10%, 20% spreads on kind of what the old leases look like? Or just trying to get a general sense of what kind of economics you're targeting. Yeah, Tayo. I think you're making a great point here, which is that our vacancy and short-term leases really have an opportunity right now to increase cash flow as we're in an environment where rental rates are increasing quickly. In fact, just yesterday, just as an example, we were shared a leasing flyer for a brand-new development in Texas, in our second-largest market. It's not an investment that, a development deal that we're directly involved with, but it's located right next to a large existing building we own. The development rental rates in that leasing flyer were 40% higher than the rents we have in place in our existing building that was built five years ago. Similar, you know, quality, even larger building, but a large delta between what, you know, current construction rental rates, asking rental rates are and where the embedded in, you know, rental rates of our portfolio are. There's a great opportunity. That's what our leasing team, our asset management team is focused on, is really understanding each market and bringing those current leases mark to market. As I said, absent the one lease we discussed, we had 10.1% leasing spreads this quarter, which is a phenomenal job by our entire leasing team and great retention with our asset management team. Great. Thank you. Thanks, Todd. Our next question comes from Joshua Dennerlein with Bank of America. Yeah. Hey, guys. Thanks for the time. Just kind of wanted to ask about something you mentioned in the opening remarks. If I heard correctly, you mentioned you expect the transaction activity to pick up in the second half of this year. What's driving that expected pickup? You know, I think the just knowing what's in our pipeline and discussions, again, when we don't do much at all, any new acquisition is a pickup, right? We do have some active discussions, but it's not the kind of volumes we've done historically because we're really, you know, pushing long-term cost of capital and trying to match up with, you know, market first year yields. I, you know, I do think the market generally, there's a lot of, you know, loans, IO loans that were issued in 2019, 2020 that were, you know, attached to buildings that were purchased at 4.5%-5% yields, and those loans are now, you know, costing 7%-7.5%. There's, there's a mismatch there, a negative leverage on, you know, acquisitions to cash flow. The LTVs are not, you know, don't support the size of those loans. We're starting to see, it's small right now, but I think that activity will pick up where we see, you know, not distressed buildings, but owners who, you know, don't want to come out of pocket, you know, to support that kind of cash flow. We think there's a pretty large volume of that kind of opportunity out there. We'll see if it materializes or not. If interest rates, you know, fall, maybe people, you know, kind of ride it through until the future. Right now, we're starting to see some evidence of that kind of combination coming to fruition. Oh, interesting. Are those mostly like one-off assets, or are they more like portfolios of size? Yeah, I'd say a combination. One-off assets is primarily what we look at. It's, you know, it's rare that we do We've done 2 very large portfolios, you know, we've really built the company 1 building at a time, so. All right. Thank you. Yep. Our next question comes from Steven Valiquette with Barclays. Great. Thanks. Good morning. You touched on this a little bit, but I guess I was kind of curious too, just on the for the same-store NOI numbers. I think this is like the maybe the fifth quarter in a row where the expense growth was, you know, faster than the revenue growth. I was wondering if there's just a line of sight to when that might reverse when the same-store revs would maybe ideally be growing faster than the expense line. You talked about part of the remedy on that, but I'm curious if there's any other one. If it's continued just upon that, you know, additional leasing you talked about or just other factors as well, maybe controlling expenses there. Just more color on that would be helpful. Thanks. Steve. Operating expenses in the same-store pool were up 6.9% year-over-year. You know, sort of in line with some recent inflation prints. You know, we're coming off of a period last year where this comparable or operating expenses were really flat in the comparable period but prior year ago. If you look a little deeper into that, what we're seeing on operating expense growth is number 1, utilities. Not necessarily consumption, because we made some very intelligent and large capital investments in the building, but in the rate of utilities, we're seeing a pretty large increase. Then we're also seeing some increases in labor expense related to janitorial, engineering, things like that. Year-over-year, that's where the operating expense growth is. Again, one of the benefits of our highly occupied Triple Net lease portfolio is that those operating expenses are nearly, you know, offset in our recoveries, which are baked into that rental revenue line item there as well. Our asset management team, property management team are always focused on keeping total occupancy costs low, you know, managing operating expenses well and leveraging economies of scale. You know, we'll continue to try and focus on keeping those operating expenses, you know, below the inflation line. Got it. Okay. Appreciate the color. Thanks. We are closing our question and answer session. I would like to turn the floor back over to John Thomas for closing comments. Please go ahead. Thanks again, everybody, for joining us today. We look forward to be seeing you at Nareit in future investment conferences and speaking to you again in August. Thanks. This concludes today's conference call. You may now disconnect your lines. Thank you for your participation, and have a great day.