Earnings Call: Q3 2019

Oct 31, 2019

Good day, everyone, and welcome to Health Peak Properties Third Quarter Financial Results Conference Call. All participants Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Barbat Rogers, Head of Investor Relations. You may begin. Thank you, and welcome to Health Peak Third Quarter Financial Results Conference Call. Today's conference call will contain certain forward looking statements Although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions, our forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations. A discussion of risk and risk factors is included in our press release and detailed in our filings with the SEC. We do not undertake a duty to update any forward looking statements. Certain non GAAP financial measures will be discussed on the call. In an exhibit of the 8 K we furnished with the SEC today, we have reconciled all non GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. The exhibit is also available on our website at www.healthpeaks.com. I will now turn the call over to our President and Chief Executive Officer, Tom Herzog. Thank you, Barb, and good morning, everyone. With me today are Pete Scott, our Chief Financial Officer and Scott Brinker, our Chief Investment Officer. Also, here and available for the Q And A portion of the call are Tom Klutch, our Chief Development And Operating Officer and Tremock Henry, our General Counsel and Chief Legal Officer. Today, we are excited to announce that we are changing our name to help peak properties effective immediately. Our common stock will begin trading under our new maker, peak and the New York Stock Exchange at the start of trading on November 5. We also redesigned our corporate website which you can find at healthpeak.com. I think you'll find the site more user friendly and easier to navigate. Enhanced information about the company and our portfolio. YHealth Peak. Ford Health, of course, communicates the sector in which we invest and operate. C, connotes our position as one of the country's premier REITs, plus, elicits the concepts of focus stability and high quality. Today marks the beginning of a new chapter. Changing our name represents the culmination of efforts to reposition our strategy, team, portfolio and balance sheet. HealthPeek, we believe in the power of clarity that a simple strategy on wavering focus and deliberate actions enable consistent delivery on our vision. Over the past few years, we've been with a focus on the 3 primary private pay health care segments of life science, medical office and senior housing. As an innovative company at the forefront of providing high quality real estate to the evolving healthcare industry, we are committed to delivering value to our shareholders, customers and employees. For shareholders, we now have a much improved and more focused portfolio that we expect to produce high quality cash flow consistent earnings and generate strong dividend growth over time. For our customers, including tenants, partners, operators and senior residents, provides sustainable properties in strategically selected markets about the modern amenities, state of the art design, great locations, and accessibility. And for employees, we're fostering an innovative and collaborative culture where leadership is accessible and people have the necessary tools and resources to develop their own leadership skills and make a positive impact. We've worked hard to create an environment that attracts and retain top talent by offering the opportunity to build a lasting and rewarding career healthy. To support the successful execution of our strategy and vision, we are also announcing key leadership promotions. Scott Brinker, in addition to his role as Chief Investment Officer, will be promoted to President. That's exceptional talent and deep industry expertise has contributed to the successful repositioning of our portfolio. His expanded role, he will assume operational oversight of HealthEquity's 3 business segments while continuing to be responsible for enterprise wide investments in Portfolio Management. This structure will enable better strategic alignment across our businesses, accelerated decision making and continued portfolio optimization. That promotion will allow me more time to focus on the strategic direction of our company, our key relationships and our culture forward to continuing, to work closely with Scott for years to come. Debt Miller will be promoted to Executive Vice President, Senior Housing. He has been instrumental in developing the senior housing team, improving the portfolio and implementing systems and data analytics across the senior housing platform. His elevated role, Jeff will have full oversight and execution of the senior housing segment. Lisa Alonso will be promoted to Executive Vice President And Chief Human Resources Officer. This has done an outstanding job transforming the HR function rebuilding our team and cultivating a people first culture. We continue to oversee all human resources activities with expanded leadership of our ongoing effort to attract and retain top talent that makes Health Peak and Employer of Troy. Finally, Barb Rogers who let up our call today has been promoted to Senior Director and will be leading HealthPe's IR efforts going forward. Andrew Johns, who has done a great job as Head of IRR over the last 3 years, has been elevated to lead our FP and A team. I want to extend my congratulations to Scott, Jeff, and Lisa, as well as Barbat and Andrew on their promotion. Turning to operations. We had another busy quarter where several important transactions announced for close that will continue to strengthen our portfolio. In your housing, we've announced over $1,400,000,000 in acquisitions year to date served to diversify our operator mix, improve our geographic footprint, and expand our relationships with top tier partners. We also made significant strides and completed the final steps of our restructuring effort. First, we announced a series of transactions that will ultimately reduce our Brookdale concentration to just under 6%. Over first announcement related to our CCRC portfolio and our Brookdale triple net lease portfolio, and the joint venture transaction was Savran Wealth Fund that we announced yesterday related to our Brookdale SHOT portfolio. 2nd, we closed the previously announced sale of the PRIME Care Portfolio legacy direct financing lease structure. Finally, we completed our path to exit the UK signed an agreement to sell our remaining 49 percent interest to Omega Healthcare, which we expect to close by year end. In Life Science, we further expanded our Boston presence through the acquisition of 35 Cambridge Park Drive, bringing our total investment in the Boston market to $1,200,000,000, back to deals of 6% plus, inclusive of the 101 Cambridge Park Drive Development project. Additionally, our approximately $1,000,000,000 life science development pipeline in South San Francisco, San Diego and Boston, will provide incremental earnings growth as we head into 20202021, along with strong NAV accretion. In a medical office, our proprietary development program with HCA continues to provide us with accretive growth opportunities. Yesterday's announcement of 2 new developments, our active HCA pipeline totaled 7 projects, representing approximately $145,000,000 of developments We also have a number of additional projects that we expect to announce in the coming months under the HCA program. So Our momentum remains positive on a variety of fronts. We completed a number of important strategic transactions, earnings and SPT, are performing at or above our expectation. Development and deal pipelines remain robust and our infrastructure continues to improve. Now, I'll turn the call over to Pete. Thanks, Tom. Once again, report a solid quarter of operating and financial results. All three of our core segments continued to perform at or above our expectations. 3rd quarter, we reported FFO as adjusted of $0.44 per share and blended same store cash NOI growth of 2.4%. Year to date, our same store portfolio has delivered 3.1% growth. Let me provide some details around our major segments. Starting with Life Science, which represented 29% of our SDC pool. The momentum we established in the first half of the year continued into the third quarter with same store cash NOI growing 5.8%. Offerings are year to date same store growth 6.3% and is a reflection of the continued tenant demand for high quality space in the 3 most important life science market. On the leasing front, year to date, we have executed over 1,200,000 square feet of leases, including 390,000 square feet in the 3rd quarter. We signed 114,000 square feet of renewals during the third quarter at an average cash mark to market of positive 50%. Bringing our year to date represented 39% of our SVP pool. 3rd quarter cash NOI grew 2.5%, bringing our year to date growth to 3.3%. As we discussed on prior calls, in addition to higher occupancy and contractual rent escalator, Growth in the 1st 2 quarters of the year benefited from outsized ad rent at our Medical City Dallas campus. Fortunately, we expected some deceleration in our same store growth rate during the second half of twenty nineteen. Our year to date retention rate remains above 80%, which demonstrates the consistent level of tenant demand for our on campus portfolio of assets. Turning to senior housing, of which Triple Net represents 16% and CHOPS 10% of our FDP pool. 3rd quarter cash NOI declined 1.3% with triple net growing 1.9% and SHOP declined 6%. Given the small size of our shop pool, the decline equates to just over $1,000,000. Year to date, our senior housing portfolio has met our expectations, triple net growing positive 2.2% and shop declining 4.7%. In line with the components to our guidance we provided at the beginning of the year. Portfolio mix between triple net and SHOP has shifted because of triple net asset sales and results in a blended year to date decline in senior housing of 0.5% on track with our expectations. Turning to the balance sheet, September, we announced a $1,000,000,000 unsecured commercial paper program providing an incremental source we had approximately $650,000,000 of commercial paper outstanding and a weighted average rate of 2.2% and roughly $71,000,000 outstanding on our revolver. We ended the quarter with net debt to EBITDA which is in line with our targeted range. In October, Bitch recognized our meaningful balance sheet and portfolio repositioning progress. With an upgrade to BBB Plus. We are now rated BBB Plus Baa1 by all 3 of the major rating agencies. A quick note on sources and uses given our recent transaction activity. We ended the quarter with approximately $570,000,000 of forward equity remaining. With yesterday's announcement of our Senior Housing joint venture and UK joint venture sale, We expect another approximately $450,000,000 of proceeds by year end, giving us total sources of approximately $1,000,000,000. We plan to utilize these proceeds to fund our announced $333,000,000 purchase of 35 Cambridge Park Drive, expected to close in early December fund $225,000,000 net for the Brookdale CCRC and Triple Net transaction expected to close in the first quarter of 2020, fund our remaining 2019 development, redevelopments and capital spend estimated at approximately $200,000,000 and due to our floating rate debt, allowing us to end the year with net debt to EBITDA of 5.6x,5.7x. From a balance sheet perspective, we are in a strong position to take advantage of the accrete about opportunities in front of us. We have a robust acquisition pipeline and attractive development and redevelopment pipeline and we are well positioned in both We are increasing the midpoint of our FFO as adjusted guidance to $1.76 per share from $1.75 per share. In addition, we are increasing the midpoint of our blended FCC guidance to 2.75% from 2.5%. Update to both guidance ranges are driven by fine tuning our expectation in our life science and medical office segment. Senior Housing remained on track with our expectations. One final bookkeeping item on Page 27 of our supplemental We added 8 K while outlining the material near term purchase option in our portfolio. Hope you find this new disclosure useful. With that, I would like to turn the call over to Scott. Okay, thanks, Pete. 3rd quarter was highly active across all three business segments. Lowe is more than $500,000,000 of strategic accretive acquisitions, including Oakmont And Senior Housing, and Hartwell in Life Science. We also entered into new agreements for $900,000,000 of acquisitions, to expand our life science footprint in Boston and to continue transforming our senior housing business. Under contract to acquire 35 Cambridge Park Drive, a brand new life science property in West Cambridge, That's next door to the property and land parcel that we acquired in January. Purchase price of $333,000,000, is a 4.8% cash cap rate and a 5.7% GAAP cap rate. Including the future development project, this campus will have approximately 450,000 square feet, they blended, stabilized yield of 5.6%. Campus is directly adjacent, Taylor Weiss Station, a transportation hub with more than 10,000 passengers each day. So this Class A campus has outstanding accessibility and the rents are at least $20 per foot cheaper than East Cambridge where the vacancy rate is near 0. We added 2 on campus medical office buildings, our development partnership with HCA, the nation's leading for profit health system. Total spend is $34,000,000 with 50% pre leasing and a blended return on cost of 7.1%. These MOBs allow HCA to expand their outpatient capacity in core markets. They're typically developed in tandem with HCA investing significant capital into the adjacent hospitals, making these strategic locations. There was an avalanche of positive activity Senior Housing. We're approaching the end of the complete transformation of the portfolio and platform. As announced on October 1, we agreed to a series of transactions with Brookdale, which are neutral, is slightly accretive to earnings. Assuming no change in leverage. We expect to close in the first quarter of 2020. Background since 2014, HealthSeq And Brookdale have been joint venture partners in a 15 property TCRC portfolio managed by Brookdale. HealthPeak will acquire Brookdale's interest in 13 of those CCRCs for $541,000,000. That's a slight increase from the October 1st announcement because we recently came to an agreement to add the 704 unit DCRC in Bradenton, Florida, the HealthPeek Acquisition Pool. An updated presentation is available on our website. This is a unique and differentiated portfolio. Catuses include nearly 600 acres of land. Which today would be virtually impossible to recreate. That scale allows the properties to offer unmatched amenities and significant expansion opportunities. Massive scale of the CCRC creates barriers to entry. There's been 0 new CCRC supply within ten miles of these properties in the past 10 years. Residents typically enter CCRCs around age eighty, which positions these assets to capture the earliest wave of aging baby boomers. Finally, the average length of stay is 8 to 10 years. President turnover is very low. The investment also allows us to grow with LCS, a well known and well respected brand, with a 50 year track record. LCS is the largest operator in the C CRC industry, and an excellent addition to our family of partners. Part of the transaction, HealthPeek will sell 18 triple net properties to Brookdale for $405,000,000. This will materially improve the quality of our triple net lease with Brookdale. In particular, the asset quality and rent coverage will increase, and we'll move from having 11 separate lease pools with various maturity dates. For a single master lease with an 8 year term. Yesterday, we announced an agreement to sell a 46.5% interest, our Brookdale SHOP portfolio, another important step, transformation of the SHOP portfolio. Our new capital partner is a large Sovereign Wealth Fund. Gross asset valuation is $790,000,000, which is a yield on sale in the low to mid 6% range before asset management fees. The transaction reduces our pro form a, Brookdale concentration to 6% and improves the age and demographics of our top portfolio. Joint venture will be unlevered. We expect to close by ye/ar end. September, we closed on the sale of the noncore Prime Care Senior Housing Portfolio for proceeds of $274,000,000. Was an important cleanup transaction and allows us to efficiently recycle capital into our pipeline. We also reached agreement to sell the remaining 49 percent interest in our UK portfolio. We expect to close by year end, marking our exit from the UK. We recently reached agreement for the early termination of our 9 property master lease with Capital Senior Living that would have otherwise matured in October 2020. We intend to market the 5 non core assets for sale, and the rest of those properties will terminate on the applicable closing dates. We plan to transition the 4 core properties to existing partners, 3 to Atria and 1 to Discovery. Capital Senior will pay contractual rent through the transition date, which should occur in the first quarter. Our 6 property master lease with Capital Senior matures in 2026 and has just over $4,000,000 of annual rent is not affected by the transaction. We've now tackled key challenges in the triple net portfolio with Brookdale, Prime Care, Capital Senior, HRA And UK. We also recast our relationships with core partners like Oakmont, Sunrise, and AAGES. A reaction was purposeful and strategic. And now emerging in ClearView is a far stronger triple net portfolio. Higher quality assets, master lease arrangements with long dated maturities and a rental stream that should consistently grow in the 2% to 3% range you year. To see the transformation visually, take a look at the heat map on Page 28 of our supplemental compared to prior periods. Surgery underway in the SHOP portfolio has been equally proactive thoughtful and decisive. So as stated previously, due to the timing of all the activity, it won't be until 2021, Redoss SPP only reflects the transformation that's been accomplished. We do feel good about the portfolio and platform that we're building. Wrapping up with yesterday's announcement, I was fortunate to join HCP in early 2018 at such a unique point in the company's history. Fully aligned executive team with a clear vision of where they wanted to take the company, supported by high caliber, and collaborative teams. Today, I feel even more fortunate to have Tom ask me to take on an expanded role at Healthy. Company with a differentiated strategy, high quality portfolio and balance sheet, disciplined portfolio management, relationships to drive growth. Our new black and white shows simplicity, clarity and focus, and the final color is gold, as we intend to maintain our standards at the very highest level. Now I'll turn the call back to the operator for Q And A. Ladies and gentlemen, at this time, we'll begin the question and answer for questions. Our first question today comes from Rick Anderson from SMBC. Please go ahead with your question. Hello, team health peak. So just, okay, two questions. Perhaps to Scott, the core versus transition portfolio of the SHOP business kind of flip flopped in terms of performance in the third quarter. You mentioned the full effect of everything you're doing, sort of a 2020 event, 2021 event. Can you describe, are we going to see sort of, kind of, variability like this through the process, or was this sort of a, 1 and done type thing you'd expect to see core do better than transition? Just get a sense of what it'll look like over the course of the next year or so. Hey, good morning, Rich. I think there are a couple of things to focus on. Why is the small numbers? So with pools this small, especially over a 90 day period, in a business like Senior Housing, the numbers can jump around quite a bit. Can become very hard to predict. So that's part of it. The other is that in the core portfolio, almost half of that pool is in Denver, in Houston to markets that have a ton of new supplies, just a very competitive environment. Good long term markets, we're in good areas within those 2 MSAs, but it's a very competitive, market today. And the NOI was down pretty significantly. In fact, in the core portfolio, if you take out Houston and Denver, our year over year SPP would have been flat instead of down 7.4%. So the balance of the portfolio is actually forming quite well. It's just those two markets in our properties there given our concentration are having a huge outsize effect. So that's what explains decline in the core portfolio. We think that number will certainly improve moving forward. I'd also note that all the communities in Denver and Houston are part of the portfolio that we are selling a 46.5% share of. To the Sovereign Wealth Fund. And then the transition portfolio, it was nice improvement. That's a, although down, 2.7%. That's a lot better than it had been in the previous 6 or 7 quarters. And we feel like the 4th quarter, should be a positive number. Hopefully materially positive. So hopefully that gives you some color about the change in direction between core and transition bridge. Perfect. Thanks. And then second question, I appreciate the color on the CCRCs and protection they exhibit in terms of competition and the length of stay. But 40% of your shop, I think, is is CCRCs now? Are you comfortable? I mean, obviously, the risk is housing market sort of tanks and you have trouble getting people into the communities. So to what degree, do you see that going down, and perhaps in dramatic fashion as you kind of change your portfolio or swap it from triple net to shop in the senior housing space? Rich, it's Tom. The CCRCs do definitely represent a different model from straight senior housing The barriers to entry are dramatically different, as you probably know, they're huge properties sitting on lots of acres of infill type land they appeal to an earlier wave of baby boomers, more in the range 81 rather than 85 for purposes of entrants. They have an 8 to 10 year length of stay, which obviously produces a better earnings model due to the predictability of those tenants. And, we think that, with with the approach that we've taken to that business that it produces a more stable component to our senior housing business that we like blending against the AL and IO continuum of care products. So we actually really like it. But 40 is the right number or do you see that And what's your appetite for other CCRCs, I guess, the question as you go forward? Yes, I think that's a fair question. Here's the thing about CCRCs. They don't trade that often because they're very difficult to put up. I mean, for instance, the new apply hitting this stuff in a, in a 10 year period and a 10 mile radius has been, as Scott had indicated, absolutely zero So there's, and there aren't a lot of them trading hands. So when quality product does change hands, and now that we've got the infrastructure set up, to take advantage of this product type, we certainly would like to purchase some more it's not going to be an outsized portion of our portfolio. It's just going to be one line of business that we have within senior housing. So we we think it's a good diversification within the senior housing segment to own a portion of it. Our next question comes from Jordan Sadler from KeyBanc. Thank you. Good morning. Just a follow-up to Rich's last question there. Why are the cap rates so much higher on these properties. And what is the tail risk as sort of you guys think about it? How should we be thinking about it? I'll take this one too. The cap rates and the risk and I'll ask Scott to chime in on this as well. From a risk perspective, One of the things that one has to consider is that the entrance fees oftentimes are paid for by the senior sale of their single family home. So if there was a dramatic decline in home values and it was prolong, that could have some impact. Yet the accounting in the way that it is set up, amortizes that entrance fee over the actuarial life of the, of the tenant. So, that, that produces a, a more appropriate matching of income, with the, with the services that are required on those properties, So a good earnings pattern that we think to be quite correct. So despite the fact that does have the, the risk factor of a downturn in housing, which hopefully would not be long term. It does produce a strong pattern of earnings that will go through the cycles. And as far as the cap rates, where they currently stand, that's where the market is. And, there's complexity in setting these things up. The accounting of both actuarial work, Sean Johnson, our CEO, spent 2, 3 months working on this around the clock to make sure that we headed right. Did a great job on pulling it together. And, now that we've got it all set up and we've studied the business we've been in the business for a period of years, along with our friends, Brookdale, we think that it's going to be a great business. Accordingly, the cap rates to me feel like they're a bit high. So I think, I think there could be some compression as we look forward over the next several That's my day. Scott? Yes, there's also not a whole lot of comparable transaction activity to point to on cap rates. So I've seen them anywhere from the 7% to 10% over the years. So it's hard to say that there's a specific market cap rate. I think it's easier to find comparables in the rental senior housing where there's just a lot of activity. It's just very rare to see for profit TCR season in particular trade because the vast majority of the product is non profit that rarely, if ever, transacts. So that would be the other comment I would make. There's obvious comparable cap rates of 0.2 from a transaction standpoint, Jordan? So, I've seen to your point, we don't get a ton of granularity on these from a lot of folks, but one of the smaller players in the space public REIT, has a significant portfolio. I've noticed there's a at the operator level, there's a significant resident buy in liability. I would imagine, those sit on these assets as well, just those fees essentially that are, I don't know, refundable ultimately upon, move out at some rate. Where does that liability sit based on sort of now that this JV will be sort of consolidated Is that going to be on HCP's balance sheet? And if so, how big will that be? And if not, just kind of still curious how big it is. Yes, the refundable entrance fee, sits as, a deferred liability. It's an evergreen liability. In other words, as one resident moves out, that, that refundable liability gets refunded to that, that senior or their state, when the next resident moves in. So it becomes an evergreen liability. That number is about $300,000,000 on our When we think in terms of the nonrefundable fee, that represents a deferred revenue because there's a future service obligation. And therefore, when you have a deferred revenue that's picked up in purchase accounting appropriately over the remaining actuarial lives of those seniors that is amortized into income and as a booster to the total income that's earned on that, on that portfolio or that particular property, which does create a nice earnings recognition pattern. That liability on the portfolio that we purchased in at the 100% level is at about $400,000,000. Scott? Jordan, I wanted to add one other thing. The average total entry fee on this portfolio is only about $200,000. So it's a very modest price point, it really appeals to a wide demographic that $200,000 is below the median home value in these markets. Pretty significantly. And all entry fee communities are different. Sometimes there are 90% refundable plans or it could be a 0% refundable plan. This portfolio is closer to the 0 percent refundable, on average of that $200,000 entry fee, only 25% of it is actually refundable and the balance is nonrefundable. So this portfolio in our view is pretty unique from that standpoint is that the that refundable liability is pretty small relative to the size of the asset value. So I think it's important to keep that in mind as well. And as Tom mentioned, it functions more like a security deposit. I mean, there's no interest rate associated to it. Sits on our balance sheet. So, it's one of the complexities of CCRCs and maybe that is one reason that the cap rates are a little bit higher, but mean, we're perfectly comfortable with it, especially given the ability to do it in scale here. I'm going to add one thing, Jordan, because you've obviously studied these and don't know that everybody on the call is at the same time. The kind of cap rates that you're speaking to, when we did the Brookdale transaction, that was in the vicinity of a 10 cap. Somewhere in that range. And that's based on NOI and the entry fees that are received. But when one breaks it down, let's get down to actual cash flows Yes. That was my next question. Yes. So let's break the cash flows apart. So if we went from, let's just call it rough numbers of 10 cap, it probably on a recurring CapEx basis, true recurring CapEx, it probably brings it down to about an 8.25% cap. And that means we spend a lot of money in these assets because they have to be kept in tip shape. If we included the the revenue enhancing capital improvement type spend as we have seek to make these assets, along with Brookdale we have seek to make them to better and better quality, it's probably more in the 7% to 7.5% yield range. But, that is with a pretty vast improvement in the quality of the assets So, again, going from a 10 cap to probably an 8.25 run rate, yield based on recurring CapEx, we put a lot of money into the assets, and that's probably putting us more in the 7.5% cap rate range, just to give you a feel. Thanks for all the color. Our next question comes from John Kim from BMO. Please go ahead with your question. Can you, I think you provided some mark to market on the life science that you had this quarter, but was wondering if you could provide that same figure for MOBs and also what should we expect for 2020 expiration? The last part was what we expect for 2020 was? The 2020 mark to market. Okay. Tom? The past couple of years, we've actually seen the mark to market and the MOBs move up. This year, it's been very good. We're in that kind of 3.4% last quarter, 3.2% this quarter. Based on historical numbers and where we've been moving, I would suggests the same kind of numbers next year, 2% to 4% kind of stay in that range? Good. My next question is on the purchase option detail that you provided this quarter. Is the annualized base rent, is that a good numerator for the cap rate that you'll be selling at? Yes. Hey, John, yes, that is a good, that's a good proximate for the numerator. Okay. Do you have any indication on what's going to happen with the 2021 option in L. A. On the HOPE Hospital in Irvine. I mean, it's likely to get exercised. So it's on the list here. That's the current assumption right now. I'd say that it's likely But as they continue to work through their plans, if they decide that it's advantageous for them to have more time, we're going to be flexible and open with them and working through that. 6.5 is that a market cap rate for that at the type in L. A? Yes. This is Tom Clarity. That's a good market cap rate for that kind of hospital. You need to ask that. I mean, it is, you're not familiar with Orange County, that's the best health system in Orange County, and it's fantastic location in Irvine. So I don't think that's representative of hospital cap rates, but it's certainly a representative of such a unique health system and market and location. Our next question comes from Michael Carroll from RBC. Please go ahead with your question. Yes, thanks. Can you discuss the South San Francisco life science market What type of demand are you seeing at your Sarah Point projects right now? And has that interest changed since one of your peers announced this quarter that they've fully leased their development project that's nearby? Hey, Mike, it's Pete. Happy to dig into that. I think about, as I said before, South San Francisco is a very important market to, to help me. We own 4,000,000 square feet in that market and the current vacancy rate is around 2% right now, which is one of the reasons why you're seeing a lot of new construction. When you think about the new construction, there's about 3,000,000 square feet right now that is getting built with all the new leases that have been signed, it's probably around 2 thirds committed, within that is obviously the the co phase 4, which is 100% leased, the short phase 1, which is 100% leased. And also within it is the short phase 2, not at a point yet, but we're ready to give any additional information on that. But I think you can glean from the demand within that marketplace that we feel very good about the prospects of the SHORE Phase II. We're going to continue to focus on life science tenants. I know there's been some activity with non life science tenants in that marketplace, which when something gets leased out to a non life science that's actually probably a good thing for us since our core focus is on life science users, and that's where our core competency is. So we feel quite good about that marketplace and we think all these projects will do well and we feel very good about our positioning with the short phase 2. Grant, I know we discussed this a little bit last quarter, but I know you have some land sites still in the South San Francisco. Is there a point where you would want to bring forward some of those projects in break ground on another one? Yes, that's a good question, Mike. We actually have a lot of land opportunities in life sciences, both within South San Francisco, but also in San Diego as well as Boston. If we had to prioritize where we are today, within South San Francisco, we'll continue to build out the SHORE Phase II, as well as the SHORE Phase III. That's our focus right now. I think as you look at San Diego, We would probably prioritize our science center drive project down there, ahead of some of the other projects in South San Francisco right just given that we have a decent pipeline ongoing currently. And then in Boston, we have our 101 Cambridge Park Drive, opportunity. We're into the city of Cambridge right now, trying to seek our site permits. And we're going as fast as we can there, but we feel quite good about how we're positioned in that West Cambridge market with 101 there. So Our priority is probably 101 as well as Science Center Drive finishing up the shore phases 23. And then to the extent that there's still significant demand. We'll start to assess those other land parcels in South San Francisco. Tom, you want to add anything? There are a few things that I would add is, as we look at, any new developments, one of the things we consider and do a lot of work around is the demand supply fundamentals We look at the amount of pre leasing that's taking place, not just within the market, but within our own properties. We look hard as to how we would match fund those investments with non core sales. In fact, this happened to be a topic, with our board meeting. A week and a half ago where we did a full deep dive on that. So we like our prospects. We like what's coming down the pike. We do have some of these projects that Pete just mentioned that fit very neatly into our clusters. And therefore, that represents additional opportunity for us in the way clusters work with biotech tenants and the like. So we like our play, but we're also going to, continue to approach it with agree of caution while still seeking to take advantage of the opportunities that we have. Great. Thanks. Thank you. Our next question comes from vikram Malhotra from Morgan Stanley. Please go ahead with your question. Thanks for taking the questions. Just first on senior housing shop, we've now had 3 large healthcare REIT report has been a range of results in views. I know you guys gave some thoughts longer term on NAREIT. I'm just wondering specifically on shop, Scott, if you could give us a sense of 2 things. 1, how did occupancy trend for maybe just the multiple pools, but just some of the pools to get a sense of how things are shaping up going into 4Q. And then what sort of the range of pricing power that you saw exhibited across all your partners? Hey, good morning, Vikram. So I'll comment on the entire shop pool. So year over year, the occupancy was down about 70 basis points, but sequentially in the 3rd quarter it actually moved up quite nicely. And if you look at where we were on January 1st this year versus where we're at today, the 1st 5 months of the year, we declined about 100 basis points. And in the last 4 months of the year, we increased about 100 basis points. So we're basically right back to where we started on January 1st in the SHOP SPP portfolio, which is pretty good actually. So that's where we're at on occupancy. The recent trend has actually been quite positive, obviously, up 100 basis points over the last 4 to 5 months. And then on rate, I think it's more appropriate to talk about the 2 pools separately because of the core portfolio, which is the more stabilized, of the 2, the year over year RevPAR is up 3.5%, 4%. So actually, it's been quite strong and continues to be the transition portfolio year over year growth rate is slightly negative. And I think there are a couple of things there. One is we do have a number of low occupancy properties within that pool, where one of the operating partners has been more aggressive on rates to improve occupancy, which is bringing down that average. It's just a small pool. Again, the law, small numbers The other thing that's happening in that pool is that the acuity level is declining. Brookdale just ran a higher acuity level than Atria, and that's the vast majority of that pool. So, the RevPAR, which is an all in rate, including care, is naturally going to decline a bit when the acuity comes down. So I think that's a factor as well, Vikram. Okay. That's helpful. On the JV with the Sovereign Wealth, so I'm sorry I missed this. It's, I think, 230 a unit. Did you give the cap rate on that? Oh, we did, Vikram, it's in the low to mid sixes, before the asset management fee. Okay, low to mid sixes. And then maybe just one for Pete. There's a lot of changes obviously over the last two quarters. I know you'll eventually give us 2020 guidance, but just sort of looking to get a sense of some of the bigger moving pieces as we go into 2020 given there have been so many changes that have gone on over the last two quarters. If I look at sort of consensus numbers. It seems like sort of a $0.45, $0.44, $0.45 run rate throughout the shop next year. Just wondering if you can talk about some of the bigger moving pieces we should be aware about as we update our models. Vikram, it's a Herzog here. I'll take that one. I think I want to do that. Okay. So we do expect to have more normal earnings growth going into 2020. As you know, we're, we still got the 4th quarter in front of us and we're in the midst right now of our annual operating plan that we'll present to our board in December. But I will share with you some directional thoughts based on where we stand today, as long as you recognize that our full year guidance is not going to come out until February, which is our standard practice. So given that, I'll just give you guys a rundown and you can use it as you do your modeling and let's start with MOBs. MOBs are primarily on campus for our portfolio, as you know. Has been a steady performer for the last decade plus, consistently has operated in the 2% to 3% range. In 2019, when you look at our numbers, we did benefit some from the outsized growth in Medical City Dallas, which brought our SPP, to the upper end or maybe a little above the top end of our typical range. And as we look at 2020, I think we can't assume that that additional ad rent continues. To grow, although it might, but we're not going to forecast that. So I would probably say somewhere in the low to mid-2s for MOBs. Going to life science, the fundamentals remain very strong right now. We continue to see near term upside Our positive mark to market is in the 15% to 20% range that, that is in our portfolio. We've got healthy lease escalators, as I think you know. So if we were going to swag a number for purposes of this call, I would say, growth in the 4% to 5% range. And let me caveat that for a moment. You guys realized we used a cluster strategy, which is vital in the 3 core life science markets. And we've got strong scale in these markets. And that combined with the significant development platforms that we have that we're delivering on heavily in 2020 2021, it gives us the ability to proactively collaborate with our tenants to meet their space needs as they grow, which has been a common thing we've done with our tenants. We have a lot of development coming online. So what this means is we'll have certain tenants that have smaller space that want to grow into bigger space which would move from one of our SPP properties into one of our non SPP properties, primarily, lease up of development. In fact, we've seen a few fairly significant tenants that are taking these exact moves that we've signed, letters of intent. And, and that's at the shore. We might have some of that stuff going on in Boston. We'll see. And it's it's absolutely, a positive to our earnings and is the right economic move, but can be negative in the short term to SPP due to the downtime we'd have in repositioning that vacant space for new leases. So it's a really good thing for the company we get this blip in the metric of SVP. So, Pete and Brinker and I and the senior team have been talking about how to best present that as we go into 2020, economics are going to be great. We'll figure out that metric and whatever the most appropriate way to present that. But bottom line is life science looks great, the real growth is in a 4% to 5% range. That takes us to senior housing, let's say, triple net, that's easier. We've dramatically overhauled that triple net portfolio. The banker talked to that. Take a look at that heat chart and go back a few quarters as he indicated it's in the sup. It's dramatic when you look at it. And, but we're looking for that business to have same store growth at 2% to 3%. Long dated leases, good credit. So that business looks great. Let's go to shop. Shop makes up 15% of our total pool, but 10% of our SVP pool some of our best assets will come into the pool over the next year, year and a half. So they're not going to be in 2020, SPP. So back to SHOP SPP being at about 10%. So, consistent with the previous views that Scott provided, We believe we've got an operating environment that is going to be choppy in 2020, but we expect to see steady improvement going forward. And we have worked really hard to remake the SHOP platform to favorably position it for our portfolio The work done to date has been dispositions, transitions, recycling of capital into higher quality assets we think will be rewarded in the direction that we want to move. And for 2020, our same store pool is going to remain very small. And, and the highest quality assets won't even be in the pool until 2021. So given all that, And by the way, I will just make a statement. Shop is inherently difficult to forecast, for everybody out there. And especially when you have a smaller pool and you've got transition. So we'd like to see Q4 play out. So we have that, that information in hand. And on SHOP, I think we'd probably want to wait until February and give us our best guidance at that date in the SHOP, but again, which represents 10% of our SVP pool. I'll go a little further to your question. On external growth, our development pipeline is going to produce some really positive, impact from an FFO as adjusted perspective. We're talking probably $0.04 a share just from what earns them. And you'll also see earn in from 2019 accretive acquisition activity, assuming we're successful, which We think there's a good chance that we'll have some upside there. We won't forecast to it, but we do feel good about that. But at the same time, there will be some offsets that I think you guys probably have in your models. If you don't, make sure that you talk to Barbat and Andrew and the light and the guys here. But, there's going to be some rollover impact from some of the late 2019, for instance, the Prime Care sale that we made. That was a great sale and cleanup sale. Came with a bit of dilution. The UK, venture dispositions came with a little bit of dilution. We're going to have the normal annual pruning of our noncore assets. We're going to do that forever. Just assume we're going to, we're going to sell $300,000,000 of older tired assets every year and recycle that into development. We've got the North Fulton hospital purchase option Keith mentioned that we've added a new schedule. We wanted to make sure you guys said that it's an $82,000,000 purchase option that is roughs out to about a 10% cap rate, a little bit of dilution there. By giving all this back to, I think, what your original question is, we expect to move back toward a more normal earnings growth beginning in 2020 with some potential positive or negative noise from the senior housing transitions, and some of these new acquisitions that we still, you know, when there's some lease up required for stabilization, but we'll come back to you with more specifics on the fourth quarter call. So that's what I'm willing to tell you on the 2020. That's actually very helpful. Thank you so much. And I would agree with you on the triple net side, even your, metric on the amount of new supply, the median household income and the median home value, they all jumped as well. So I definitely agree with you. Our next question comes from Joshua Fairlane from Bank of America. Please go ahead with your question. Hey guys, thanks for the question. I'm curious on the Brookdale Shop JV that you created this quarter. Why not just sell those assets outright? And then maybe could you talk about their performance versus your overall shop performance and maybe the impact on your shop pool today and in the future, how you might present that? Yes. We don't want to call out the specific performance of that portfolio, although I did mention that Houston and Denver are a significant part of the core portfolio. And that the balance of the core portfolio was actually flat year over year versus down 7.4%. So I think that gives you at least directionally an indication of how that portfolio was performing. The decision to do a JV rather than sell the assets outright with a couple of things. 1, it's a new capital partner that we've been talking to for a good period of time that over time, we think could be an excellent strategic partner on any number of opportunities. So there was a mutual desire to establish a partnership. It may ever grow. It may grow significantly. We'll see based on the opportunity but that was an important consideration for us. And the other is that over time, we think these are going to be good assets. For the next couple of years, we think it's going to be more challenged because of the markets that they are in And fortunately, the Sovereign Wealth Fund, there's some benefits to being private. They're able to take a long term view, which they do. Were able to take a long term view, but only to a certain extent, and we needed to manage the portfolio accordingly. So we think that over time, this will be a very good portfolio, but for a couple of years, it probably will be more challenged. So we thought this was strategically and economically the right thing for us to do with the assets. And then Josh, let me try and answer your question on SPTO speak up as we've been told that there's some sound difficulties It's the first time I've been told that I'm too quiet. So from a SPP perspective, our policy is to remove JVs from SPP. So if the deal does close in the fourth quarter, it could have a material positive improvement on our reported numbers. Importantly, and this is very important, our current guidance does not assume these assets come out of our full year pool. And we will be transparent in the fourth quarter on the impact of these assets and show it both with and without these assets included. I'll just add one thing to that, Pete, if I could. As we go into 2020, we will be assessing whether to show these types of JVs on a pro rata basis going forward because when we get some larger JVs like this, it just feels like there's assets missing that we would like to report on. I'm sure you'd like to have information. So, we're working on that. Our next question comes from Chad Benacore from Stifel. Please go ahead with your question. Hi, good morning. This is Paocho on for Chad. Congrats on the rebranding. My first question is on the shop performance. Looks like occupancy has improved quarter on quarter across the board. Given the competition you mentioned Denver and Houston in your core portfolio, did you offer more concession in the quarter to defend occupancy? What is the outlook for 4Q and going forward and how should you think of occupancy versus rate increases in the choppy market that you just mentioned in 2020? Good morning. So there wasn't as much price concession as there was increased marketing spend So, that's one reason that the year over, well, actually the sequential performance was a bit weaker. So, not significant discounting, it was more capital into the buildings as well as elevated expenses to improve the marketing effort, including new sales people. Okay. And my second question is on dispositions. You just mentioned the plan to like recycle $300,000,000 assets annually as a normal run rate. So other than the 18 chip on the assets you are selling to Brookdale, are there any major portfolio dispositions that are in the works near term? No, nothing dramatic. It's more just typical pruning. Okay. That's it for me. Thank you. Thanks. Our next question comes from Nick Joseph from Citi. Please go ahead with your question. It's Michael Bilerman here with Nick. So I just wanted to come back to the joint venture. And Scott, you mentioned a low to mid-six cap on a total portfolio value of $790,000,000, which equates to total NOI of of about $49,000,000. And then the other piece that you sort of talked about was, that it included the assets in Houston and Denver that, if we're excluded from the shop pool, would mean it would be flat. So if you were to look on page, 34 of your sup. In the 3rd quarter, right, there was $14,600,000 of cash NOI, that was down 7. So half of that is Denver and Houston, down, let's call it, 15 to make the math simple. How does that all tie out to a what's embedded to about a $49,000,000 NOI at a 6 quarter cap on $790,000,000 of value. I'm just trying to piece it all together. Maybe the cap rates on a different NOI number versus what's in place. Maybe not half of maybe there's other assets outside of what isn't here. Can you just sort of tie it all together? Yes, I'll try to and maybe a follow-up call would be helpful too just to walk through all the details, but the assets that we are selling to the Sovereign Wealth Fund or Doming a JV, not all those assets are in the SPP pool because there are some that are actively being redeveloped. So they're not in SPP. And then if you look throughout the supplemental, when you see the SHOP asset count for Brookdale. That also includes a number of assets that are held for sale. So there's a population difference that I think is maybe driving some of the confusion. But you're correct on the roughly $48,000,000, $49,000,000 of NOI over the $790,000,000 purchase price. But what is that NOI? Is that a current in place reported 3Q number arguably a part of that sounds like under redevelopment, a part of that where you had significant NOI weakness? Or is it what is forecasted for next year? Is it trailing 12 months? What does that $49,000,000 represent? Yes, it's a T12, Michael. The T3 annualized would be more like high fives to 6%. And the forward looking cap rate, I'll probably let the Sovereign Wealth Fund comment on that and we'll give our view when we give February guidance. Right. But that's an important number at least from a 3Q annualized because that's the NOI we got to pull out of our model, in which case, it's going to be less dilutive if it's in that 5 to 5.5 range versus 6 to 6.5. The other thing in was really helpful, Tom, as you walk through, a lot of the elements of next year coming from this year, you have like storage, a self storage company come out and give 2020 guidance. Actually, fewer companies give 2020 now, like DXP and a few others, would you consider you have a big conference coming up with NAREIT in few weeks, maybe putting more of those building blocks together, so you can give a little bit more color to the street versus waiting until February? Michael, I thought about that. And I must say if, you know, I've got a path in other sectors, were one that's dealing with a single sector. When you start dealing with multiple sectors, it becomes much more complex, as you can imagine. And I will say a senior housing sector is a far different animal to forecast than the others, that I've ever dealt with. And so it we almost need to see how the year completes out to get a feel for the fourth quarter to see how January looks before we set guidance for the year because there are so many moving parts and even the moving parts despite the difficulty in the transitions, it comes down to, think in terms of assets that are often at 15, 20, 25, 30 percent margins. Smaller changes in the, NOI, it could be, it could be rents, it could be expenses, a variety of different things, can cause some pretty dramatic changes in the numbers. And, that's especially true when we have a small pool like we have in shop. I was, what I worry about in SHOP is that we can have a change that is literally immaterial to our outcome for earnings for the year. But it can swing this metric that seems so exceedingly important to the street because I know that they're comparing it to certain peers it's an enormous number in their portfolio. And so we have a tendency to want to get enough time to model it as best we can to get good estimates on that number. It would be hard for us to come out with full guidance, early when we've got the shop number that we want to dial in as best we can. So I'm inclined not to come out with specific guidance at NAREIT, but rather give the directional guidance as we can, like I just did, and then dial it in, in February. Listen, I agree with you on same store. There's way too much focus when all three of you calculated a different way. I mean, well, power doesn't even calculate it the same between their SEC filings and their supplemental. Where do you stand at least trying to come together? You know, the industrial REITs came together. 24 months ago to at least agree to a common definition on same store. Is that something that you feel you can do that there's willingness to do? Yes, Michael, it's something that we would gladly do. But it requires all parties to want to come together and come to a common definition. So, If, if, if, we find that our peers want to do the same, we will be the first to sign up. Last one, just on same store. I guess you must have listened to Welltower and bent off this call. I'm sure Scott listened to Welltower because had some really nice comments from his old boss on it. But from the same store perspective, where do you lean in terms of the the senior housing operating environment overall? Yes, Michael, I guess we'd be somewhere in between. What did you say? I can't hear you that well. You're very distant. Michael, I would just say the industry environment is generally in line with what we've been talking about for the past 2 years. So it's challenging. Certain markets are better positioned than others. Certain operators are better positioned than others. We're starting to see modest signs of improvement in more markets, than we would have a year ago. In general, our portfolio is performing in line with what we expected at the beginning of the year, even though it's a really small portfolio and hard to forecast. So our view hasn't changed on industry fundamentals. We didn't see any dramatic change in the 3rd quarter, but that doesn't mean that somebody else didn't. It's a very local business, especially if you've got transition assets in the pool. That I certainly wouldn't disagree with any comments that were made by anyone else. But we can't comment more specifically on what we're seeing as well as the conversations we have, with operators who have bigger footprints. And I would just say, our view is that it's challenging. It's been challenging. Things are getting better, but it's going to take a little bit more time to improve, at least at a national level. There are certain pockets that are doing extremely well already. Oakmont is a great example. Aegis is a great example So, there are some markets and operators that are making a lot of money right now, in which confused by anyone talking about a challenging operating environment and then there are others at the exact opposite end of that spectrum, particularly in smaller markets, with older assets in particular if you're in the middle of a transition. So, I think it requires a lot of nuance about what portfolio you're talking about, and be best to avoid sweeping generalizations about senior housing. Right. Okay. Thanks for the time. Thank you. Our next question comes from Steven Valiquette from Barclays. Please go ahead with your question. Great. Thanks. Good morning or good afternoon. Tom and Pete and Scott, congrats on your continued life science strength is pretty important. But unfortunately, I also have a question on senior housing. So just to follow-up further around the discussion on performance in the SHOP core versus transition portfolios. Your comments around Denver and Houston were helpful. But when you look at it, in the revenue growth trends year over year, we're actually fairly comparable between the core transition portfolios. And instead, to me, it was really the operating expense growth that kind of jumped out and was higher at around 5% in core versus only 1% of the transition full year. So I'm not sure if that was related to the acuity differences that you alluded to earlier in the Q and A, but I guess the question really is with the overall industry discussion rising labor costs and other expenses. Is there any extra color you can provide about initiatives that you and your partners may have to try to control operating expenses within the overall SHOT portfolio? Thanks. Yes, happy to take that one part of the gap the transition in core portfolio on expenses is that last year, we talked about some of the transition assets having disproportionately high operating expenses during the transition, whether it's repair and maintenance or over time, or contract labor. So that started to reverse a little bit. So that's one reason that the growth in operating ounces in that transition portfolio. This year is lower than what you're seeing in the core portfolio because the cost of labor, I think you've seen this pretty consistently among the other health care REITs as well as the publicly traded operators, it's in the 4% to 5% range in most markets. And that was true of our core portfolio and true of our transition portfolio. So it was really expenses outside of labor that were driving most of the difference in operating expenses between the two pools this quarter. Is there any hope to kind of bring that expense level down based on some initiatives or you kind of stuck with costs expenses growing in that 4% or 5% range that we just talked about? Yes. Well, I wouldn't say that stuck at the same time seniors are moving into these communities with an expectation of a certain service level. And it requires a lot of human to human interaction. And that's not something that we're willing to compromise. So, any consideration around cutting expenses, but at the expense of the service level, that's really off the table. And it's a competitive labor market. And at the end of the day, usually companies with the best employees end up having the best performance in the senior living community is no difference. So you have to pay a competitive wage to get a high quality worker, not at the same time, if there's a strong culture, good development opportunities, etcetera. You have a better chance to have less turnover, and attract, a more talented workforce in that's really the emphasis. Now longer term, are there chances for technology to reduce the amount of personnel needed at the community yes, I think that's the case, but I wouldn't say that there's a dramatic opportunity on that front in the next year or 2. Okay, got it. Okay. Appreciate the color. Thanks. Our next question comes from Drew Vabin from Baird. Please go ahead with your question. Hey, good morning. Just a couple of quick ones for me. The Capital Senior, properties that are the ones that are flipping over to RIDEA. I know when this happened with Sunrise, I think their rent payments were subordinate to a capital spending. And so, wasn't really a noticeable uptick in CapEx from HCP's perspective. With these properties, are you going to see kind of a increase in the amount of CapEx HEP is responsible for, if you could just kind of talk about the structure there? Sure, Drew. I'll take that. So it's 4 assets. Those will probably transition in the first quarter of 2020. They're good properties and we think good submarkets. I think it's more likely than not that all four of those will end up being redeveloped their twenty five year old properties, under a triple net lease over time, the amount of capital reinvested into the property is not always as significant as you might want. So I think it's more likely that those would move into the redevelopment pool. In which case, it's a different type of spending than CapEx that would be impacting earnings. Okay. That makes sense. And then just one more for me, the Bradenton CCRC that ultimately Health Peak will be buying. What was the reasoning for bringing that one in? What changed in the deal or just give a little more color on that, I'd appreciate it. It was nothing more than valuation. So we've been talking to Brookdale about this portfolio for a long period of time and there was a disconnect on that particular property about the right valuation that did not get resolved by October 1st. But we subsequently were able to come to agreement on the right valuation for that asset, at a price we were a willing buyer and they were a willing seller and LCS is excited to take it on as well. It fits very nicely within the Florida geographic footprint for that portfolio. So we think it's a nice add. Thanks. Our next question comes from Daniel Bernstein from Capital One. Please go ahead with your question. I just wanted to ask, go back to the comment you made on additional land at the CCRCs and just generally given the impressive restructure of the portfolio and where the starts have been in CCRCs and maybe senior jousting generally coming down do you see some additional opportunity to ramp up your construction and development, seniors housing and maybe to what extent would you do that? Yes, it's not going to be a steep ramp up, but as a long term owner, we think there's substantial long term opportunities. There is one active project underway, And at virtually every campus, there is some level of expansion opportunity. As an example, the project that we're underway with already, the independent living portion of the campus, which is usually 2 thirds to 3 quarters of the total units are in very good condition. They've been reinvested in over the over a period of time, but the community has a very tired health care unit. There's no memory care provision. The assisted living is studio apartments, The skilled unit is semi private occupancy, and this is a campus with 50 acres of land. So there's the ability to construct a brand new assisted living community, as well as memory care and create private units for the skilled nursing. So, today it's a property that you walk in the independent living, and it's fantastic. And then you see the health care component of the campus and it's not much to talk about. So there's really an opportunity to dramatically change the health care side of that campus So that's just one example of the type of project that you can do when you've got 600 acres of land. Okay. And then just one last question. You've done some recent private equity, Sovereign Wealth Fund Transactions in the MOB and seniors housing space, do you see any opportunities in life science to expand those opportunities as well? There's certainly plenty of interest, but, Dan, one of the things Tom talked about before is our cluster strategy and our ability to allow tenants to grow within the portfolio as they have success That becomes more challenged as you start joint venturing different campuses and moving tenants from perhaps they wholly owned campus to a joint venture campus or vice versa. So to date, we have not done any joint ventures within the life sciences space. That's the primary reason why. Next question comes from Tayo Okusanya from Mizuho. Please go ahead with your question. Pleased the start of a bigger and better thing. As we start to think about 2020, again, just along the lines of the CSU questioning, There are a couple of other operators to where lease coverage kind of remains weak. As we start thinking ahead of 2020, should we be kind of throwing some kind of consideration around lease restructuring around some of those names as well? No, I don't think so. Kyle, I mean, the vast, vast majority of the triple net rent now is with Brookdale, Aegis, and HRA. And those are now very long term master leases with improved credit. There are a couple of, I'll call them, cats and dogs that have very little amount of rent. All of them have corporate guarantees. So, and I think we're more likely to just collect the rent through the maturity date. If we did choose to do something early, which is not our expectation today, the amount of rent from those properties is so insignificant that it wouldn't even be a blip for earnings. Gotcha. Okay. So that's number 1. And then number 2, Tom, I'm not trying to show you the door or anything, but with the promotion of Scott, What kind of signal are you really trying to send us just around maybe succession planning at this point? Well, that's, I think I don't want to answer this one, Tayo. By the way, welcome back. Good to hear that. No, here's my thinking, Taylor. Don't read anything into that. It wasn't so long ago that I thought of a fifty seven year old as an old guy, but as far as CEOs go, I think it's a relatively young guy, near as I can tell. So I expect to be around for a lot of years. I'm looking forward to working with Scott in partnering with him. And, I think that's going to be for many years to come. So don't read anything to that into, this promotion at all. Other than, I think Scott is going to be able to help us run this business even better by bringing under 1 extremely talented person, the overall oversight of our 3 businesses along with the transactions so that that's being headed up by one person. And that was, that was the sole rationale for it as well as that allows Scott to continue to group himself, for bigger things going forward. Our next question comes from Lucas Hartwich from Green Street Advisors. Please go ahead with your question. Thanks. Just one left for me. Can you provide an update on the tenant interest level at 75 Hayden? Sure. It's Pete here, Lucas. So one of the interesting things about 75 Hayden is we actually had to build a parking garage first before we could begin construction of the steel, that has been completed fairly recently deal has gone up. And in fact, we just had the topping off event a few weeks ago. We think we're really well positioned with 7 85 Hayden vis a vis the market fundamentals there. So similar to the SHORE phase 2, nothing to report today, but we feel very good about how we're positioned. And we're looking to deliver that basically a year from now. So we're right in that sweet spot where think we can And ladies and gentlemen, at this point, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks. Well, thank you, operator, and thank you for all joining us on the call today and your continuing interest in Health peak. We'll look forward to seeing many of you at NAREIT and talk to you soon. Ladies and gentlemen, that does conclude today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines.