Ventas Inc (VTR) — Q3 2018 Earnings Call Transcript

Thanks, and good morning and welcome to the Ventas conference call to review the Company’s announcement today regarding its results for the third quarter ended September 30, 2018. As we start, let me express that all projections and predictions and certain other statements to be made during this conference call may be considered forward-looking statements within the meaning of the federal securities laws. The Company cautions that these forward-looking statements are subject to many risks, uncertainties, and contingencies, and stockholders and others should recognize that actual results may differ materially from the Company’s expectations, whether expressed or implied. Ventas expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations. Additional information about the factors that may affect the Company’s operations and results is included in the Company’s annual report on Form 10-K for the year ended December 31, 2017 and the Company’s other SEC filings. Please note that quantitative reconciliations between each non-GAAP financial measure referenced on this conference call and its most directly comparable GAAP measure, as well as the Company’s supplemental disclosure schedule are available in the Investor Relations section of our website.

Thank you, Ryan, and good morning to all of our shareholders and other participants. It's great to be with you on today's Ventas third quarter earnings call. I’m also delighted to be joined by members of our Ventas team to report on another solid quarter and to highlight our financial strength, our investment and growth, expanded pipeline and partnerships, and commitments and recognition to ESG. After Bob provides detailed insights into our financial results, we will be happy to answer your questions. Let me start with our results and full-year 2018 expectations. We're pleased to report normalized funds from operations of $0.99 per share this quarter, to improve our full-year normalized FFO expectation and to confirm our same-store cash NOI expectations for the year. Turning now to our enterprise and capital allocation strategy, we continue to enhance the long-term durability of Ventas by following our differentiated and deliberate approach of investing in our future growth with top tier customers and extending and expanding our key partnership. First, this quarter and immediately following, we invested approximately $100 million in attractive medical office buildings and outpatient facilities with two key partners, Ardent and Pacific Medical. We also announced our pending acquisition of a premier independent senior living community located in the appealing Battery Park neighborhood of downtown Manhattan, firmly establishing our leadership in the high-end senior living Manhattan market. Second, we extended our exclusive partnership with Pacific Medical for a further 10-year term. With almost 50 years of experience and outpacing facility development with key U.S. health systems, PMB's knowledge and expertise in development is extraordinary. The attractive MOB investments we made this quarter are an example of the benefits of our partnership with PMB. As is our trophy MOB development attached to Sutter’s new flagship hospitals in downtown San Francisco, which is on track to open in early 2019. We're also happy to report on the great performance of the lease-up and delivery of our university-based research and innovation centers. Our forward pipeline of excellent projects is robust and growing. In light of strong university demand, our leading market position and the positive risk-reward investment profile of this project, we intend to ramp up our investment activity in this space. The attractiveness of our university-based development model was recently brought to light at a summit hosted by Ventas and our partner Wexford. The buzz among attendees was palpable as we brought together leaders from universities and academic medical centers to share ideas and discuss innovative approaches to achieving their strategic goals. Our partner Wexford is a trusted advisor, catering to university needs and enjoys an incredible track record and reputation for conceiving, building, leasing and delivering powerful knowledge communities on university campuses that supercharge research and innovation. We are proud to partner with these leading universities and Wexford and to fund and own these knowledge communities for the long-term. In this business, I would like to note that one of our newest research and innovation buildings at Penn just opened. This project, which is on the precipice of already being 90% leased, further builds out our footprint in the attractive U City submarket. The success of this project follows on the heels of another recently owned project at WashU's Cortex Innovation District, which we expect to be 100% leased very shortly. Finally, Atria Senior Living also continues to distinguish itself. In addition to Atria's consistent operational excellence in our portfolio, it just linked to a $3 billion agreement with Related Companies to develop high-end urban senior living projects in major markets. We are effectively a general partner in these potential projects through our one-third ownership interest in Atria. With Atria's expertise and Related's world-class development capabilities, we are excited about the potential for this deal. I would like to turn to another area where we are making significant investments, specifically environmental, social and governance or ESG matters. We believe that our commitment to ESG principles underpins our long-term success. This year, we have been recognized repeatedly by leading organizations for our positive impact. Today, we are pleased to launch our inaugural corporate sustainability report showing our leadership and commitment to ESG policies and practices. I would like to give a special shout-out to our whole ESG team who work long and hard at improving our ESG profiles showcased in this excellent report. To my mind, sustainability starts with financial strength and resilient cash flows from a high-quality diverse portfolio. At Ventas, we are focused on both. This quarter, we continued our proactive and successful efforts to build financial strength and reduce risk through debt refinancing and maturity expansions, and our portfolio produced growing same-store cash NOI per of 1.3% as a result of its quality and diversification and product type in operating model. Looking at macro senior housing trends, we are very encouraged with the recently reported continued improvement in senior living starts, which are at a five-year low. Importantly, in primary markets, net absorption in assisted living in the third quarter of 2018 was the strongest third quarter for net demand on record. However, it has been widely documented that we expect to experience another year of elevated deliveries in 2019, as the industry works its way through the opening of new communities that were started in anticipation of the demographic demand that will accelerate in the coming years. If current trends continue, the current supply-demand equation will surely reverse in our favor, and that's why our senior housing assets continue to be so highly valued. Finally, we are always mindful that seniors live in our communities, patients are receiving healthcare in our facility, and tens of thousands of employees are serving in our properties. Thus, we were heartened when all seniors, patients, physicians and employees were reported safe despite the devastation of recent hurricanes Florence and Michael. We are thankful for the preparation and execution by our care providers, especially Ardent, whose team exercised extraordinary efforts in the face of the storm. We sincerely thank our operating partners for their preparedness and care. In sum, our cohesive team is confident in our enterprise and our continued success. This confidence is founded on the resiliency of our portfolio, our financial strength, our focus in increasing investment in our future growth, the quality of our partnerships and relationships, and accelerating demographic demand. I'm now happy to turn the call over to our CFO, Bob Probst.

Thank you, Debby, and congratulations on once again being named one of the top 100 best-performing CEOs in the world by Harvard Business Review. I'll begin with a review of our segment level performance which on a combined basis delivered portfolio same-store cash NOI growth of 1.3% in the third quarter. Let me start this segment discussion with SHOP and the key leading indicator for future SHOP performance, namely the new construction starts. We are very excited that the trend line of lower new construction starts in our trade areas continued in the third quarter. In fact, new store starts for our portfolio are at the lowest level observed in nearly five years. Annualized new starts for the first three quarters of 2018 represent just 1.7% of inventory in our trade areas, well below the roughly 2% near-term demand growth rate for our senior target market. In terms of current performance, third quarter SHOP NOI performed in line with our expectations with same-store cash NOI lower versus prior year by 2.7%. Occupancy was ahead of our expectations while rate growth moderated together delivering 1.2% revenue growth in the quarter. Occupancy in the third quarter reached 88%, a sequential improvement of 80 basis points, which is better than our normal seasonal trends and better than the industry overall as reported by NIC. On a year-over-year basis, the GAAP in SHOP occupancy also improved in the third quarter to 60 basis points below Q3 of 2017. Third quarter RevPAR growth moderated to 1.8% as new competition drove wider releasing spreads. Operating expenses grew 3.1% in the third quarter. Wage costs per hour continued to run at roughly 4%, partially offset by more efficient staffing levels and reduced indirect costs. At a market level, we're seeing strong NOI growth in Los Angeles and San Francisco meanwhile NOI is lower in markets expected by new competition such as Atlanta and Chicago. Our SHOP 2018 full-year same-store NOI guidance range remains unchanged at minus 1% to minus 3%. Though we will give formal guidance in February with the benefit of observing our year-end finish and early start to next year, we do expect elevated levels of new deliveries to continue in 2019. As a result, same-store SHOP NOI may evidence a similar year-over-year percentage decline in 2019 as in 2018. That said, with the positive trend of lower new starts together with accelerating demand, we do expect supply-demand fundamentals to offer powerful senior housing upside over time. Our valuable office reporting segment which comprises 26% of our portfolio, increased same-store cash NOI by a robust 3.5% in the third quarter. The office segment was led by a terrific result from our university-based life science portfolio, which grew same-store cash NOI by 12.4% in the third quarter as a result of strong lease-up activity. The total life science portfolio grew NOI by nearly 23% in the third quarter, fueled by exciting new projects at WashU, Duke and Penn. For the full year life science same-store pool in 2018, we continue to expect very robust same-store NOI growth in the range of 3% to 4%. Our reliable and valuable medical office business grew same-store NOI by 1.1% in the third quarter as a result of increases in place escalators approximately 3%, and best-in-class tenant retention of nearly 87%. Q3 operating expenses were 3% higher versus previous years due in part to timing of expenses. We continue to forecast a 1.5% to 2.5% full year NOI increase from our same-store medical office portfolio. Our combined office portfolio of life science and MOB assets, same-store cash NOI guidance range is also unchanged at 1.75% to 2.75% growth for the full year 2018. A quick note on the recent hurricanes is appropriate here as their principal impact was on two Ventas-owned MOBs and one Ardent-owned hospital in Panama City, Florida, which were significantly damaged. It is too early to determine the financial impacts of the hurricanes and therefore they are not included in our guidance. Moving onto our triple-net lease segment, which grew overall same-store cash NOI by 3% in the third quarter, in place lease escalations were the primary driver of this increase. In terms of rent coverage, trailing 12-month EBITDAR on coverage in our triple-net same-store seniors housing portfolio held steady at 1.2 times through Q2, our latest available reporting period. Notably, the asset sales announced as part of the Brookdale transaction are progressing. We expect the first tranche of these sales to occur in 2019. And our triple-net post-acute portfolio cash flow coverage held steady at 1.4 times. We continue to expect our LTAC to generate improving results in the second half of 2018 with operational strategies mitigating LTAC criteria. In health systems, Ardent coverage remains strong and steady at 2.9 times on the back of a solid second quarter. Momentum at Ardent continues, and the business is performing exceptionally well. We are holding our 2018 same-store NOI guidance range for the triple-net portfolio overall to grow between 2.5% and 3%. Finally, our book of loans extended by Ventas now stands at 4% of NOI, down from 7% at the start of 2018 due to repayments of profitable loans. We expect further reductions to our loan investment book with maturities on existing loans of roughly $300 million in the second half of 2019, with proceeds earmarked to fund our exciting life science development pipeline. Let's turn to our overall company third quarter financial results. Normalized FFO per share was $0.99 in the third quarter. This result was principally driven by two factors. First, the expected receipt of a $0.03 per share fee from Kindred's successful go-private transaction in July. And second, the dilutive net impact of $1.3 billion in dispositions and loan repayment proceeds received in the first half of the year and used to reduce debt. Stepping back since 2005, we have completed nearly $8 billion in value-creating capital recycling activity. Over that same time period, we've also been highly proactive in refinancing our debt maturities to extend duration and limit interest rate exposure. In 2018 alone, we have retired or refinanced $3.2 billion in debt. As a result, we have a strategic asset in our sector-leading financial strength and flexibility, evidenced from the third quarter fixed charge coverage was 4.6 times at quarter end, our net-debt-to-EBITDA ratio stood at 5.4 times, less than 12% of our total debt matures in the next three years, and we enjoyed liquidity of nearly $3 billion. Our aggressive efforts to reduce debt, extend and stagger our maturity profile, and significantly reduce medium-term refinancing risk has already paid off as we completed these efforts prior to the recent strong move upwards in rates. Let's close up the prepared remarks with our 2018 guidance for the Company. For 2018, for the third time this year, we are improving our full-year outlook for normalized FFO per fully diluted share, which we now forecast to range between $4.03 and $4.07. We have also confirmed our total and segment-level same-store cash NOI guidance for the full year 2018. The assumptions within this guidance range are substantially the same as our previous guidance in July, including the previously described $1.3 billion in capital recycling and related debt retirement. To close out, the Ventas team is cohesive, determined, and sharply focused on delivering against our financial commitments as we close out 2018. With that, I'll hand it back to the operator to open the line for questions.

I wanted to ask you just on your SHOP guidance for next year. So you pointed out, this is about 7% as in-place inventory under construction primary market. Do you have a sense of what percentage will open over the course of 2019, which you think it would like kind of similar to what in the 12 months trailing that you just mentioned? And just on that front, what are your operators telling you about wage increases going forward into next year their expectations around that?

This is Bob here. First of all just to clarify, in early indication for SHOP of 2019, I would say as opposed to formal guidance we'll give that in February. But there are things we now know standing here today which include deliveries having seen three quarters of the year, we have a pretty good view into delivery levels next year. Our view today is that they are roughly in line with where we are going to see 2018 pan out, so effectively equivalent on the deliveries line. I want to highlight that we expect performance in '19 to look quite similar to '18 in terms of year-over-year. Within that, the same things, I would highlight whether it would be price occupancy wages and the same thing will likely play out in '19 as we saw in '18. But again, we want to see the year-end, we want to see the rate letters and so on before we give formal guidance.

And then just with your relationship with Atria, will you be investing more capital into that relationship now given their announcement with Related or does that remain unchanged?

This is Debbie, Smedes. The deal with Related is a really exciting one and has the potential to be $3 billion of high-end urban senior living over time. We will have the opportunity, of course, to invest capital in effectively general partner position in those projects. If there are other opportunities to invest capital on the projects that we see as attractive, those opportunities could manifest for us as well.

On holiday, I just wanted to ask about that some of your peers have been talking about having been scared about converting some of the leases in triple-net through idea. Can you confirm if you've been and how you are thinking about your exposure? And also as part of those broader discussions, are you interested in acquiring any incremental holiday assets at this point in the cycle given maybe some available for sale?

So, I would like to put holiday into context for Ventas. It's about 3% of our NOI and as you know they did a deal with new senior that is public that has a conversion of assets from a lease to management fee, management structure with the payment of a large fee connected therewith. I think just like every other customer that we have, we would typically engage in conversation just like we did with Brookdale, just like we have done with Kindred over the years. We will be thoughtful and have a lot of ways of coming up with optimal changes should we believe they are appropriate.

And then just on the seniors housing on the regular side going back to that, can you comment on how newer renewal spreads are trending? And if there has been any expansion between those two, just looking at the sequential same-store numbers, it looked like RevPAR did come down despite occupancy ticking up. I'm not sure, if you could comment on what drove that specifically, I don’t know if that was equipped to Related or not?

Sure, I think you're referring to RevPAR which was 2.1% year-over-year in the second quarter, 1.8% in the third quarter, and that is driven by what I call releasing spreads or new leasing spreads. That's driven by new competition and so that's really what's driving that drift sequentially.

Bob, the quarterly run rate, as the run rate has bounced around this year and the guidance is currently implying that there's going to be another drop in the fourth quarter even if you exclude the Kindred fee this quarter. Can you kind of provide some color? And what is the correct run rate of FFO? And what's driving the drop between 4Q and 3Q?

We've been asked to repeat the questions. I understand there may be some static on the operators line, so which we apologize. So, I think in sum, the question is really to discuss the fourth quarter normalized FFO rate implied in our 2018 guidance.

Right, and I’d just frame that again, the third quarter FFO was $0.99 that included a $0.03 Kindred fee, which we were very explicit about last quarter. As of this call last quarter, that's in the third quarter when you adjust for that, that's $0.96. As you say, the implied midpoint when we look at the fourth quarter is approximately $0.94. What's going on there? The key as we think about this is the cumulative impact of the dispositions that we've seen over the last year, including the LHP repayment, including the Kindred dispositions of last year, effectively using those pre-proceeds to retire debt. That now really is complete, it was complete as of the end of the second quarter, and therefore we're seeing that run rate impacts really manifest in the fourth quarter.

And then last question for me. Debbie, I think in your prepared remarks that you highlighted that you expect the ramp-up investment within the Wexford platform. Can you quantify what that ramp-up means? It seems like the investments are churning between $300 million to $500 million. Will 2019 exceed that pace?

Well, as I mentioned, we're seeing a lot of good projects, the timing, they are large and they are high-quality projects with lead institution either existing customers or new universities. The timing is harder to predict with certainty, but I could see that substantially increasing.

I guess I just want to follow up on that last line of questioning. Bob, you've made the comment that most of the dispositions were sort of done by the end of the second quarter. So I would've thought that the negative impact would have been felt fully in the third quarter and therefore there wouldn’t be a further drop down in Q3 to Q4. So can you just or maybe help me understand where all of those really not done by the second quarter? Or is there something else that's kind of dragging down Q4?

Sure, Steve. The question is, why there is $0.96 to $0.94 third quarter to fourth quarter sequentially when adjusted for the Kindred fee. I would point to seasonality particularly in SHOP for that difference, that’s the key item the fourth quarter on a dollar basis is seasonally lowest at that stage, and that's really the biggest driver.

And that really has to do with seniors' behavior moving in and around the holidays and things like that. So, that’s a typical pattern.

So, if I could get back to the run rate question, I think Mike asked earlier. If you take $0.94 multiplied by 4 for your $3.76, consensus for next year $4. I know you are not giving guidance, but let me maybe frame the question this way. I know, you also said that you're ready to do some more on the life science side, but is this the time to be a buyer in senior housing as well before this inevitable turn starts to happen? I think everybody on this call is waiting for the next big thing from Ventas, and I'm wondering how you feel about that in context with what The Street is currently thinking about you guys for 2019.

Okay, so I'll try to repeat the question. I think it started with woo hoo, but the question is really around buying senior housing, if I could summarize, Rich. We are buying the trophy Battery Park asset because we do see strength there. The good news is our assets are very highly valued, so there continues to be a very strong bid in senior housing for the inevitable upturn. We are continuing to look at investment opportunities that we think will do something for Ventas strategically, accretively. We will be opportunistic, and if there is a next big thing, you will be the first to know.

And then, if I could just get a reconciliation and explanation. Bob, you reiterated the same-store guidance of 75 basis points to 1.5%, but it's on the back of the supplemental. The range in the more detailed breakout is lower 0.6% to 1.3%. What is the difference?

Rich, can you refer us again to the page, we didn’t hear you?

The difference, Rich, you'll see a line item there which is called fees; that's the Brookdale cash fee we received in the year. If you adjust for that item, it's included in the guidance, but we want to show it with and without that item and that's the difference.

It looks like there may be a little bit of an increase appetite for traditional MOBs. Any insight you could offer there? And maybe a little of the compare contrast on what is sold versus purchased since the end of last quarter?

So the question was really about our investments in outpatient medical office buildings. We have built a great business here which is at 19% and 20% of our portfolio. We like this business. It's been a very steady grower, very reliable. Now, I'm going to turn to people who really are new leader of the business and talk about what we like about the investments that we make.

Sure. Thanks Debbie. As Debbie said in her opening remarks, we've been very opportunistic and careful of our investments, but these five assets that we've bought and the one additional we felt our operating pieces very well. They are in great locations, primarily in California, Arizona and Texas. They are associated with great hospitals—Baylor, Dignity, and Tenet. They are essentially fully leased, and very importantly, they are associated with key partners of ours. One of them is associated with Ardent, and we have an existing MOB on the same campus, and five others are with PMB, our key development partner. Lastly, all these transactions were off market, so they were very attractively priced.

Pete, can you just expand on maybe the asset that was sold. I know it was—I think you had a 40% stake in that one, but the cap rate there was a bit higher relative to the going new cap rates on the acquisition. Can you talk about the quality or the caliber of that asset?

Yes, this is Debbie. Real quickly, Jordan, the question was about a sold asset, not with respect to a purchase option.

Lastly, one more quick one for Bob. Bob, can you just clarify that releasing spreads scout that you quoted. Does that include concessions or is that just straight face value to face value?

That's face rent face, value to face value, but it's actuals, so it's not like a street price against which are a significant discount, it's actuals. So, I think it's a pretty clean number.

On your early indication for SHOP next year, can you provide some color on some of the key components of this? In other words, may occupancy be higher offset by lower rate growth and high expenses?

I'll summarize the question. Could we have some more insight into your '19 early indications, as we look to the P&L? I would say the themes again very similar, if you just look at the third quarter P&L, I think it's a nice guide as we think about next year. Year-over-year occupancy has been improving albeit still a gap to prior year. Some moderating pricing, I expect we will still have nice price increases on the in-place annual rent letters that we get in the beginning of the year. But I do expect we will have some of the continued pressure through releasing spreads in the balance of the year. And then on the operating expense line, certainly, the tight labor market wage pressure will carry on as we think about next year. The operators have done a wonderful job this year as I have said, repeatedly, and the staffing models and how they have managed that cost. I do expect there's some runway to continue there as we think about next year, but again yes, we get that relative to the occupancy line also. So very thematically similar to the P&L as we look at the third quarter.

Bob, for this year's guidance, your CapEx I think the FAD is $145 million as a midpoint, but year-to-date, your FAD CapEx was $79 million. Are these two comparable figures?

A great question. The question is the ramp on FAD CapEx for the fourth quarter and is it achievable would be my interpretation of the question because it is a significant ramp. We typically do have seasonally in the fourth quarter a significant increase. That hill decline this year is a bit steeper. So all its equal perhaps, we have a little bit of core opportunity there. But seasonally, we do expect a significant increase in the fourth.

Yes, remember that, and then just to repeat, that’s a non-cash item.

I wanted to ask about the Battery Park acquisition. What sort of accretion opportunity do you see there? How do you expect the 5% cap rates to trend? And would you like additional scale in New York City?

So, the question is really about the pending Battery Park asset acquisition that is a deal that we're excited about. We've been in the Manhattan senior living market really since 2011, and we think that the pricing on this asset is well below replacement cost. We could foresee with the attractive demographics in New York and the unique positioning of this asset that we would have obviously just stabilized NOI growth going forward, and there are potential redevelopment and licensing opportunities over time that could provide additional opportunities for really great returns. So, we have multiple paths to success is what I would conclude. So, the question is really on cap rates and sitting across from John Cobb, our Chief Investment Officer. I would say that the amount of capital that is attracted to our states for all the reasons previously mentioned is continuing to keep valuation high and cap rates relatively in the same range that they have been for several years now. In terms of the way we underwrite assets, we obviously are always looking at our cost to capital and the growth rate of the asset and the reliability of the expected cash flows. As we look at the university-based life science investments, the stabilized yields that we would expect is frankly in the 6% to 8% or 8.5% range, depending on the profile of the asset. If you have a 100% pre-leased building with AA credit that is in a great location, that’s going to be on the lower end of that. If you have a 20% pre-leased building, that obviously would have a different expected to stabilize cap rate. So, that’s how we are looking at these opportunities, but the big takeaway is that at the end of the day, as we grow this part of our portfolio, it is increasing and improving the overall age, quality, and reliability of our portfolio with these highly-rated really elite institutions. So hope that's responsive.

Back to the MOB transactions, the cap rates shown on the four you acquired was 5.6. Does that include any fees you paid PMB or maybe you could talk about some of the economics around your relationship with PMB? And just how did you get that what I would consider above-market growth?

As Pete said, the question is about the yields on the acquired MOBs, and as Pete said, because these were assets that we acquired through existing relationships, we do think the pricing is very attractive. In terms of the NOI, to the extent that there is a management fee for the assets, that’s embedded in the cap rate already.

And just looking at your segment guidance, your overall NOI guidance changed, but SHOP looks a little bit lower and then the non-segment is higher. So what’s pushing that non-segment guidance higher?

The question is about our segment guidance which again we've reconfirmed from the July 27th guidance. Bob can speak specifically if there's anything further you'd like to add.

Yes, some small amount of acquisitions. The net impact to small amount of acquisitions that we've built in and is in non-same-store, so that's the difference.

I'll sort of switch it up just a little bit and just ask about how ESL is doing and whether that was the outlook for '19? I know its preliminary outlook includes ESL performance in that.

Yes, so ESL now, I guess 8 months old itself and maybe 10, continuing to roll out operational initiatives. I'd say Cai and team are deep into that right now, things like the staffing model and the operating model, and really bringing best practice there. So, they are on it. Certainly, we've seen some transition impact in terms of NOI that's always expected. But again, I think we've stabilized on that and we're looking forward to the impact of those initiatives as it is rolling out.

It's Michael Bilerman here with Smedes. I had a couple of questions. The first is just on senior housing supply. And you talked in your comments about how you are pleasantly surprised by the reduction in the growth rate, but at the same time you talked about seeing both Related and Atria launching $3 billion at the high-end senior housing. I guess what gives you confidence that the supply is not going to stop anytime soon, especially with that demographic range that will come out in the future?

Mike, you snuck in here. We thought this was Smedes. So, we'll open and close with the call with Citi I guess. The question is really about senior housing supply, and I think the key data points are around new starts which are very encouraging in the sense that they are at a five-year low. As we were able to predict years ago that supply would be coming at this moment, I think based on the data that we now see, one could expect to predict a big upside as we look at the data sitting here today in the coming years. So, it is true that there continues to be interest in the assets and interest in developing as we talked about with the Related high-end urban developments, and that continues. But if these trends continue that we are seeing now with starts, then we feel very optimistic and upbeat about the supply-demand fundamentals being very much in our favor.

Just a couple of others. Bob just on the loan portfolio running at about $800 million. Is there any maturities that we should be aware or prepayments that you are aware of as we think about 2019?

Yes, Michael, we have about $300 million of loans maturing in 2019 into the back half of 2019. That is all that matures next year. So that today we have 4% of NOI implication. Obviously, this would mean a lower percentage of our loan book in our as a percent of NOI next year.

As we think about when you do provide guidance, your assumption around that would be that that gets repaid and not replenished in that capital just goes to repay debt or you would make an assumption that you will find other loans to invest in?

Yes, right now where you are marking that, Michael, for reinvestment into the life science development pipeline.

And then actually on the pipelines for redevelopment and development standpoint, your gross pipeline right now stands at about $1,730,000,000 your share, and you recently completed about $200 million of development and redevelopment. How should we think about the tailwinds that those investments give you as we go through '19? Certainly not all the assets are going to stabilize by then, but a number of them are going to start producing income in '19. How should we think about the yield on that $1 billion of in-process and completed development at your share?

So, you are right on, Michael, we will start to see, starting in '19, but really accelerate from there. The income benefit of these developments in particular in life science, some of which have recently opened, but we mentioned for example, WashU and Penn to name a few. Those we really start to pick up steam in the back half of '19 and into '20. So, certainly a tailwind as we come out in February with the puts and takes. That’s certainly on the good side to look forward to.