Good morning, and welcome to the Healthcare Realty and Healthcare Trust of America Strategic Combination Announcement conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. T o ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Todd Meredith, CEO of Healthcare Realty. Please go ahead. Thank you, and good morning. Thank you for everybody joining us this morning. With me are Kris Douglas, CFO, and Rob Hull, EVP of Investments. We issued a joint press release and presentation this morning, which are available on the investor relations sections of both companies' websites. I'll also remind you this conference call and webcast include forward-looking statements. In both the press release and presentation, I direct your attention to the safe harbor language and additional legal disclaimers governing the content of today's call. This morning, we announced an $18 billion strategic combination between Healthcare Realty and Healthcare Trust of America. Through this combination, Healthcare Realty will be the leader in the medical office building sector with a portfolio of 727 buildings across 44 million sq ft. This combination is a game changer for Healthcare Realty and HTA, and the scale benefits are significant to all shareholders. We are creating the preeminent high-quality pure-play MOB REIT, nearly double the size of the next largest MOB portfolio. Just like us, HTA's team has deliberately crafted a high-quality portfolio with a focus on well-located medical office buildings in key densely populated markets associated with top health systems. We will have a national footprint that stretches from HR's Seattle clusters to HTA's Boston corridor. We are combining these leading dense coastal markets with many of the nation's fastest-growing Sun Belt markets, such as Phoenix, Dallas, and Atlanta. Importantly, the combination accelerates our focus on deepening and broadening our markets and clusters to achieve both regional and national scale. Nearly 60% of our square footage will be focused in 14 markets where we will own more than 1 million sq ft. On average in these markets, we will be 50% larger than our next competitor. About 80% of the combined square footage will be in 26 markets, where we will own at least 500,000 sq ft. With 2/3 of the combined portfolio in overlapping markets, we can drive significant revenue growth and cost efficiencies. We think it's clear these two portfolios are strong individually, but the sum is greater than the parts. What I really like is the ability to accelerate our accretive investment volume with meaningful scale in so many markets. We'll also have a larger embedded development pipeline totaling over $2 billion concentrated in high-growth markets such as Seattle, Dallas, and Denver. This combination gives us a deeper and broader set of relationships with 57 of the top 100 health systems and a presence on 231 hospital campuses to support growing outpatient demand. These relationships will drive leasing, acquisition, and development volumes for many years to come. Given the similar nature of our businesses, this transaction naturally results in substantial synergies. We will benefit from the elimination of approximately $35 million of annual costs. Importantly, this transaction is expected to be accretive to per share results. Looking ahead, we expect to capture additional leasing and operational value from the overlap between the two portfolios. We also expect to realize meaningful financial benefits, including greater access to capital at a lower cost and a wider range of funding sources. With more private capital entering the MOB space, our greater scale and efficiency will extend our competitive advantage. Having been in this business for many years, we know that a portfolio of this size and quality is rarely, if ever, available. This combination is truly a game changer, both for the immediate scale it provides today and the growth it will deliver over time. Healthcare Realty will be a category leader in the medical office sector and positioned to create shareholder value for many years to come. The new company will continue to operate under the Healthcare Realty name and will be led by the current HR management team. The board will consist of 13 members, of which nine will be from Healthcare Realty, three from HTA, and one new jointly appointed board member. Knox Singleton will remain Chairman, and Brad Blair will join us as Vice Chairman. The company's headquarters will remain in Nashville and will maintain corporate offices in both Scottsdale and Charleston. Now I'll turn it over to Rob. Thanks, Todd. With this transaction, Healthcare Realty will own the dominant national MOB portfolio focused in dense, growing markets and aligned with leading health systems. It represents a strong extension of the work we have been doing for the last several years, shaping our portfolio market by market. Today, I'll walk you through how this combination expands scale within markets and clusters while broadening health system relationships. We expect this to lead to additional value through enhanced leasing activity and additional opportunities for accretive investments. At the market level, HTA's portfolio significantly expands our presence in target markets like Houston, Raleigh, Austin, and Denver, where we have been actively investing over the past three years. Through this combination, we are gaining the equivalent of about seven years' worth of work in these target markets. It also adds new densely populated markets in the Northeast, including Boston, New York, and Pittsburgh. We gain a foothold in new high-growth markets we have been looking to enter, such as Salt Lake City, Charleston, Jacksonville, and Orlando. Beyond markets, we will have 147 clusters of properties, up from 61 today. Each cluster is a collection of assets in close proximity and can include on- and off-campus properties with a mix of price points and amenities. For our leasing and investment teams, this drives greater velocity and activity by making Healthcare Realty a must-call. We will have relationships with 57 of the top 100 health systems in the country, an increase from 34 now, and we will more than double the number of hospital campuses where we have a presence. This gives us over 120 new campuses where we can expand through targeted acquisition and development activity. Through our greater market presence, increased number of clusters, and deeper health system relationships, we expect to double our acquisition volume in the years ahead. At the same time, we will maintain our proven strategy of building a portfolio with a focus on dense, high-growth markets. Development activity will also benefit and is poised to accelerate with a combined pipeline of over $2 billion. We expect development starts to increase over time to $250 million-$350 million annually, up from our current targeted levels of $75 million-$125 million. This increased pace will be proportionate with our larger size and will result in meaningful value creation at spreads 100 basis points-200 basis points higher than acquisitions. This combination is powerful, and at a 4.8% cap rate, the relative valuation is as attractive, particularly when considering the benefits of synergies, scale, and future growth potential. When compared to recently marketed portfolios that traded at similar cap rates, HTA's portfolio stacks up much better. Quality metrics such as density, population growth, on-campus mix, and exposure to leading health systems are all superior. As we look ahead, we will continue to be targeted with our investment approach. What's important is that we will grow from a larger base with more markets, more relationships, and more campuses to build from. This larger opportunity set gives us a path to double our annual investment volumes. We believe this strategic combination came at exactly the right time for Healthcare Realty. Now I'll turn it over to Kris. Thanks, Rob. This morning, I'll cover the financial aspects of the transaction as well as expected structure and timing. First, and most importantly, we expect this transaction to be accretive to FAD per share with full realization of expected synergies. Integration and associated cost savings are projected to occur within 12 months of closing. Excluding integration and transaction costs, we expect immediate accretion to normalized FAD per share. The elimination of duplicative corporate and public company costs are projected to result in $33 million-$36 million of annual savings. This does not include any potential benefit from property operating expense savings or upside in revenue from enhanced leasing and investment activity. This upside can create meaningful long-term value. Having a scaled platform will greatly improve G&A efficiency and compare favorably to our healthcare peers, as outlined on page 15 of our investor presentation. The enhanced efficiency will generate accretion today and drive value for shareholders for years to come. Shareholders will also benefit from a scaled balance sheet with greater access to capital. We intend to maintain a flexible investment-grade rated balance sheet with a well-staggered debt maturity schedule. As a larger, more frequent debt issuer, we expect to improve access to capital and lower borrowing costs. Pro forma for the transaction, we project debt to EBITDA to be in the low sixes, which is in line with both our peers and our investment-grade ratings. Additionally, from an equity perspective, we expect our shareholders to benefit from greater liquidity and higher index weightings over time. Now I'll quickly cover the key points of the transaction structure. HCA shareholders will receive an implied value of $35.08 per share based on HR's unaffected price of $30.26 as of February 24. This is comprised of a special cash dividend of $4.82 per share and a transaction exchange ratio of 1 to 1. The value represents an 18% premium to HCA share price at the close of markets last Thursday. We expect the special cash dividend to be funded through a combination of asset sales and joint venture transactions. We are already engaged in a formal process on the sales and JVs and have received strong initial interest. Our expectation is that pricing will be generally in line with the overall cap rate of the transaction. With respect to timing, this combination has been unanimously approved by both boards. We will be filing a joint merger proxy, and the transaction is subject to a vote by both company shareholders. We expect to close in the third quarter of this year. Before opening the line for questions, I'd like to echo both Todd and Rob's enthusiasm. We believe this transaction provides numerous benefits. Enhanced scale and major growth markets will generate operating efficiency along with increased leasing and investment velocity. Deeper relationships with major health systems will drive development demand. A stronger financial profile with greater liquidity will improve relative cost of capital over time. The result is a platform structured to generate attractive and sustainable cash flow for investors. Andrea, we're now ready to open the line for questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Juan Sanabria of BMO Capital Markets. Please go ahead. Hi. I was just hoping to ask a bit more about just the use of the joint venture in the transaction, how big that's contemplated to be, the leverage of that joint venture, and are you bringing anybody potentially in, new from outside of TIAA, or should we interpret that as their involvement as part of the deal? Yeah. Juan, this is Kris. First off, the total size of the JV, it'll be, you know, a combination of the JV and asset sales to fund the $4.82 special dividend. That ends up being a little over $1.1 billion, combined. You know, the ultimate split between the JV and asset sales, you know, has not been determined yet, but we would expect it to be weighted more heavily towards the JV. We have, as I mentioned, engaged in that process and are talking to multiple parties, including Teachers. You know, we'll have more to report on that as that process continues. Oh, and I think you asked about the leverage. You know, we are expecting this to be, you know, a little bit different than our current JVs, which we don't put any asset level debt on. The current JV is more, you know, equal 50/50 split, where our anticipation is this will be more of a, we'll have more of a minority interest, call it like an 80/20 split, where we're the 20%. Leverage will be more in line with, you know, typical joint venture structures, you know, call it 50% leverage, specific to the joint venture. Thank you. I was just hoping you could, if possible, provide any color on any potential break fees or go shop period that has been discussed or contemplated as part of the agreement? Juan, those data points will be in the merger agreement that'll get filed in the next day or so. Obviously, we're not in a position to say those now, but those will certainly be public in not too long. Same goes for any kind of process that would be related to that. Okay. Then can you quantify lastly, sorry, the potential accretion you guys are talking about? Should we think like 1%, 2% or what's the quantum you guys are expecting? Can you mention that one more time? I'm sorry. I broke up. I didn't hear the question. Sorry. What's the percent accretion that you expect from the merger? Any ballpark- Yeah. Range could you point us to? Yeah. We're looking at, you know, FAD per share accretion, kind of in the low single digits, kind of call it plus or - 2%. We're looking at that on, you know, 2023 numbers with full integration, you know, synergies assumed. You could also look at it on a normalized FAD basis, assuming that those savings were in place day one, and that accretion would be immediate with that assumption. Thanks, gentlemen. Good luck. Congratulations. Thank you, Juan. The next question comes from Richard Anderson of SMBC Nikko. Please go ahead. Thanks. Good morning. So the cap rate, the 4.8 pre-synergy, and you know, you guys, your stock's trading, you know, in excess of 5% implied. How do you justify the transaction? I guess the question is, what does that 4.8 become relative to your own stock's implied cap rate so that you know, anyone pushing back on this deal won't view it as you know, sort of an empire building transaction that you know, sort of gave value away? I'm not implying that. I'm just saying, how do you marry your stock's valuation with what you're buying, which is obviously new to the portfolio? Sure. Rich, certainly an understandable question. I think the way we look at this is this is obviously a little different than just looking at an incremental portfolio, putting a cap rate, you know, on the NOI from a set of properties. We think this is clearly a strategically transformational transaction. Obviously has a lot more to it in terms of benefits than just simply capping the, you know, the NOI. I think our view is clearly the biggest driver of that out of the gate is the synergies that we've all touched on. That takes care a lot of that premium right out of the gate. Then on top of that, we see obviously a lot of upside benefits operationally as well as investment activity and balance sheet strength and access to capital, all of those things. I think also putting together some creative structures, as Kris just alluded to, with the combination of asset sales and JV. I think it's clear that we would expect to see transactions, whether they're JV or asset sales, that would be at very similar cap rates. I think Rob walked through a number of portfolios or referenced portfolios that have traded in that same range. We think you put all that together with the combination of the accretion that Kris just alluded to, we think it's very compelling. Two things change in the combined company relative to legacy HR, and that is off-campus goes up and multi-tenant goes down. Do you envision having, you know, kind of work to do over this next several years to get those two, sort of factors more in line with what, you know, you guys have always talked about is what you prefer? That is more on-campus and adjacent and more multi-tenant. Sure. Logical question, Rich. We've laid this out in the presentation. I don't know exactly what page, but you can see a side-by-side comparison of what- Yep. You're talking about. Clearly a good question. I think what you've seen from us in the last few years is we have shifted our mindset a little bit to focus on building these clusters around an anchor of on and adjacent to campus buildings, but extending that market reach to include some off-campus assets. As Rob went through in his prepared remarks, we see an incredible overlap and expansion of that concept and that strategy with the combination here. When you take us at, you know, call it 85% on or adjacent, combine it with theirs, together, we end up being nearly 70% on or adjacent. We're really comfortable with that ratio. The key is it has to make sense in terms of the location of those off-campus assets relative to other on and adjacent to campus assets. Forming those clusters rather than just random, you know, off-campus assets. We think it's very compelling in that regard, and it's an extension of what we've been doing lately, which we think differentiates it from, you know, just sort of, hey, we really like off. It's off in a strategic way. Single versus multi, it's kind of similar. If it's in clusters and it makes sense and it's additive to what we're doing, we're comfortable with it. I think you're right. You'll see at the margin, we're gonna tend to focus more on multi-tenant. We're comfortable with some amount of single tenant. Maybe at the margin, that comes down a bit through our investing going forward. Maybe some of these asset sales are a little more of the single tenant, but not a tremendous shift in that regard. We're comfortable generally with that level. Okay. Yeah. My last question is for Kris on the kind of the cadence of accretion. Is it kind of? You used FAD accretion. Is there sort of a CapEx component to all this that you wanna comment on that aids in the accretion dynamic? It seems to me like you're kind of down $0.07 at the FFO line and then up $0.10 after synergies. Is that kind of the cadence of what will happen in the next couple of years? Yeah, Rich, I guess the way we're talking about, and one of the reasons we're focusing more at the FAD line than the FFO, has more to do with the non-cash adjustments that will run through FFO, as straight-line rent and other non-cash items are reset. It creates a little bit of comparison issues as a result of that. That's the reason that we're talking more about the FAD than the FFO. As I mentioned, we look at it on FAD, we do expect it to be accretive, you know, once all of the synergies have been realized. Excluding those, it'll be accretive immediately. You know, as you do look at FAD kind of through the balance of this year, we have, and we talked about this on our call last week, we have a little bit higher maintenance CapEx in 2022, and that's with our expectation of increased you know, leasing. You know, we expect that will drive significant NOI growth moving into the later part of this year and into next year. When you get onto a good kind of run rate basis, we see good you know, steady state, call it kind of 4%-6% per year and hopefully growing from there of FAD per share growth moving forward. Okay, great. Thanks very much. Thanks, Richard. The next question comes from Jonathan Hughes of Raymond James. Please go ahead. Hey, good morning. I'm just curious, was a larger JV transaction considered, you know, where HR buys a smaller stake, maybe say three years worth of deal activity versus the, I think you said seven years worth, earlier, you know, that might lead to increased management fee income potential and more accretion? Yeah. We looked at multiple options and structures there. We felt like that this had the right risk/reward balance in terms of the sizing, to your point, with the fees that come out of the JV. The offset to that would be the associated leverage, given the fact we would anticipate that JV partners would want to put, you know, more leverage than we have at our corporate balance sheet level. Balancing those items, we felt like this was the best, you know, mix in terms of JV and cash, you know, consideration as part of the structure. Okay. I think the accretion math or number on FAD you said earlier was ±2% and that I think embeds the leverage ticking up a little. Have you run that math on a leverage neutral basis or say taking, you know, leverage up to the, say, mid- to high-5-turn midpoint that's embedded in guidance from last week? Well, I think, Jonathan, you kind of have to look at this differently. I mean, we're actually the smaller of the two companies, and so I think to run the math you're talking about doesn't necessarily make sense. I mean, certainly you could run it, but I think the view is we're actually looking at leverage that's not too dissimilar from where HTA is. So if you kind of look at it that way, that's maybe the way to look at it from more of a leverage neutral basis. I think to assume that us at roughly 40%, pro forma ownership going down on leverage on somebody that's got a little higher leverage, I think obviously that math doesn't make a lot of sense. We think we're getting to a leverage level that's very sustainable, as Kris articulated, going forward and including the JV in that. We're comfortable with those leverage levels. Okay. Then the last one just for me, maybe for Rob or Todd, I'm not sure who. Is the increased investment potential, you know, is that a result of taking on more of the HTA professionals to help find more deals, or is it more so having, you know, one less large competitor out there? I think really what we're articulating, Jonathan, is just the sheer size of the portfolio and the concentrations that you'll have in markets. It will come through a combination of professionals and relationships. Obviously we've articulated how we've seen a lot of synergies, even between our leasing folks and our investment team. We see much more of that. You heard Rob talking about doubling the number of hospital campuses, more than doubling the number of clusters. We see a tremendous increase in the number of relationships. You know, we'll certainly be looking at growing our teams across the whole company. But I think it's a combination of that, but really looking at the sheer scale that you will gain in these markets and with relationships. All right. Thanks for the time. Thanks, Jonathan. The next question comes from Omotayo Okusanya of Credit Suisse. Please go ahead. Yes. Good morning, everyone. Kris, this one's for you, sir. The FAD accretion that you talked about, and I think you talked a lot about kind of straight line adjustments, resetting and things like that. One, could you kind of give a little bit more detail around kind of what changes from that perspective to make the deal FAD accretive versus just kind of running the numbers straight through with what kind of HTA has already in their financials? And then two, could you also talk a little bit about FFO rather than FAD accretion, if possible? Yeah, I guess, you know, kind of look at those a bit combined. You know, the FAD per share we're looking at it, that accretion really kind of goes to the underlying cash flows as we see it. You know, as you look at the FFO, there's going to be obviously the adjustments as we reset straight line rent and other non-cash items. If you kind of just look through that, You know, the FFO ends up being, you know, pretty close to break even. The ultimate outcome of that FFO and all the non-cash will kind of be will ultimately be set and figured out as we get through closing. I think I said, I think it just creates some odd comparisons from where both of us are today to what we may look like immediately. 'Cause it's not gonna be just saying, take our current straight line rent and add them together. You're basically gonna wipe out, you know, theirs and do a recast of all of their straight line rent. That's the reason that we're focused more on the FAD. Gotcha. Okay. Thank you. Thanks, Omotayo. The next question comes from Jordan Sadler of KeyBanc Capital Markets. Please go ahead. Thanks. I just wanted to come back to the pre-share dilution a little bit. What is the implied cap rate that you have your own portfolio trading at? Well, Jordan, we obviously provide that in our supplemental, so I'll refer you to that. You can look at that. There's a range as the stock prices range. I think somebody, I think Rich maybe on the earlier part of the call said it's, you know, mid-5s. It's obviously been affected by news that got out late last week. Obviously, assumptions that have led up to that, people certainly speculated in notes and conversations around who would be involved in this, including us. We think obviously that's gonna be a range. As I addressed in Rich's question, this is, you know, we view this as a 4.8 cap rate. I think Rob mentioned that. We think it's much more compelling than just throwing a cap rate on NOI. I guess I'm just trying to figure that out a little bit. You guys have, you know, spent a lot of time over the years focusing us on the quality of your portfolio, particularly in the context of all of your peers' portfolios, including HTA. If we just look back to your decks that you guys have on your website, you know, we can see where you guys had everybody stacked up relative. I'm kinda, you know, if you guys are trading 100 basis points above, on an implied cap rate basis where this company is being purchased, how do you outgrow that dilution from 30 basis points on an $11 billion portfolio from 30 basis points of synergies? I mean, is that, you know, on an annual basis? I mean, it seems like a lot needs to be done to grow out of that hole from a portfolio that you guys have suggested is lower quality than your own, which presumably would result in lower internal growth. A couple things. I see the G&A goes away, but what's the other piece of it? Yeah. There's three or four things that we've all hit on. G&A synergies actually, you know, takes quite a bit of that gap that you're talking about. Really, you've got three or four things in addition to that. One would be occupancy improvement. You've seen both us and HTA talk about occupancy that we've both lost a little bit through the course of the pandemic with momentum on leasing activity in the early days of the pandemic. We've both seen some of that improvement start to come back around. We think there's very strong signs that occupancy can come back and start to improve there, which is very powerful. You know, direct correlation, really almost a double correlation from occupancy basis points to NOI growth. Then beyond that, we see the strength of the combination in the markets and the clusters of being able to increase the rate of growth in rents and NOI, which we think is, you know, very powerful. That's just baseline without occupancy improvement. A couple other pieces would be the investment volume that Rob alluded to, being able to double our investment volume and looking at increasing those spreads over time. Obviously, we see a powerful combination of having scale and access to deals, more relationships to tap into, more opportunities to take advantage of. Adding to that over time, some cost of capital advantages. You know, it starts with simple things like having some scale that will help in terms of, liquidity, on equity and also in over time on, more safety, portfolio diversification and security that leads to lower debt costs. You put all that together, and you can make a very clear quick case for overcoming the premium. Then really from there those are all modest levels that you need to do that, and then really adding to that year after year, over time. Okay. Just to clarify on the capital structure, I think Jonathan touched on it in his question. The 6-6.5x net debt to Adjusted EBITDA, I think that's on a pro forma basis for the transaction. Is that the company's new target capital structure or new target range? We shouldn't expect you to look to delever incrementally from there back to where you guys were on a standalone basis, just to be clear. No, we don't have any immediate plans to deleverage. We think with the additional scale as well as you just look at how both portfolios in the asset class p erformed and the stability of the cash flows over the last two years, you know, supports this leverage level. If you look at it with the additional scale and looking at it against peer companies and, you know, we do have a commitment to keeping our investment grade ratings, these leverage levels are certainly in line with that. All that combined, you know, being in the low sixes is something that we're comfortable with. We're always, you know, analyzing based off of the competitive landscape and what's going on as to what any adjustments may be needed there. At this point in time, we're comfortable with that leverage and expect to stay in that range. The other thing, Jordan. Oh, sorry. L et me go back just to quality. You touched on a couple things there. I think it's clear, and we've said this for some time, that the public company MOB portfolios, while we do try to really lay that out clearly for folks to differentiate, we've consistently said we think the public companies have superior portfolios to the vast majority of portfolios that come to market, yo u know, that may be much smaller in size, you know, $100 million-$1 billion, and there were quite a few of those last year. Rob's talked about those a good bit. We really think that there were five good examples last year, that were sizable portfolios, not saying they're terrible, but we think the HTA and many of the other public REIT MOB portfolios are far superior. To be able to get to this kind of portfolio and scale and the advantages that come with it at a cap rate that's basically the same as some of those, we think is tremendous and gives us a huge platform to develop from there for accelerating growth. I think quality-wise, it's our job to always differentiate from competitors, but when we see an opportunity to accelerate the platform, accelerate growth, reduce risk, we think it's wise to take advantage of that. This was a very compelling opportunity to do that and keep a very high-quality portfolio. Remember the Duke portfolio, for example. We chased after that years ago and have competed handily with HTA for many things over the years. No portfolio is perfect, but we think this is very high quality and will be more powerful together. Okay. I just wanted to clarify just Kris's response on the leverage. Kris, you guys I believe are BBB, Baa2. I know one of the premises of the transaction is increased scale and better cost of capital, but are you expecting to maintain those credit ratings? Yes, that is our expectation. Okay. Thank you, guys. Thanks, Jordan. Our next question comes from Nick Joseph of Citi. Please go ahead. Hey, good morning. It's Michael Bilerman. I'm here with Nick. Just wanted to get some clarification, questions just on the $1 billion of asset sales and joint ventures. What is the net sort of sale cap rate that you're assuming in that, in calculation of your accretion? Because I would assume obviously the exit there would have a meaningful impact on the level of accretion. Could you just outline sort of the numbers that you're contemplating there? Yeah. We're assuming basically neutral to the transaction cap rate. That same 4.8 level. That would be net of fees so. Yeah. Any fees that you would receive on the joint ventures. Well, on the joint ventures, we would then get our proportion of, you know, fees. You know, I guess excluding transaction costs. Right. You have the, you know, effectively call it, you know, a $55 million drag effectively of lost NOI or something from that. You obviously have the $35 million of synergies that you outlined. What is the mechanism for you to actually make the deal 1%-2% accretive? Yeah, I mean, I think it's a combination of obviously the stock for stock piece as well as the, you know, which takes the leverage to roughly that six level. Then the JVs, the JV and asset sales at a neutral cap rate would also add to that or at least keep it neutral from there, and certainly generate some fees from that, which will help. I think the cap rate, to your point, would be neutral and then additive to see the fees coming from the JV. How do you think about your cost of capital going forward? You talked about this increased investment opportunity. I'm not sure if that is thinking about it from the combination of where both of your acquisition pipelines would have been or just looking at it from an HR perspective. Obviously, as you said, it's a reverse merger, so, I'm just trying to understand the way you're positioning this. Are you trying to say that both your pipelines together will be greater or that HR's pipeline will be greater going forward? I'm just trying to understand how you're talking about the changes. Yeah, I mean, I think it's both, but clearly we're, you know, the management team at Healthcare Realty will be continuing to lead the company. It will come from our perspective of how our pipeline builds, but there's no doubt it will be additive to work with the professionals and the relationships that HTA has. It will be a combination, but certainly with the lens that we've always brought to it at Healthcare Realty. I'm not sure you can completely untangle it, but I think it will be Healthcare Realty led with some addition from HTA. One thing I might add to that is, you know, you've heard Rob and Todd and all of us talk about how we've really gone about our acquisitions over the last few years and really growing in existing markets. It's really been beyond just the markets. It's been in the clusters, in the specific locations around where we already own buildings has helped drive you know the volumes that we've been seeing as our acquisition pace has been increasing. I think Rob mentioned last week on our call last year you know all of the acquisitions we bought were within target markets, but almost I think more meaningful was that 75% of those acquisitions were in clusters that we already had. I think that that's the way we're looking at the incremental you know, acquisition volumes going forward, that this will increase the markets and the clusters and the hospital relationships and locations that have been successful for us over the last few years and will provide you know, a great opportunity to keep growing those investment volumes moving forward. Yeah. Just as an example of that, we've had recently several situations where, you know, we've been buying in a market within a cluster. Because of our notable activity, you know, building owners have made, and brokers have made inbound calls directly to us about, "Hey, we see that you're buying in this market, reputable buyer, get to the closing table. Would you be interested in this building here?" We do see, as Kris said, the benefit of the clusters as we've been building them. We're more than doubling the amount of clusters that we have. We're gonna, we think that both on the investment side and even on the leasing side, we're gonna see revenue synergies there. Yeah. Maybe, Michael, I mean, you may have already looked at it, but in the investor presentation, couple of pages, eight and page 11, where we show, and I think, page 11 kind of articulates what Rob referred to as seven years' worth of work of really expanding all the work we've been doing in the last few years in key markets, and then how much more depth and concentration you get with the HTA portfolio. Again, we see what Rob just described as multiplying, having a multiplier effect from that scale in those markets. The other thing I'll add is on the development side. I mean, we've talked about a building development pipeline, but you know, oftentimes when we go in and we build a presence around a campus, that leads to significant dialogue with the hospital. We've got another example in our investor deck, the Kennestone campus, the Wellstar Kennestone campus in Atlanta. We started that cluster when we bought the M&O portfolio back in 2017, several buildings around that campus. Since that time, we have acquired a number of buildings off market around that campus. We have started significant dialogue with the health system regarding development and expansion to the north of that campus. Obviously, HTA is adding to that cluster with two buildings that are in the portfolio. That's a very good example of what we see the power of the cluster model and the investment activity that can be generated once you get in there and you get your people in on the ground. Yeah locking arms with the health system regarding strategic growth. Maybe just come back in terms of cost of capital, because it obviously is something that you've talked about as potentially being a positive, at least on the debt side. You talked a little bit about how the equity markets obviously has affected your share price and others, given some of the discussions that were going on in the press and other places. It's not really a new phenomenon in terms of where the pure play MOB companies have traded more recently relative to NAV, which has, you know, impacted your cost of capital to go out and pursue external growth accretively. I guess when you think forward, and you've talked a lot about the benefits of this transaction, what in your mind can you do or what will you do if your shares don't narrow the gap relative to NAV? What levers are you thinking about pulling? Because ultimately that's the to advance all of the external things that you're talking about, you would need an equity cost of capital that would allow you to do it. Sure. No, I think you're right. not suggesting that, you know, all of the price issues have just been because of this potential transaction. That's for sure. You know, the pandemic, certainly we had some relative outperformance in the early days of the pandemic, and then everybody went chasing growth. MOB is, you know, much more of a rock steady type of cash flow with solid growth, but it's not, you know, typically double digits. we understand that phenomenon has been going on for a while, and I think what you saw us do as one strategy, and it came, it was underway before the pandemic, but it worked out very well on timing, was forming the joint venture with Teachers. I think what you're seeing in this transaction, and partly for that reason, is to illustrate an ability to continue to expand that tool set. I think someone asked early on, will we expand those relationships? Very possible to do that. Certainly Teachers is included in the process. So we may end up with one or more relationships that come out of this and are additive to what we're doing. I think that's probably the key thing. Clearly the private market continues to keep pricing aggressive on MOBs, and we need to be able to compete with that. We're using the JV structure to do that. We'll obviously look at using our scale advantage here to do that, to access deals, but also to hopefully improve our cost of capital over time as well. Thank you. Thanks, Mike. The next question comes from Michael Gorman of BTIG. Please go ahead. Yeah, thanks. Good morning. Maybe, you know, Todd, if we could just stick with the growth for a minute longer here, and I don't wanna beat a dead horse, but maybe you can just kind of contextualize as you think about the investment opportunities. You talked about doubling it. You're more than doubling the size of the portfolio. These two portfolios on a standalone basis were kind of 2%-4% growers over the past five years. So I guess I'm just trying to figure out, like some of the prior questions, like what is it that gets that up to 4%-6% combined? Is it better pricing on the deals? Are there deals that neither company previously had access to that they do now? I'm just trying to see kind of what it is that accelerates the growth that these two companies have generated independently over the past two years or past five years. Yeah, I would say that the 2-3 is a little bit of a rearview mirror view. If you look at our FAD per share growth in the last few years, it's actually been running more like 4.5%. I think that's an important thing to remember, is that a lot of people have been following us, we've been around a long time, and you know, same store. I'm not you know, changing the subject from same store. You're right, same store tends to be this 2%-3% range that you see from all the MOB portfolios. We've tended to average the high end of that, and certainly we see a very clear path back to that as we see improvement this year, coming off of some, a couple of strange years, but still only, you know, testing down to maybe the 2% level. We think the HTA portfolio is in the same position to continue to improve. We see a lot of opportunity to apply what we've done in our portfolio and the combination of the overlap and the clusters, we think we can drive, you know, that rent growth, even stronger in their portfolio on top of what we've done. We see a lot of opportunity there. I think from a growth run rate standpoint, you've seen us accelerating that, in the last few years. Part of that has been external growth as well. Obviously, as Michael asked, we have to navigate carefully cost of capital and use all the tools available. It's a combination of really running the portfolio well, getting operational benefits from whether it's cost savings or enhanced revenue growth, occupancy gains, but also putting together a very attractive and robust external growth. I think development is an extension of that as well. Much more profitable. Obviously, building at an annual pace that's constructive and meaningful. We see all of that is what we've been doing at Healthcare Realty, and we see a huge opportunity to combine that here and more than double it in effect with HTA. Okay, great. Maybe just switching to the disposition side, sorry if I missed it, but as you think about that, is there anything in the HTA portfolio in terms of ROFRs with healthcare systems or markets where maybe you wind up with clusters of competing healthcare systems where they may ask for a disposition or ask for some type of a competitive transaction where maybe you're not gonna be as in control of what assets you're selling or what assets aren't coming with the portfolio? There will always be some of that, Michael. That's just the nature of the business and ground leases and working with hospitals. We certainly don't think it's a worrisome level. There will be some opportunities to take advantage of that. There may be an asset here or there that we also lose that we'd rather not, but we don't think it's a level that will, you know, detract from the benefits of the combination. You know, some of this is mitigated by the fact that changing control at the company level isn't always triggering everything. We've certainly gone through an analysis of that, and we'll engage with the relationships and sort through that. You know, it will contribute, we think, potentially to the asset sales, but we'll think we have a lot of opportunity to guide and, you know, really inform what we sell and take advantage of a few of those. Again, not a material change to the strategy. Okay, great. Thanks. Last one from me. I'm not sure how much you can speak to this, but you talked about both boards unanimously approving the transaction, and obviously a lot of moving pieces, but just, you know, kind of implied value looking at the market today, the implied value to HTA is kind of below where, you know, they previously had activists get involved. Anything you can share, I'm sure there'll be more in the prospectus in terms of the board discussions, and whether or not the HR board had any interactions with any of the strategic partners or strategic discussions with activists on the HTA side. Sure. I think a lot of those types of details will come out in merger proxy. I don't think there's anything of concern, maybe to just generally address your question. I don't wanna avoid it, but it's obviously an area that has a lot of disclosure requirements around it, so we'll stay away from the details. Nothing of concern there. You know, I think our view on value is that, you know, we competed aggressively, obviously keeping in mind, you know, a reasonable price that we could afford, and it made sense with all the strategic merits. We did our best and came out successful and think we really, you know, convinced their board and our board and everyone involved that this is gonna be a very powerful combination. You know, we know they had choices, and I think this was the most compelling, as you would expect with that kind of vote from the board. We're very pleased with the outcome and, you know, think it was well within the range of all the different speculation about prices. Look, the market's evolved since then too. A lot of things going on in the world. It's not a static analysis. It's an evolving dynamic analysis, and we think this will continue to be very compelling. Okay, great. Thanks for your time. Thank you. Next question comes from Daniel Bernstein of Capital One. Please go ahead. Good morning. Congratulations. I guess I wanna see if you could put any more maybe quantifiable numbers or ideas around the idea of what type of operational synergies you could get. I mean, maybe how much of their portfolio is managed in-house versus yours and maybe make some comparisons there. You know, 'cause like you said, when you know, just to take a 4.8 cap rate and make it static doesn't make a lot of sense here when you're combining such large companies. I don't know if you can quantify what the benefits might be from an operational side. Yeah. There's some incremental ways to think about that, just thinking about models and how you might construct that. Obviously, the G&A synergies is the biggest one by far. I mean that's worth a substantial amount. You could argue that's worth, you know, effectively $3 a share if you wanna look at it that way. The other components, I mentioned occupancy. If you think about how we've talked about our portfolio, and I think you can say the same for HTA is, you know, 40, 50+ basis points of upside within a year and looking at adding to that over time. That's a way to think about, you know, constructive growth expansion from occupancy. I think in terms of rate growth and revenue growth, we think about increments of, say, 10 basis points. If you can grow instead of our average escalator is 2.9%, you've seen us move that up over the years from something like 2.7%-2.9%. It's a powerful move that compounds every year thereafter. If we can continue to do that with the HTA assets, combine that with ours, and move the 2.9% closer to 3%, above 3%, and obviously add to that through cash, better cash leasing spreads, 10 basis points across, you know, $1 billion+ of revenue is very powerful. I think another piece is the investment volume. We talked about doubling the volume, if not more, and then being able to have, call it 10 basis points better spread on that through over time through a better cost of capital. Just that alone can be very powerful. Then kind of the last piece is just more about, you know, basic things on the balance sheet strength, maybe getting better debt costs on bond offerings and credit facilities. You know, 10 basis points of improvement in that is very powerful. You add those things up together with the synergies, and you can easily cover the premium paid, and then you start looking at incremental improvements on each of those measures, you know, each year thereafter. We think those things, you know, clearly address the premium and then build on it from there. Okay. All right. That, that's all I had. Thanks. Thanks, Dan. The next question comes from John Pawlowski of Green Street Advisors. Please go ahead. Thanks for keeping the call going. I apologize if I missed this, but could you share the total transaction costs that you're thinking about right now? Yeah. It'll probably be in the, you know, $150 million, you know, maybe slightly higher than that. That assumes. Is there any additional costs at the property level assumed for, like, triggering property tax resets or even on the asset sales, debt repayment penalties? Any costs above that $150 million? Yes. It takes all that into account. We've taken a look at the property tax resets, you know, and then you gotta look through what the pass-through to operating expenses are. There is in that number, and that's why I kind of said a range, didn't say it's exactly that number. It comes down a bit to what the transfer tax could be related to, you know, to the transaction as well as, you know, the potential asset sales in JVs. So that's where I kind of like base $150 million, depending on how those, how those, you know, transaction taxes and things come into play could be, could be slightly higher. But yes, those have all been considered. Okay. Last question from me. Obviously, it's been talked about the share price getting hit on Friday, could be potential additional pressure today. The substantial amount of HTA shareholders may start looking at the total consideration, and unhappy with it. Where are you comfortable taking leverage and, you know, increasing the special dividend? As an HR shareholder, potentially concerned about how much more you have to lever up to make the deal close, what's kind of the max pain threshold for leverage for you? Yeah. I don't think we're looking at changing the consideration. I mean, I think we're obviously we've reached an agreement. We've executed a definitive agreement, so we'll stick with that and, you know, obviously, like everyone, do what we can to make sure we engage with every investor and talk through the strategic merits and the financial benefits and, you know, that's where we'll go. All right. Thank you for your time. Thank you. 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. Before we go, I just wanna thank the HR and HTA board members for their support during this process. Additionally, I wanna sincerely thank all the employees from both companies, as well as our advisors who worked very hard to bring this to fruition. I wanna thank everybody on the call this morning for your time, and we'll look forward to seeing many of you next week at the Citi conference. Have a great day. The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.