I would now like to turn the conference over to Carla Baca, Associate Vice President, Investor Relations and Corporate Responsibility. Please go ahead. Thank you for joining us today for Healthcare Realty's first quarter 2021 earnings conference call. Joining me on the call today are Todd Meredith, Bethany Mancini, Rob Hull, and Chris Douglas. A reminder that except for the historical information contained within, the matters discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks, and uncertainties. These risks are more specifically discussed in the Form 10-K filed with the SEC for the year ended December 31st, 2020. These forward-looking statements represent the company's judgment as of the date of this call. The company disclaims any obligation to update this forward-looking material. The matters discussed in this call may also contain certain non-GAAP financial measures, such as funds from operations, FFO, normalized FFO per share, normalized FFO per share, funds available for distribution, FAD, net operating income, NOI, EBITDA, and adjusted EBITDA. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the quarter ended March 31st, 2021. The company's earnings press release, supplemental information, and Forms 10-Q and 10-K are available on the company's website. I'll now turn the call over to our Chief Executive Officer, Todd Meredith. Todd? Thank you, Carla. Thank you, everyone, for joining us today. We are very encouraged to see outpatient volumes getting back to pre-pandemic levels. This will drive our internal growth toward our long-term growth profile. When we add our accelerated pace of external growth, we are building positive momentum in FFO and FAD per share. Foot traffic and patient flow in Healthcare Realty's facilities is fast approaching normal patterns, now at about 95% of pre-pandemic levels. Some disparities still exist between markets. For example, the Bay Area is several months behind Nashville, where providers have been back to normal for a while. We've seen a noticeable uptick in traffic in just the last two months, which is correlating with vaccination levels. The most vulnerable group, the 65+ cohort, is well-vaccinated and consumes the most healthcare per capita. 83% of these folks have received at least one dose and will be fully vaccinated in a matter of weeks. These folks are increasingly comfortable going to the doctor's office. As vaccination levels steadily rise and patient volumes normalize, optimistic providers are re-engaging in plans for growth. We expect this to translate to more leasing momentum in the coming quarters. We see several positive indicators that will improve same-store NOI from 2% today toward our long-term growth rate of 3%. We are raising rents steadily and retaining our tenants at very high levels, and we are seeing strong underlying demand for space at our properties. All MOBs are poised to do well in the short term as patient volumes return to normal. Longer term, the common denominator for success is aging demographics. Three keys to our ability to outperform are choosing the best markets, leveraging our local relationships, and aligning with the best providers. Our core business is on and around hospital campuses, where performance is consistently strong. What's new is that we're also finding some attractive off-campus opportunities. Typically, these buildings are in close proximity to our hospital clusters. Our teams are plugged into local relationships that help us identify the off-campus buildings in high demand from providers. The MOB sector is highly competitive with plenty of capital chasing limited supply. Highly desirable properties around hospital campuses are difficult to source, especially at scale, and thus have a long history of steady, rich pricing. For these properties, we have an edge over the competition due to our long-standing credibility and network of relationships. This helps us invest in more than our share of hospital-centric properties. Looking ahead, we see the bulk of our investment allocations going to these properties around the hospital campus. We will also invest selectively in higher-yielding off-campus properties with a higher allocation going to our joint venture in order to balance our risk and return on capital. Healthcare Realty's off to a robust acquisition pace in 2021, and with providers actively re-engaged in growth plans, we expect to initiate multiple development starts this year. This strong external growth, together with accelerating internal performance, is translating to attractive FFO and FAD per share momentum. Now I'll turn it over to Bethany. Thanks, Todd. I'd like to provide an overview of the current state of healthcare and government health policy. We've been encouraged by recent for-profit hospital company financial results. Volume is down but heading in the right direction, and EBITDA margins are up based on solid revenue growth. COVID cases are decreasing as a percentage of inpatient volume. Growth in outpatient surgeries is positive. Hospitals continue to be impacted by fewer low acuity ER visits. Still, year-over-year, same-store revenue has remained strong, on average up 10% from higher acuity services and insured patient mix. These results have been similar for not-for-profit hospitals, which make up the majority of our health system relationships. Health systems continue to focus on strategies to lower costs, preserve, and even expand inpatient capacity, and increase services in outpatient settings. On the physician office side, other than a select few markets slower to reopen, our tenants are seeing positive patient flow and strong demand for services. With an increasing number of vaccinations, particularly among those 65 or older, most physician practices are looking past COVID recovery toward growth. On average, the 65+ population visits a physician office 2.5 times more each year than those under 45 years old. As a percentage of the total population, this cohort is expected to increase from nearly 16% today to over 19% by 2028. Underlying demographic growth is clearly in place to support the long-term value of MOBs. The regulatory and legislative landscape remains relatively benign for healthcare providers. The Biden administration's agenda is focused on expanding health insurance coverage through adjustments to the ACA, while also supporting healthcare providers through ongoing COVID relief. The most recent $1.9 trillion COVID relief bill increased ACA subsidies and lowered premiums for at least the next two years. Incentives to close the low-income insurance coverage gap are expected to increase the number of people eligible under the ACA by 3.6 million, and signal a positive direction for providers' compensated care. There is strong political support to make these benefits permanent and to offset healthcare funding that expires down the road. Conventional wisdom still holds that it is very difficult to take away a benefit once provided, truer now as Congress continues to shore up healthcare providers in the wake of COVID-19. Other items potentially on the legislative agenda, two of President Biden's campaign hallmarks were a public insurance option that would allow people to buy into Medicare, and a reduction in the age of Medicare eligibility to age 60. The political balance in Congress will keep large-scale policy proposals more limited in scope for passable legislation in the near term. Expansion of government-funded health insurance should be measured and incremental, a positive for healthcare providers. As hospitals and physicians look to move beyond COVID, they will benefit from steady commercial payer mix, a rise in the total insured population, and support for positive Medicare rate increases in 2022. Insurance payers, both private and public, continue to promote healthcare delivery in outpatient settings. We view any legislative or regulatory effort to lower healthcare costs as an advantage to outpatient care and the development of more outpatient facilities. The value of physician offices and hospitals has been underscored in the last 12 months. With aging demographics, their services will be more critical as they meet rising demand in the years ahead. Healthcare Realty's longstanding relationships with many of the nation's leading providers will bolster opportunities for growth. Now I will turn the call over to Rob. Thank you, Bethany, and good morning, everyone. I will summarize Healthcare Realty's first quarter investment activity and our outlook for the remainder of the year. We are off to a solid start investing this year. Our relationships with health systems, property owners, and brokers often give us access to deals before they become widely marketed. As we deliberately build scale in target markets, we are often viewed as the preferred buyer for buildings. These advantages have enabled us to maintain a robust acquisition pace at attractive cap rate levels. This is especially noteworthy as more buyers have moved back into the market and pricing remains competitive. Far this year, we have purchased 10 buildings for $129 million, including four purchased through our joint venture with Teachers for $67 million. All 10 buildings are located in our core markets, including San Diego, Dallas, Atlanta, D.C., and Denver. What I really like is that the majority of these add to our existing clusters. As an example, in Orange County, we acquired our fourth property around the campus of Saddleback Medical Center, which is part of MemorialCare. We now have a sizable portfolio around this hospital of on, adjacent, and off-campus properties, which places us at the center of deal flow. Recently, a practice from another submarket had a need to expand into this area. We were able to show them a range of locations, price points, and interior finish levels. Having multiple product types was instrumental in keeping them exclusively engaged with us throughout their decision-making process. Another example is in Atlanta. We acquired two properties around Wellstar's Hospital in Douglasville, where we already own two buildings. Our expanding relationship with the hospital gives us insight into its future plans and potential demand for these four buildings. Cap rates for these 10 acquisitions average 5.5%, with a low of 4.5% and a high just over 7%. The low is a value-add opportunity within an existing cluster, and the high is an off-campus property. Both of these buildings were purchased through our joint venture with Teachers. For some additional color around cap rates, we included a page in our investor presentation that lays out cap rate ranges by region for the $1 billion of acquisitions we've completed over the last couple of years. What you will see is that we have been able to expand our footprint beyond the campus and generate incrementally higher returns. Our off-campus acquisitions have been at spreads of 40 and 90 basis points above on-campus properties, depending on geographic location. Our acquisition pace shows no sign of slowing as we continue to grow our pipeline. Currently, we have properties under contract or LOI totaling over $150 million that we expect to close near the end of the second quarter. With the strength of our year-to-date acquisitions, we are raising our guidance range by $50 million at the midpoint with an upper end of $550 million. We also took advantage of a strong pricing environment to sell three properties for $34 million at a combined cap rate of 4.8%. These buildings were not in line with our strategy to build out clusters of properties around leading hospitals. We reinvested the proceeds accretively into MOBs with superior long-term growth prospects. Looking at redevelopment. In March, our first new tenant took occupancy at our project in Memphis. This 29,000 sq ft orthopedic group will drive volume to the surgery center in the building. The surgery center is currently being renovated and expanded to accommodate more volume. This property is well on its way to stabilization early next year at a projected yield over 7.5%. In April, we started a redevelopment in Seattle that includes expanding one of our existing buildings by 23,000 sq ft. This 100% leased project has a budget of $12 million and an estimated stabilized yield of 6%. We expect tenants to move in and start paying rent by the middle of next year. Looking ahead, we have a couple of more developments expected to start this year. Our developments create financial value with targeted yields from 100-200 basis points above comparable stabilized assets. Additionally, they foster deeper relationships with hospitals and providers as we work closely with them to plan for their outpatient growth. In summary, our acquisition and development strategies are paying off. I look forward to carrying this momentum into the quarters ahead. Now I'll turn it over to Chris. Thank you, Rob. The positive momentum we saw late last year continued into 2021. First quarter year-over-year FFO per share grew 2.6%. What's noteworthy is that in each of the pandemic impacted quarters of the last year, we had positive FFO per share growth. This was possible due to the underlying revenue growth drivers of our portfolio, as well as accelerating external investments. In the first quarter, sequential FFO increased $1.7 million. This was driven by a $3.1 million increase from the full quarter contribution of the $337 million of fourth quarter acquisitions. This contribution was offset by a $1.3 million increase in G&A, $900,000 of which is related to first quarter only items. We see current same-store NOI of 2% trending back to, or even above, our long-term average of approximately 3% as the impact from the pandemic dissipates. Where we really saw COVID-19 effects in the last year was the loss of parking income and occupancy during the second and third quarters. This was partially offset by lower operating expenses. The timing of the rebound to pre-pandemic levels for these items will fluctuate and vary by market. However, with vaccinations becoming more widespread and the number of leasing tours increasing, we see a path to accelerated growth in the quarters ahead. The growth potential embedded in our existing leases remains solid. The average in-place contractual increase for our portfolio is 2.86%. For leases renewed in the first quarter, the average cash leasing spread was 4.4%, and the average future contractual increase will be 2.98%. Our ability to achieve this level of performance is tied to targeting markets where population growth runs well above national averages and drives our expectation for future internal growth. Solid operating fundamentals and a strong pipeline of accretive investments will ensure the ongoing strength of our FAD payout ratio, which was 88.7% over the last 12 months. It is worth noting FFO per share grew 8% over the prior 12 months. This drove the improvement in our payout ratio even as we increased the dividend in March. In the first quarter, maintenance CapEx decreased to $8.4 million, down from a seasonal high of $21.1 million in the fourth quarter of 2020. Maintenance CapEx spending will fluctuate quarter to quarter. We expect to maintain a trailing 12-month FAD payout ratio below 90%. Net debt to EBITDA was 5.3 times at the end of the first quarter. This is right in the middle of our target range of 5 to 5.5 times. Net acquisitions of $69 million in the first quarter were primarily funded through $63 million of net proceeds from the settlement of forward equity. Looking ahead, we have multiple sources of capital to fund over $150 million in our near-term acquisition pipeline. Our funding options include up to $127 million of proceeds from yet to be settled forward equity, more planned dispositions and joint venture capital, along with nearly full capacity under our revolver. As we reflect on the pandemic hurdles of the last year, we are pleased with the stable performance of our portfolio and encouraged for the future. We see the most significant impacts of COVID-19 on our portfolio fading, with widespread vaccinations and foot traffic at our properties increasing. Underlying solid growth of our revenue drivers, including healthy escalators and cash leasing spreads, are poised to drive same-store growth to 3% or more. Improving internal growth and a robust pipeline of accretive investments will accelerate per-share earnings growth in the quarters ahead. Sarah, we are now ready to open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question from the queue, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Juan Sanabria with BMO Capital Markets. Please go ahead. Good morning. I was just hoping you could give a little bit more context with regards to the benefit from parking to same store. Is there a way to quantify kind of how much you're generating today versus what the normalized pre-COVID levels were? Yeah. Right now, we are running about 80% of what first quarter 2020 parking income was. We do see that as a benefit to us in the coming periods as we start to see that rebound back to more normal levels. That impacted same-store results by call it about 50, 60 basis points. Great. I was just hoping, maybe more of a conceptual question, the local cluster you guys have been able to generate, what impact does that have to margins as you benefit from local knowhow and maybe having lower personnel by asset? Is that not really a driver to margins and it's more of just local knowhow? Just curious on what you're seeing and what that means for margins and same-store NOI growth. Yes. I would agree with sort of where you were headed there, which is that we really see it as more of a revenue driver benefit, a leasing benefit, and a momentum benefit, rather than just an expense savings benefit. Clearly, there can be some of that expense savings as you scale up. What we also find, if you look at probably our premier example, and we show this in our investor presentation in Seattle, we're very spread out there across a lot of different clusters across a pretty big region in the Puget Sound. You don't just centralize with one office and send everybody out. It's a high level of service, a lot of folks in the buildings that we own. We don't want to cut customer service due to the high traffic in our buildings and so forth. Really to us is the benefit of being in the flow of the leasing discussions that are going on, whether it's with brokers or directly with hospitals or physician tenants. It's much more of a revenue piece and driver and accelerating revenue and occupancy than expense savings. Maybe just one last quick one. What do you expect the development deliveries to kind of average as that ramps up going forward? When you say development delivery, what do you mean? Just the volume. The volume? Yeah. I think as we move forward, we're looking at starting anywhere from two to three projects a year, and that's generally on the volume side, that's generally going to be in that $50 million-$100 million a year in starts that we're targeting. Right now, we're at 60. We could probably easily push towards the upper end that would be underway by the end of the year, if not exceeded. On average, I think Rob's right. Over time, two or three projects that are active and/or getting started each year. Thank you, guys. Thank you. Our next question comes from Nick Joseph with Citi. Please go ahead. Thanks. You talked about the geographic differences that you're seeing, but I'm wondering if you're seeing any differences across different specialties or practices of volumes returning or patient flows. Not tremendous. Certainly, you see the specialists clearly are getting very much back to normal. I think it is much more geographic than it is necessarily by specialty. There are some extreme examples, as you might point out, or we might point out that some of the cognitive counseling, psychology, psychiatry, some of those things, certainly behavioral health. There are some things that can lend themselves much more to not getting back to normal and can be somewhat handled in a more virtual telehealth manner. Most of what is in our buildings, we're seeing back to normal, most of those specialists. Certainly even the ones that we saw impacted pretty significantly, like dentists and dermatologists, all that's very much back to normal. That's helpful. What do you think about, I guess, leasing on a geographic basis? Are you seeing differences there, just given what's happening kind of from a volume perspective? Is that leaking through in the leasing market at all? I'd say a little bit. Certainly, the emerging signs of more growth, as all of us touched on, would be much more concentrated in some of your places that are a little more have been back to normal longer, whether that's here in Nashville or in Texas, over in North Carolina, different places like that, where Rob's team is very active. I would say that does correlate somewhat with markets that have been much more open sooner. A place like the Bay Area is definitely going to look a little sleepier on that front. Southern California is a very different story, though. I'd say, Rob gave an example that was in Orange County, and we've seen tremendous engagement there and momentum. It is very specific to particular markets. Thank you. Thank you. Our next question comes from Nick Yulico with Scotiabank. Please go ahead. Hey there. This is Josh Baron with Nick. Maybe could you guys just talk about what you're seeing in terms of leasing activity? Leasing volumes were pretty strong this quarter. Releasing spreads and retention rates are both at the high end of guidance. Any color that you could provide on leasing expectations for the rest of the year would be helpful. Yeah. I think you're right. First quarter was strong in terms of our leasing metrics. Specifically to our cash leasing spreads, they were a little bit above what our guidance range of 3%-4% for the year. Really, that has to do with just where the ultimate mix comes out. We ended up with, I think it was about 3% of the leases that had negative spread. Having a very small number in that bucket certainly lets your higher-end renewals play through to the average. If you look at it still, the vast majority of the renewals were in the 3%-4% range. That's still what we expect for the year. Overall, in terms of absorption, we did have positive portfolio absorption. We're pretty flat on a same-store basis. That can fluctuate from quarter to quarter, but as we've been talking about, there's some positive signs of things improving across the country that we think can help drive absorption as we look to the back half of the year and into next year. Just overall, you all heard us talk about just the backdrop behind the whole sector with the aging demographics and the need for additional space, we think is going to be a benefit to leasing, not just in the year ahead, but in the years ahead. Got it. That's helpful. Could you just give an update on the current acquisition pipeline in terms of activity and pricing? Maybe you could just talk about what drove the increase in acquisition disposition guidance and then the better pricing on dispositions. Yeah, I'd say on the pipeline, we certainly started off the year with strong investment activity. 10 buildings, $129 million at a blended cap rate of 5.5%. We do have a continually to building our pipeline, I think it really stems from our process of how we're building that pipeline. We very much are going into our targeted markets. We have around 30 markets that we are intently focused on. We see an opportunity to grow in. Our team is there building these relationships, getting to know building owners, that creates some visibility for us in terms of what we see out in the future. Given the strength of that pipeline and the mentioned $150 million that we have under contract for LOI that we think is going to close around into this next quarter, that volume and that activity level are giving us confidence that we're going to get to the upper end of that new range that we've given the investors. On the disposition side, yeah, I think this quarter you saw us sell a few properties at low cap rates, where blended cap rate there was 4.8%, selling into the strength of the pricing market. Those were properties that didn't fit in with our cluster strategy, our long-term cluster strategy. We took the opportunity to recycle those assets and those dollars and put them into accretive MOB transactions. You'll see us continue to do that this year. We've got some opportunities to realize some nice value from some of our properties, and we'll rotate that into accretive MOB transactions. Got it. Thanks. Our next question comes from Jordan Sadler with KeyBanc Capital Markets. Please go ahead. Thanks, Rob. I'd like to follow up on the dispos. Maybe you can kind of just walk us through the rationale on the two that closed this quarter. I know you got a couple more teed up, I saw on the 10-Q, a couple of bigger ones in Virginia, et cetera. Valley Presbyterian in L.A. or Piedmont in Atlanta, what was sort of the rationale around these couple sales? I'd say at the Valley sales, that was a campus that we had two properties there. When we look at that hospital, we didn't see a lot of additional opportunity to build out properties in and around that campus. The buyer of that property, the tenant was an owner in the building or part of the ownership group, and they made an offer at a very aggressive cap rate. We wanted to take advantage of that and sell to that group and rotate that into an area and some assets where we saw potential for growth and to build out clusters down the road. The other asset was an off-campus asset in a similar theme. We didn't see an opportunity to build out in that immediate area, a cluster of properties over the long term. We took the opportunity to sell into the strength of this pricing market and deploy those dollars elsewhere. Okay. In terms of the stuff that's teed up, I did see one larger asset that seems like it's held for sale, $52 million. Yeah. The one in Virginia you're talking about. That one is an on-campus building, but it's interesting that it has some capacity to actually convert a portion of that building to inpatient. The hospital had approached us of their interest in buying that asset to help them with some expansion opportunities they're looking at on the inpatient side. We were able to agree on a price at a favorable cap rate. I think it's a sub-four cap rate on that one. A good opportunity to accretively dispose and reinvest that capital. Okay. That makes sense. Chris, I was just curious on the FFO side sequentially, you commented on a full quarter's contribution from all the acquisitions that closed in the quarter. One of the headwinds you pointed out was $900,000 of G&A that is not going to continue. Was there anything else that was a headwind in the quarter aside from sort of the elevated G&A? I would've thought FFO would've been sort of pressured a little bit higher based on sort of the underwriting and some of the metrics you guys had provided. Yeah, no, that really is the main item with that G&A. We've talked about that each year. We kind of have that in the first quarter, that's seasonal only. If you would've had that would've started pushing on a rounded basis that your FFO growth back up, call it another $0.01 or so. That is certainly the main item. Obviously, we've talked about that our same-store is growing a little slower than frankly what it has been historically, because of the COVID-19 issues that we experienced last year. As we see that rebounding, that will provide some additional lift for us on overall growth. As we look at it, I think things are lining up very well, especially as we look towards the back half of the year and moving into next year of very strong per share growth on FFO and FAD. Do you have, out of curiosity, less important, but just for sake of the metric, and you pointed to it, the GAAP same-store NOI growth year-over-year? I don't know the exact number off the top of my head, but you can see inside of our supplemental, we do lay out the straight-line rent, so the math wouldn't be that difficult to calculate. Yeah. I'll follow up with you. My recollection- It's hard to actually get there because you don't provide the line items for revenue and expense for the acquisitions, its redevelopment, disposition line items, so it's a little bit tricky. I'll follow up with you on that. On the shares settled in the quarter, in terms of the equity, can you give us timing on that? Was that late in the quarter or early? Yeah, I'm trying to remember the exact timing, but I think it was late February, early March. Okay. Thank you. Thanks, Jordan. Our next question comes from Vikram Malhotra with Morgan Stanley. Please go. Good afternoon. Thanks for taking the question. Just wanted to maybe get some of your latest thoughts on how big the opportunity set is for, leaving aside the pure on-campus for Healthcare Realty, just the off-campus, adjacent, other nomenclature. Just how big the opportunity set for you is. Maybe over time, where you think that goes in terms of a percent of the portfolio. I ask just given, obviously, the broader talk about hospitals incrementally looking to take pieces of their operations and move it more into the community, to off-campus settings, more procedures being reimbursed for that. Just want to get your, how much of this is you're building towards a slightly different, not completely, but somewhat different healthcare delivery model versus this is an opportunity set that you find sort of accretive and maybe it's a bit of both. Any of your thoughts would be helpful. Sure, Vikram. I think it is a bit of both. We probably have a slightly different view than maybe sort of this prevailing binary view that there's a fixed bucket of services on a campus, and if anything decants, then the bucket's smaller on campus. We don't really subscribe to that. We think that bucket is always growing. The acuity levels are growing. The volumes are growing. I mean, the amount of inpatient expansion we see that sort of counters the narrative that hospitals are somehow shrinking, we just don't see it. We're seeing more demand and more on-campus MOBs being built, and a lot of what Rob's working on is stuff right around the hospital campuses. We think it's all a growing sector. We'll continue to invest in both aggressively. There's no doubt, we've always said it's a very real trend that things have been moving also off-campus as well. Over time, acuity in the off-campus setting can improve too, and it is. As you just pointed out, there's going to be more and more that can be done in those off-campus settings. We like the odds of all of it. We think what's really important, though, is learning how do you navigate that and balance the risk and the return. I think that's what you've heard us express today, is that we're finding our own way to get better returns and have more risk and less variability by looking at things that have a strategic alignment with our clusters. It's an extension of relationships that we have being in denser, larger markets, all those things that help mitigate sort of the risk of just small, rural off-campus buildings that can go dark on you. There is no hard and fast number. I think Rob maybe mentioned that we've got in our JV, we're doing more off-campus there. I think the JV to date is roughly 40% off-campus, that's a very different picture than the balance sheet, which is high 80s on-campus and around the campus. Our view is there's not a hard and fast number. We still, as I mentioned, are allocating the bulk of things to the campus model, but we are opening up, and I think it does increase the addressable market for us, which is very encouraging. That makes sense. Given this sort of, can you talk about just competition from maybe away from your traditional peers? Has the playing field changed in any way over the last three, six months as the recovery has picked up? Have you seen new players come in? Maybe just give us the latest thoughts on where pricing is. Yeah. Vikram, I would say that's right. We have seen really buyers that maybe were sitting on the sidelines last year, they've moved back into the mode of competing for product, certainly on the marketed deal side. Oftentimes we say it's a lot of the same names, we really think about it from the standpoint of the capital that's behind the same names in many cases. We are seeing quite a bit of capital move into the space, and they're chasing opportunities, just like we are. You're seeing a little cap rate compression, mostly on the portfolio side, where these guys are trying to get in and make a big move. On what we're calling the ultra core side, you're seeing a little bit of it as well. Cap rates certainly moving a bit, but through our process, we've been able to find the right deals for us at accretive cap rate levels and make sense of them, and a lot of those are being borne out by relationships that we've established previously. Repeat sellers, folks that we're doing repeat business with, they know that we'll close on the transaction. They know that we'll underwrite it properly, and they're getting a fair price. We're really finding that that's paying off as we're out there in this competitive environment. Got it. That makes sense. Then just one last one on, you referenced obviously the developments over time and you increasing the pipeline. Given sort of all the cost pressures across various materials, I'm just wondering, as you think about underwriting here, are there certain areas you're focused on or markets you're focused on where you may feel you have a little bit more pricing power from an underwriting standpoint? Just trying to figure out the underwriting in light of where cost of construction's going. Yeah. I think that's certainly an observation, and it's the right observation. You're seeing some escalation in construction prices from various things, everything from materials and labor in some cases. Really, as we look at development, we've always said we're focused on this embedded pipeline that we have internally. We shared that with you over the years, and that's where we see our pipeline being kind of built and feeding our development efforts. There, yeah, you're right, we're focused in markets where we feel like rent growth has been strong, rent levels are strong, where they've been able to keep up with some of the escalating construction prices. Hospital systems are growing aggressively, and so they have a need a dditional space. They've built in the price escalations and the cost to construct into their business plans. Places like Seattle, where we just started this redevelopment. Here in Nashville, we're working on a development opportunity that we hope to kick off this year. Rents here have been very strong. That's where we're spending our time. It's really driven by our hospital relationships and a need, and focusing on that targeted yield 100 to 200 basis points above where we're seeing stabilized assets. Great. Thanks so much. Thanks Vikram. Our next question comes from Connor Siversky with Berenberg. Please go ahead. Hey, everybody. Thanks for having me. Just to follow up on the development pipeline, you mentioned multiple starts. I'm wondering if these are all built-to-suit projects, and then can you provide any color as to what the facilities plan specializations are, whether it's dermatology, oncology, something like that? Yeah. I think, certainly, our developments are being driven by growth initiatives of the hospital. Just for an example, we're working on a development here in Nashville with the health system, it's going to be on the campus. The hospital is growing. They're enhancing their women's services on the campus, that's going to be a big part of this building. They are also growing their cardiology service lines. The other buildings in and around the campus are full, and they need to grow that service line. There's dialogue with them about putting more cardiac services into the building. It's mostly specialty physicians, service lines that are certainly growing, higher acuity service lines that need to be on campus or around campus. That's what we're seeing, and that's really what's driving the bulk of our development efforts. Okay. Just a bit more on some of these cost pressures that Vikram had mentioned. Have any decisions or has anything been signed related to the leases in these development projects, or would those rates be reflective of the end project cost? No. The development we just started, we have a signed lease for 100% of the building, and the rate is set. That's where when we go into these projects, that is what we're doing before we commit to putting a shovel in the ground. Okay. It may not go for 100%. Whatever that hospital-driven service line or multiple service lines, usually you're working hand in hand with your contractor. You're not just saying, "Let's get a lease, and then we'll go figure out what it costs." It's a parallel process that you're constantly working at the same time. You're keeping your construction cost estimates live with your contractor, working towards a contract, just like you're doing with your lease or your leases. Okay. That's helpful color. Just one last piece of this. Do you foresee, or is there any expectation maybe for delays in starts or ongoing project schedules? You're certainly planning the development, it certainly has its ebbs and flows. As we're pacing right now, we're on target to start as we've laid out, and complete as we've laid out in our schedules. Certainly permitting and getting a building permit in this day and age certainly can be more challenging, but we feel like if you hire the right contractors and you have the right team in place, you're going to get those pushed through, and you're going to get started. Okay. That's all for me. Thank you. Thank you. Our next question comes from Tayo Okusanya with Mizuho. Please go ahead. Yes. Good afternoon, everyone. Question. I'm sure you guys have seen the recent Revista report out there that's just kind of talking about off-campus versus on-campus, and they actually put in real data behind this and kind of drawing the conclusion that off-campus affiliated assets have actually tracked well, if not better than on-campus assets, but yet trade at wider cap rates. First of all, I'm curious what you think about this data, kind of given the historical argument that on-campus should do better than off-campus. Second of all, does it influence you in regards to having more off-campus assets on balance sheet? Yeah. It's interesting. We've certainly seen that report. We've read it. I think it's a good effort for them to try to cover that type of information. I think it's a little early for them to come out with a thesis that says, "We put a stamp on it. Off-campus is just as good." One thing you'll notice that's not in that data is NOI growth. You'll notice also they only looked at three years, and I think that's the benefit we have and some of our peers. You heard, I believe, Healthpeak yesterday got into this a little bit, that they're doing a deeper dive over a longer timeframe. We've been doing that for a long time. We're doing the same thing, I think when you look over time and you go through cycles, you factor in the fact that buildings can go dark if they're off-campus, sometimes even if they're anchored, once lease cycles are passed, the lease expirations occur. There's some real challenges to trying to do that on a third-party basis. There's also a lot of data integrity issues that. They're mashing up lease rates of all different varieties and types that don't really fully tell the picture. Again, I think I'd applaud them for trying, and I think there's something to glean from it, but our experience is a little different. We think there is a difference between on and off performance. Another key difference that we saw in that report is they throw all the adjacent properties into the off category. Adjacent behaves a lot more like on, you're lifting your off performance by burying the adjacent in there. There's another issue. There's a lot more nuance to it than that report suggests. I think that's our job, is to figure that out and learn from what we have experienced over the years, what we see changing, and put that to work to generate better performance. I think the key thing that we would say is on these ultra core properties that are on campus or right around the campus, they tend to perform better, higher growth, and they tend to do it with less variability. When you get off, you just start opening up the performance issues and variability, and so you have more risk. That's why we put together some of our on versus off cap rates in our investor presentation. You'll see, as Rob said, we've been getting 40 to 90 basis points of spread on versus off, and we think there's some rationale for it. We're very careful in how we look at that risk. We'll certainly bring more as well, like Kelsey mentioned, to NAREIT to talk about as well on that topic. Great. Thank you. Thanks, Tayo. Our next question comes from Rich Anderson with SMBC. Please go ahead. Hey, good morning, gentlemen. On the off-market commentaries you made about the relationships and whatnot, is that a price situation where you get a better cap rate exclusively, or is there some sort of, it's just easier, you can almost customize things a little bit, and you can have a little bit more flexibility on how to approach things? Is that like the trade-off and maybe you don't get a special bargain, but you get more flexibility out of that? Is that a fair way to think about off-market? Yeah. Rich, I certainly think that's it. I don't think we're sitting here saying that we're getting discounts on acquisitions because we're buying them off-market. To me, it's more about building that relationship with that seller. We've had a number of deals that we've done recently that is repeat business. This is the same building owner, sold us something they had in a different area, and they came straight to us. I think that is right. You've built a relationship with them. They know you can close, they know your reputation, they know you know how to underwrite the property appropriately so that they feel like they're getting a fair value, and it becomes an easy process. That's where the real value comes in for us in doing off-market, is that we know we can kind of look and build that pipeline and see what it looks like further out, rather than just waiting for marketed properties to hit the market and then reacting to those. Maybe the savings comes from, it's not as hard of a process, and you save money by chasing around, maybe. I'm just sort of speculating. Rich, I think the other thing, and Rob mentioned earlier, if you allow these properties to get pushed into a big portfolio, that's where you avoid the premium as well. By getting to these early and through these relationships, it just saves them a lot of headache, the seller. They, again, they want a fair price. My joke is always, when you go knock on that house that you and your family have liked and always wanted to buy, and you go knock on their door, chances are they're not going to sell it to you for a steal. The idea here we see is that there is premium in portfolio size, and so you avoid that by building it the way we've been doing. Well, with me, they wouldn't even open the front door, but that's another issue. That's a different issue. When you talk about being able to push rents and you're not seeing too much pushback, do you have a comfort level about retention going down? Do you have something in mind like, okay, let it trickle down a couple percent, or if you see any indication of retention being impacted by pushing rents, that you'll take your foot off the gas? For us, Rich, we say that our expectation on retention is 75%-90%. We've frankly been running more in that kind of ±85% for some time. That's going to ebb and flow by quarter. As we look at it, we say we're looking to grow 3%-4%, we have some markets that we're doing better than that. You have some markets that, yeah, you have to recognize what's going on in the market and the competition, you have some roll down. This quarter was pretty minimal of that, I think 3%. You're just trying to build a portfolio that gives you the opportunity that you can hopefully over time grow that at a more consistent rate and a stronger rate. As we look, we've had some people have asked us, like, "3%-4% are reasonable compared to inflation." I said, "Well, we really look at things from a kind of construction cost replacement value," which has been growing north of that 3%-4% for some time. Frankly, right now, with some of the questions we even had on this call, there's some concern of could that speed up moving forward. We think that there's still plenty of room, and we think that we're still showing value to our tenants in terms of making sure that we have properties that have the space they need, that are maintained. We certainly make sure that we are investing the capital in TI as well as building CapEx to be able to maintain this level of growth that we think is sustainable long term. Great stuff. Thanks. I'll yield the floor. Thanks, folks. Our next question comes from Todd Stender with Wells Fargo. Please go ahead. Hi, thanks. Thanks for sticking around. Rob, for you highlighted the off-campus property you acquired, I think in here in Q2, I don't know if it was the Colorado Springs one, at a 7%+ cap rate. If that's a redevelopment candidate, what kind of cap rate do you think that will look like on a stabilized basis? Just kind of narrowing down the value creation opportunity there. Yeah. Todd, I think I heard you say I'm having a little bit of hard time hearing you, but I think I heard you say a property that we said was 7% cap rate. Yeah. That was actually a deal in San Antonio, and that was an interesting situation where our direct sourcing process really paid off for us. The seller of that property was wanting a quick process and an surety of close. They wanted [audio distortion] really fast, and the broker that was working that deal knew we were familiar with that market, knew we could achieve that and came to us, and they weren't as interested in maximizing value as they were just getting out of the property real quickly. We just got through telling Ritz that we weren't getting discounts, but probably on that one, we might've gotten a discount. What is the cap rate compression expectation there? If you're buying at a seven, is that market something in the fives? Is it that ambitious? Yeah. I'd say in the high fives, low sixes, high fives. Yeah. I think, Todd, if you were to take that out into a portfolio, not that we're gonna do this, but package it with some other nice properties in a portfolio, yes, you would see compression well into probably the high fives. Yeah, there's a lot of value creation that can be had there. Great. Thank you. Thanks, Todd. Our next question comes from Mike Mueller with JPMorgan. Please go ahead. Yeah. Hi. Just in terms of getting back up to the 3% same-store NOI CAGR, what are the P&L headwinds that you're facing today to get there? Your in-place bumps are almost at three, rent spreads are fine. Is it the parking, or are bad debts elevated in any way? What's the drag today in the P&L? The main things that we've talked about is really the parking, then operating expenses, and then occupancy changes. Bad debt is back to minimal, if any. We collected basically all of our deferred rent, that's not an issue. The parking, like I said, is probably impacting on the revenue side 50, 60 basis points on an NOI. It's frankly even a little bit more than that. On a revenue per average occupied, we are trending below our average because of lower operating expenses. Right now, we had negative operating expenses this last quarter, which is great, that's unusual. The operating expense pass-through on the other side reduces that revenue growth. To an NOI bottom line, that's still a positive for us. We did experience the loss in occupancy in the second and third quarters of last year, which is rolling through, I call it 50, 60 basis points. We always say that that's gonna have a one-to-one impact on the revenue growth. That could bring down your close to 3% revenue growth down into the mid-2s. As you take that to the NOI with our margin, it's kind of really a 2: 1. You can have almost 100 basis point impact as it relates to the occupancy. As we see the parking coming back, as we see the operating expenses kind of more normalizing, and we think the occupancy is hopefully at least bottoming out, although it can move around each quarter and over the long term, we think can grow. When you build all of that back together, you get to see that revenue model and that NOI model that gets back to those long-term averages of 3% or frankly, even more if we're able to see some absorption. Got it. I know you said the parking was off, I think it was off 20% year-over-year. Just thinking bigger picture, if you have $100 of revenues, what portion of that comes from parking? Just to put parking into perspective versus everything else on the revenue side. Yeah. It is very low. I'll get the exact number out for you. Less than 2%. Yeah, I was gonna say about 2%. Got it. Okay. It's $2 million a quarter on $120 million of revenue a year ago. It's less than two. Yep. Okay. Got it. Perfect. Okay. That was it. Thank you. Thank you, Mike. Again, if you'd like to ask a question, please press star then one. Our next question comes from Daniel Bernstein with Capital One. Please go ahead. Hi. Just one quick question. It seemed like both you and your peers' retention rates have really gone up in the first quarter. I didn't know if that was just kind of like a one-off thing, or if you're seeing an actual trend due to maybe tenant movement or desire to stay in the buildings and expand in the buildings, and just trying to understand if there's a trend there and how you think about that and how it might impact your occupancy and TIs going forward. Dan, I wouldn't read too much into one quarter. It does move around. Right like Chris described. We're comfortable, 75-90. It has been running a little higher. I don't think it's unusual, given the pandemic, that people are getting themselves back on their feet, running at full capacity. They've been focused on safety protocols and just running things back to normal. That may explain some of it. Also, we're seeing a lot of interest in expansion and so forth. Again, that may help, too. I think, as some people have asked, maybe some perception that rents are rising elsewhere, construction costs are rising. That helps a little bit at the edge, too. We're not suggesting next quarter's going to be the same or better. I think we're still comfortable in our range, and it will move around a little bit. I wouldn't read too much into it. I think it's probably just in a range that we've been in 80-85+. Would that be the same answer for the weighted length of term? That bounces around a lot, too, but again, any change from tenants in terms of what they've been asking for in terms of length of term, especially with inflation going up? I would say on a long term to long term basis, I don't think we've seen a big difference. I will say that last year, while we were in the midst of the pandemic, it trended down. There were people that just weren't in a position to make a long-term commitment, and we were comfortable with that, and we signed a little bit, probably a higher percentage of short-term deals. As a result, you may have seen our averages trend down a little bit. Now that we're getting back to kind of a more normal environment, I don't think that our expectations are much different than they were over a year ago. Okay. That's all I have. I appreciate the call. Thank you. Thanks, Dan. Our next question is a follow-up from Jordan Sadler with KeyBanc Capital Markets. Please go ahead. Thanks. I was just parsing through the supplement a little bit. On page 25 in one of your same-store reconciliations, there's something called rent concessions. Can you just remind me what that is exactly? I saw that it sort of spiked up, and I wasn't sure if that related to the increased leasing or if that was more like a deferral or abatement. What is that? Yeah. It will be tied to multiple things, but typically, it's going to be some type of free rent that is going to be related to mostly new tenants. We don't really have any on renewals. I'd have to dig into the specifics, but we did have a couple of tenants inside our redevelopments that started. Those typically end up with a little bit of free rent at the front end. That would be my guess of specifically why it is a little bit higher, although I'd still say it's still not that meaningful to the overall revenue. That's the reason you're seeing a little bit higher this quarter than previous. There's no abatement in there or anything like that? No. Okay nothing like that. This is really about some free rent, maybe for a tenant, specifically a new tenant, especially on redevelopment, where they may be still having to build out some space or moving from one building to the next, and you're kind of helping them out as they're moving across buildings. No, it's not rent abatements. Okay. That's helpful. As it relates to your lease structure, I think the preponderance of your leases are fixed, but I know there's also a CPI portion as well. I was just kind of curious on the upside, we don't talk about this that often, but I know this theme has sort of popped up here a little bit, but is there a cap on the CPI escalator? Generally, no. There's all kinds of leases out there, and there are some that will have a floor two, a cap of five. I would say generally, they're more just tied to whatever CPI is. Overall, CPI is not a large percentage of our structure. It's under 5% of our leases have a CPI-based escalator. We are typically more fixed, as you pointed out. Historically, we frankly have done better with our fixed, running it closer to three than where CPI has been. People have questions like, well, if CPI starts ticking up, is that a risk? I said, well, we also have a generally pretty regular turn in our leases, with about 20% that are up for renewal each year. If we do start to see pressure on cost across the board, in construction costs and janitorial costs or elsewhere, we think we have a very reasonable amount of our leases that we can start to look to try to recapture that if that does start to occur. Okay. Lastly, I think on the joint venture deals, I know a handful of these happened this quarter, and you've got some more teed up for next quarter. I'm just curious, since you have some examples here of deals that you've closed, what's the thinking of JV versus on-balance-sheet transactions? What are you showing them versus what are you not showing them? Some of these deals look like straight up the middle HR deals, and I'm just trying to figure out how we're supposed to tell what the difference is. Yeah. I think if you look at what we did this quarter, and really it looked like what we did in the fourth quarter as well in the JV. You had an opportunity that really looked more of a value-add opportunity, where it was a building that we purchased that had some upside in terms of occupancy. Opportunities like that, where we think there might be some near-term drag because of the lower occupancy, but we see a nice upside, those are opportunities where we're going to entertain those in the JV, and we did. One of the buildings that we bought this past quarter was really our fourth building around a campus in Orange County, and we have been placing buildings into the JV around that campus. There, we see some real upside, we've seen some real absorption in the other buildings. That's where you'll see us participate and show those to the JV. The other side is really on the off-campus side. Three buildings that we put in there this quarter were off-campus properties, where we think that there is some additional risk, and so we're putting out half the capital but getting that higher incremental return. Those are opportunities that we're sharing with the JV. The stuff that's down the fairway, you said. where we already have nice relationships on adjacent. We're generally keeping those on our balance sheet, and we intend to. As we said before, we're not obligated to show them a certain number of deals or certain types of deals. It's really at our discretion. You'll see us continue to do that. I think that Todd pointed out in our supplemental, I think it's page 19, where we're showing the breakdown of the JV. I think 40% of the properties that are in there are now off-campus, as opposed to our on-balance-sheet portfolio that's staying down around that 12% range. I think that's really the way to think about it, is when you get into those situations where the cap rate's a little richer and we can make better sense of it, or maybe there's some upside that may have some near-term drag and in the off-campus buildings. Got it. Thank you. Thank you, Jordan. This concludes our question-and-answer session. I would like to turn the conference back over to Todd Meredith for any closing remarks. Thank you, Sarah, and thank you everybody for tuning in today. We'll be available for follow-up if you have any questions, and we look forward to connecting with most of you at Nareit soon. Have a great day. The conference is now concluded. Thank you for attending today's presentation.