Good day and welcome to the Healthcare Trust of America Q1 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mary Jensen, Vice President of Capital Markets. Please go ahead.

Good morning and thank you for joining us today for Healthcare Trust of America's First Quarter Earnings Conference Call. Joining me on the call today are Robert Milligan, our Chief Financial Officer and Amanda Houghton, our Executive Vice President of Asset Management. HTA's first quarter results of 2017 has been a continuation of our strong 2016 results and a continued focus on executing on our 2017 business plan. From an overall perspective, our financial performance this quarter resulted in one strong same-store cash NOI growth of 3.2%. This included a 2.2% increase in base revenue, tenant retention of 80% and a continued emphasis on maintaining and raising annual rental escalators. Two, continued investments in our key gateway markets of $35 million and an average cap rate slightly over 6%. In addition, we have another $150 million in MOBs under signed PFA [ph] located on our key markets that we expect will close by the middle of the second quarter. Three, normalized FFO of $0.41 per share, up 3% compared to the first quarter of last year. Four, a quarter-ending investment great balance sheet with leverage below 30%; and finally, after quarter-end, we raised $62 million on our ATM. These results show that our team is executing on our long term business plan, focused on key markets, critical core locations, critical mass in markets and an asset management platform that continues to drive both cost-savings and margin expansion. The medical office market overall continues to perform well with steady and consistent growth. Cap rate for MOBs continue to range from 5% to 7% depending on size, quality of the assets, market and location. Our investment philosophy remains the same. We are focused on 15-20 key markets that we believe will experience significant growth that are attractively positioned to the result of…

Thanks, Scott. Our first quarter continues to demonstrate the consistency of the MOB sector in our company performance. Solid same-store growth, margin expansion, investments in key markets and a strong balance sheet. From an earnings perspective, first quarter normalized FFO per diluted share was $0.41, an increase of 3% per diluted share compared to the first quarter 2016. Overall, normalized FFO increased over 15% to $60 million as compared to the prior year. The increase in year-over-year normalized FFO was primarily driven by our same-store cash NOI growth of 3.2% and NOI derived from the strong investment activity over the last year and a reduction in year-over-year leverage. Our normalized funds available for distribution increased 9% to $52.9 million compared to the prior year. In the first quarter which includes all properties acquired through the fourth quarter of 2015, our NOI growth was driven by a 2.2% increase in base revenue, which falls entirely to the bottom line. Our expenses for the comparative period actually increased slightly, based on higher utility spending. However, our overall margins expanded by 40 basis points as we were able to perform additional services using our internal platform that we continue to roll out and utilize especially as we consolidate management on our key markets. This is a key strength of our platform and one that really drives our investment philosophy within our key markets. Our leasing activity remains high. In the period, we entered into over 770,000 square feet of new and renewal leases. This totals almost 4% of our portfolio and is almost 3x higher than the first quarter of 2016. Overall, our lease rollovers increasing in 2017 from a previous run rate of 6% to 8% per year to 13% for 2017 including month-to-month leases. However, the occupancy in our same-store portfolio…

Thank you, Robert. We'll turn it over to the operator to line up questions.

[Operator Instructions] At this time, we will pause momentarily to assembly our roster and I will like to hand the call back over to Robert Milligan.

Thank you. Just to be clear, during the course of the call, we will be making forward-looking statements are based on the current beliefs of management and information currently available to us and our actual results will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they're not guarantees of future performance. Therefore, our actual future results could materially differ from our current expectations. For detailed description on some potential risks, please refer to our SEC filings which can be found in the Investor Relations section of our website. With that, we're now happy to take questions.

Okay. Our first question comes from Karin Ford from MUFG. Please go ahead.

Hi. Thank you. Good morning out there. Robert, I think you said in your remarks that you expect occupancy to potentially push higher later on this year based on your leasing pipeline. Can you just elaborate on that a little bit and just talk about the leasing pipeline you have today and where you think occupancy could head by the end of the year?

Well, I think as we've talked about things, I think we've had a very strong activity certainly as we start out the year. The activity in the leasing that we close in the first quarter were certainly about 3x as high as what we did in the first quarter of last year. As we continue to gain traction specifically in the Dallas market and get some of the prospects that we currently have out there closed, we think we could certainly see that get back up to the 92% range and I think after that, it's where we see continued upside from there.

And with the momentum you had so far this year, do you think there's an opportunity potentially to push rents harder in the portfolio later on in the year?

This is Scott. I think that that's the blend that we're working on. We talked last quarter on our call that we talk internally about moving rates, spreads, reducing concessions which we've done over the last 18 months very successfully. But I think that you're seeing with the activity, with the momentum and the sector as a whole, I think there will be opportunities for landlords such as us in key markets, key locations to move spreads and to really start seeing perhaps a momentum that we haven't seen in the last couple of years.

Great. And then just a last question for me. You mentioned in the press release that you're expecting to invest in an expansion in your project at New Haven. Can you give us a detail on that? How big the investment would be? What your expected returns are? And since development is a little bit of a new area for you guys, how you're approaching it? What role you're going to have on the development side?

Yes. Really all we did is really in the heart for New Haven marketplace. We have an expansion with the existing developer that we actually bought the properties from. These were frankly expansions that were already under way when we closed the deal last April. So it's pretty minor I think they're developing, higher than what we're acquiring at the six and-a-half range and they certainly have another 50 to 100 basis points on it in that market. Overall, just a small expansion really on an existing property that we already own there.

Okay. Thanks very much.

Our next question comes from Aaron Wolf and Chad Vanacore from Stifel. Please go ahead.

Hey, all, good afternoon. How are you doing?

Good.

Quick question on the same store tenant retention. Were there any primary factors that contributed to the dip from last quarter?

Well, I think overall, we've historically run somewhere between 80% to 85% retention for the overall portfolio and I think that certainly was the case here again this quarter. So I think there's naturally going to be some volatility within that number from quarter to quarter. Overall for the year, we expect 80% to 85% retention is going to be the norm.

I think the big focus for us, and this is kind of the place upon the question that we just got from Karen, is that we're actively - and I would say - aggressively looking at our leasing transactions from a return perspective based upon the amount of capital we're putting in, the amount of capital that we're requesting that the tenants put in which is increasing, certainly that we've seen over the last 12 or 18 months. And so we're trying to make sure that we maximize the potential of the space they were leasing. Robert mentioned that we think 92%, 93% is achievable over the next 12, 18 months. I think it's very achievable, but I think again, the key that you want to look at is how are you maximizing your dollars that you're putting into to incentivize or to retain tenants? We put a big emphasis on that and I think we've talked about that in the past about the amount of capital that's put in by each of the peers and the marketplace. I think we perform extremely well to that comparison.

Okay, thank you. That's helpful. In terms of the Baylor [ph] Medical office building dispo, can you provide any color on what type of cap rate you received on that? And are there any more planned dispositions in 2017?

That particular asset was a very small asset located outside of...

Outside of Dallas.

Dallas and it came with a larger portfolio. It was bought early in our history back in 2008 or 2009. As we've talked about it, we'll move through assets as we see the potential A, that we can't acquire any other assets; or B, they don't fit into a high energy core critical location that we use our asset management with in that particular transaction which is an example of that.

Okay, great. Thank you for taking my questions.

[Operator Instructions] Our next question comes from Michael Knott from Green Street Advisors. Please go ahead.

Good morning. Scott, just curious if you can give us a little more color on how you're thinking about capital allocation today? My sense is that you are maybe a little bit cautious setting into the year and you're sitting now with better cost-to-capital, I would say than maybe at that time. So just curious, are you thinking about that? Particularly with that due portfolio sitting out there?

Well, I think that there's a little more certainty. We're seeing a little more certainty knock on wood here given interest rates. The 10-year has pulled back certainly. REITS [ph] in general have done better. I think our capital allocation really is as it all it has been - make sure that it's accreted, make sure that it's in our critical markets, make sure that our asset management program can add the accretion to it once we bring it in-house. We put a big focus this year and you're going to see the results - we're seeing the results - of moving services in our platform to tenants. Instead of going to third parties or instead of employing third parties, we're the ones providing the service and then getting the benefit of that transaction with our NOI and with our margin. I think that's really what we're looking at, continue to grow our key markets, our gateway cities and get critical mass, that all drops to the bottom line.

Okay. And I assume you're looking at the Duke [ph] portfolio, but that's probably not something that you would ultimately be sort of in the funnel running for, I would imagine?

I think a lot of people are looking at it and I really don't have much to add from what is out there in the marketplace.

Okay. That's fair and then just the last question for me if I could on the NOI growth for the quarter, the 3.2%. Just curious, as you were giving your 2% to 3% guidance at the beginning of the year for 2017, just curious if you're off to a better start than what you had sort of anticipated at that point?

Well, I think as we looked at this year and as we're considering the way the performance would shake out, we're certainly focused on the fact that leasing rollover schedule is increasing. We've been on a nice run rate of 6% to 8% per year for each of the last three years and that's going up to 12%, 13% including month-to-month leases in this year. Certainly, there is going to be some volatility in there. I think we're pleased with the way the first quarter played out. I think the tenant retention of 80% was strong. The amount of leasing that we had was strong and I think what's really interesting is the way that as we've gotten our portfolio in place with scale in markets, I think the profitability to some extent is probably outperformed thus far in the year.

Okay, thanks a lot.

Our next question comes from Austin Kato [ph] from Jefferies. Please go ahead.

Hey, guys, how are you doing?

Good morning.

I was just curious, thinking about the acquisition outlook for the year, would it be safe to say to the year [indiscernible] historical amounts of $200 million to $300 million, or is it possible that we could see a year like 2016 where you guys are close to the $600 million to $700 million?

The first quarter, we talked about the fact that the activity in the market has slowed up a little bit. There is more activity right now. Certainly seeing an opportunity of this. We're looking at them all. We want to make sure that we go back to our criteria. We're very disciplined and we intend to continue to be disciplined. I think that this year, it's looking in the opportunities that I think are going to come maybe consistent, maybe not as much as last year. But I think there will be opportunities if one finds the right asset, manages their balance sheet correctly and it's accreted to what they're trying to accomplish.

Great. That's all for me. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Chairman, Scott Peters for closing remarks.

Well, thank you, everybody, for joining us on our conference call. Any other follow-up questions, please don't hesitate to give us a call back. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.