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Healthcare Trust of America Inc (HTA)
Q4Â 2018 Earnings Conference Call
Feb. 15, 2019, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good morning, and welcome to the Healthcare Trust of America Fourth Quarter 2018 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 Caroline Chiodo, Senior Vice President of Finance. Please go ahead.
Caroline Chiodo -- Senior Vice President, Finance
Thank you and welcome to Healthcare Trust of America's Fourth Quarter 2018 Earnings Call. We filed our earnings release and our financial supplement yesterday after the close. These documents can be found in the Investor Relations section of our website or with the SEC.
Please note, this call is being webcast and will be available for replay for the next 90 days. We will be happy to take your questions at the conclusion of our prepared remarks. During the course of the call, we will make forward-looking statements. These forward-looking statements are based on current beliefs of management and information currently available to us.
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 are not guarantees of future performance.
Therefore, our actual future results will materially differ from our current expectations. For a detailed description on potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website.
I will now turn the call over to Scott Peters, Chairman and CEO of Healthcare Trust of America. Scott?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Thank you, and good morning, and thank you for joining us today for Healthcare Trust of America's fourth quarter and full-year 2018 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 begins 2019 as the largest dedicated owner and operator of medical office buildings, with a balance sheet, portfolio, leasing and property management platform and development platform that management believes is extremely well positioned to deliver growth and shareholder returns over the next three to five years.
Our focused, disciplined and strategic investment strategy has resulted in HTA becoming the largest best-in-class owner of medical office buildings in the US. HTA has accumulated its irreplaceable portfolio located in key high-growth markets over the last 10 years, while also delivering 5% annual FFO growth, since 2012 while at the same time maintaining a conservative, disciplined investment-grade balance sheet.
Our full-service leasing and property management platform has delivered same-store cash NOI growth of approximately 3% annually since 2013, while also focusing on efficient annual capital utilization approximately 13% of cash NOI.
We have talked for years about our view of the overwhelming trends in healthcare that reflects a move to an integrated outpatient experience. This delivery will take place in three settings; one, on-campus, where we are the largest owner of MOBs in the country; two, off-campus in community locations where all leading healthcare providers are focusing; and three, in academic university healthcare system locations where academic and healthcare combinations are critical. Our portfolio composition reflects these trends and the critical nature of this real estate, where the best assets in each location demonstrate high levels of tenant retention and rental growth opportunities.
As such a focus on one or two of these locations without all three removes the opportunities for accretive external growth and also importantly the alignment with the future of healthcare and healthcare system requirements in the US. As we have started to see recently this view is shared by both public and private markets, where cap rates for both on-campus and off-campus assets have compressed over the last five years.
Our portfolio and investment strategy has reflected these key trends in HTA's targeted key fast-growing markets where we have presently gained scale in 15 markets with over 500,000 square feet and eight markets with approximately 1 million square feet or more. Our future strategy is the same; continue to add to our scale in these and selected markets allowing HTA to utilize our asset management platform, which generates long-term value for our shareholders.
To add to our ability to execute our investment strategy, our platform now includes an integrated development team that has completed over 300,000 square feet of development, since we acquired it in 2017 and has an additional 175,000 square feet under development today. We certainly feel that this is just the beginning of the capacity and opportunities that will present themselves to HTA in the future.
The recent ebbs and flows in the public market has allowed HTA to demonstrate our disciplined capital allocation and capital market execution and strategy, focusing on patient, pragmatic decision-making reflecting a long-term disciplined accretive growth strategy. In 2018, we focused on recycling the assets and ended the year with a fortress balance sheet with 31% leverage and over $1.1 billion of liquidity.
We maximized our 2009 $163 million investment in Greenville, South Carolina with a $285 million disposition resulting in a 14% unlevered IRR return for shareholders. This positions us in 2019 to aggressively pursue growth as we find investment opportunities that are accretive to our long-term enterprise value and annual earnings.
Turning to our operational performance in 2018, and our same-store portfolio, we achieved strong results. Same-store growth of 2.5% for the year and 2.7% for the fourth quarter, driven by strong 2.6% rental revenue growth, solid leasing performance with a total leasing of over 2.8 million square feet for the year and 625,000 square feet in quarter four; including a 139,000 square feet of new leasing.
Our cash releasing spreads from renewals for the year increased to 2.6% for the year and accelerated to over 4.4% in quarter four. Strategically in 2018, we focused on specific objectives; including internal growth, integration of assets and expanding healthcare system and tenant relationships. Looking at the Duke acquisition in 2017, our platform has achieved over $7 million in annual synergies, and most importantly for shareholders the investment yield has grown to 5.4%, 40 basis points above the acquisition yield. This high-quality strategically located portfolio is performing as we expected when we underwrote the asset and the investment and we believe the assets will continue to outperform in future years, compared to many of the portfolios that have recently traded.
From a capital allocation perspective, we remain very active and disciplined focused on identifying opportunities that meet our acquisition criteria of; one, located within our key market -- gateway markets; two, quality real estate that will generate same-store growth of 2% to 3% consistently over the long term; and three being accretive to our cost of capital.
In 2018, we saw a number of large deals come to market. In total, we underwrote over $4 billion of acquisition opportunities. However very few of these transactions met our acquisition underwriting criteria. Of the 25% or so that did fit our criteria we were outbid by aggressive capital that is trying to get into the medical office space or diversify away from other riskier healthcare asset classes. This occurred despite the rise in short and long-term interest rates.
Rather than chase these deals down we took advantage of this situation and sold over 300 million of non-core lower growth assets at very accretive and attractive pricing and used the proceeds to repay debt, increase liquidity and repurchase our shares.
As we look at 2019, we will for the first time provide corporate earnings guidance. Although we have a very straightforward business model, we have had a number of new investors and analysts look at our Company and the MOB space and we believe providing formal guidance will enable them to see how our business model translates to earnings, especially given the recent dispositions and accounting rule changes that have recently occurred.
For 2019, we expect our normalized FFO per share before accounting rule changes to range between $1.64 to $1.69, a 3% increase, compared to 2018 at the midpoint. Including the anticipated $0.02 per share impact from the accounting rule changes, we expect our reported normalized FFO per share to range from $1.62 to $1.67 per share with the primary movement resulting from the timing and amounts of expected acquisitions and dispositions activity. Robert will give some additional color in his comments.
Finally, we are intently focused on ensuring that our same-store growth and capital allocation decisions translate to bottom line growth for investors in 2019 and in future years, gaining momentum into the back half of 2019 and into early 2020. In addition, we look to supplement our earnings platform with the consistent development opportunities that will start being delivered in 12 to 18 months at accretive yields.
I will now turn the call over to Amanda.
Amanda Houghton -- Executive Vice President-Asset Management
Thanks, Scott. In 2018, our team remained focused on delivering high-quality operating and leasing results, while integrating our 2017 acquisitions onto our platform and capturing the efficiencies and synergies anticipated as part of these acquisitions. Having now demonstrated the ability of our platform to bring $7 million to the bottom line in synergies, the Duke Acquisition is a great representation of the significance of both our platform and our key market concentration and the value they jointly bring to shareholders.
Our asset management platform, which consists of 59 property managers, 106 building engineers, 18 leasing professionals and nine construction managers across 23 offices in the United States is the by-product of 10 years of deliberate efforts, planning and training. Our team is focused solely on the management leasing and maintenance of the largest portfolio of owned medical office buildings in the country with 15 markets over 500,000 square feet. This platform and our key market concentration would be extremely difficult to replace in today's environment.
When we started the initiative to in-house management and leasing services in 2009, we did so with an intention of establishing direct relationships with our tenants to enable us to better serve them as landlord. This immediately led to improved leasing and retention versus years past under third-party management.
As we gained scale, we quickly recognized the expense savings opportunities that our size and market concentration provided us and have continued to capitalize upon that competitive advantage. It is this focused concentration in key markets that allows our platform to maximize value as it is in these larger markets where we are able to better allocate staffing, expand those services we're able to in-house and more efficiently bundle services for discounted pricing. The combination of our specially trained in-house asset management team along with our key market concentration puts HTA in a position to uniquely create long-term value for our shareholders and tenants alike.
To further demonstrate the quantitative impact of the platform, it's worth noting that over the past five years, or 20 reporting quarters we have generated average quarterly same-store operating expense savings of nearly 1.4%, while our peer group has generated an average operating expense increase of 1.3%. Our ability to operate efficiently without sacrificing service or quality is what we believe sets us apart in our market.
Turning to our Q4 and year-end results. We had a very good year in which our same-store leased rate increased 20 basis points year-over-year ending the year at 92.2% leased. And our same-store occupancy increased 60 basis points, ending the year at 91.6% occupied. For the year we signed over 2.8 million square feet of leases or over 12% of our total GLA. This included over 700,000 square feet of new leasing and 2.1 million square feet of renewals.
During 2018, our total tenant retention was 81%, while our releasing spreads averaged 2.6%. We saw this positive releasing accelerate in the back half of 2018 increasing to 4.4% in Q4 and included a mix of large and smaller renewals. Average annual escalators across our leases signed in the period were 3% and 2.6% for the year. This continued blending efforts of our in-place escalators on the 92% of our portfolio that is leased is the key to our continued and consistently strong rent growth. Our TIs remained steady at $1.26 per year of term on renewals and under $2 per year of term overall.
In addition, during 2018 we demonstrated our ability to successfully transition assets that have undergone hospital sales or changes. The most extreme example was at our Forest Park Dallas campus. We came into 2018 with approximately 100,000 square feet of vacant space and buildings that were approximately 50% occupied. During the year we signed over 870,000 square feet of new leases and ended the year at 86% leased. We expect to fill this campus in the first half of 2019 with rates that are 20% above our portfolio average.
As we look to 2019 expiration, we have over 12.5% of our leased square feet expiring including month-to-month tenants and expect our current leasing momentum to continue. Across these leases, we expect to achieve 75% to 85% retention with pre-leasing spreads between 2% and 4% and annual escalators of approximately 3%.
On the expense front, we continue to show the benefit of our economies of scale and ability to perform additional services using our internal engineering platform. Although our same-store expenses increased these were mostly -- entirely driven by increase in property taxes, primarily in Texas. Outside of this, we were able to hold expenses relatively flat despite inflationary pressures.
I will now turn the call over to Robert to discuss financials.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Thanks, Amanda. From a financial perspective, we have continued to execute our strategic plan, while growing our financial performance and maintaining our balance sheet positioning. Despite our significant growth and portfolio improvement over the last five years, we have continued to execute on our existing portfolio, allocate capital in a manner that has maintained our strong balance sheet and importantly grew earnings by more than 5% per annum.
In 2018, we operated effectively; first, growing our full-year same-store cash NOI by 2.5% and fourth quarter to 2.7%, primarily as a result of base revenue growth; and second driving improvements in our 2017 acquisitions growing our effective yield by 40 basis points to 5.4%. That is a terrific investment yield in today's acquisition environment, especially given the strong portfolio of quality and growth embedded in these acquisitions.
We also took steps to lower our leverage and increase liquidity selling over $300 million of non-core assets and completing the $70 million in equity we raised in late 2017 on a forward basis. We did this at pricing that allows them to be accretive when redeployed into other investments. We utilized the majority of this capital to repay over $240 million of mortgage debt allowing us to end the year with leverage of 5.4 times net debt-to-EBITDA and maintain over $125 million of cash on the balance sheet, which we expect to deploy in the first half of 2019.
Given the capital markets throughout the year, we stayed disciplined from an acquisition perspective. However, the equity market volatility did give us an opportunity to repurchase $67 million of our own shares at an implied cap of around 6%, well above our net asset value and where inferior assets are trading. While we don't intend to be large wholesale buyers of our own stock, we won't hesitate to make smaller repurchases, when we can do so on an accretive and leverage-neutral basis, utilizing proceeds from non-core asset sales.
Our normalized FFO per share for the quarter was $0.40 and was $1.62 for the year, flat to the prior year, but an increase of over 26% from the levels where we started our strategic plan five years ago. As we pivot toward deploying capital again in 2019, we expect our performance to again fall to the bottom line, which has been a staple (ph) of our performance since we came public in 2012.
Our recurring capital expenditures during the year were $61 million or approximately 13% of NOI. We have started leasing up some former leased shelf space, which has caused non-recurring capital to increase slightly. However these are positive income-producing investments, which lead to long-term recurring income.
Looking to 2019, our expectations are for us to grow our same-store cash NOI by 2% to 3% for the year and slightly lower than that on a GAAP basis given the impact of straight-line rent. We expect our G&A to remain relatively flat of between $36 million and $37 million before the impact of the accounting rule change related to lease accounting ASC 842. As we have discussed previously, we currently do the majority of our leasing in-house and capitalize the majority of these costs.
For 2018, we have capitalized approximately $5 million or between $1 million and $2 million per quarter. This compares to the more than $12 million we would have paid in third-party commissions on these leases that were completed by our team at a conservative of 3% rate on their gross lease value. Nonetheless those expenses will hit the income statement in 2019 and will impact our earnings by approximately $4 million to $5 million for the year or approximately $0.02 overall.
From a capital allocation perspective, we expect to complete $250 million of acquisitions at a 5.5% average yield primarily the deployment of our year-ending cash, while also disposing of $75 million at a 6% yield. Given these expectations our formal guidance for 2019 is $1.62 to $1.67 per share with momentum in earnings building in the second half of the year.
Over the next three to five years, we believe we have a steady and dependable earnings model of between 4% to 6%, driven by our same-store growth of 2% to 3%, which translates to 3% to 4% earnings growth given operating leverage. The potential for external accretive growth through both acquisitions and development should allow for the remaining growth all holding leverage constant. This is consistent with what we have produced over the last five years.
I would now turn it back over to Scott.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Thank you, Robert, and we'll turn it over to the operator to get questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Daniel Bernstein of Capital One. Please go ahead.
Daniel Bernstein -- Capital One -- Analyst
Good morning. Actually I wanted to ask you guys a little bit about the leasing expirations for 2019. When I was looking at the supplement, it looked like the -- excluding the month-to-month the expirations went down from 11.1% to 10. 4% of rents, actually GLA, sorry. So were some of the rents -- the leases pushed up to early renewals into 2018? And maybe how should I think about that affecting CapEx spending in '19 versus '18? Can you hear me?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
All right. Can you hear us now? Is that better?
Daniel Bernstein -- Capital One -- Analyst
I can hear you. But did you guys hear my question?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Yes, we did, we did.
Daniel Bernstein -- Capital One -- Analyst
You do hear, OK.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
We did. So we'll start with the overall. We've been seeing numerous tenants, larger tenants also physician groups coming to us with lease expirations that are in the next 24 months, coming and talking to us about extensions, talking about putting in TI dollars or renovating some space. So I think our expiration schedule, as it -- as we see it right now will actually change somewhat in the first six months of this year. I think we'll see expirations over the next two years that we anticipated or are scheduled to renew probably go down, because we are going to -- we are having those discussions right now. And I think we'll get to some place that gets those completed in the next six months. Amanda -- Robert can answer the question about capital.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yeah, I think from a capital perspective, as we look at some of the earlier renewals as we lease space and extend it, that certainly brings in additional TIs, but I think our anticipation still is holding it in that 10% to 15% kind of a little bit of a broad range on a quarterly basis as a percentage of cash NOI averaging out to the 12%, 13% overall.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
We've also seen -- just to touch on that, we've also seen a -- over the last, I would say three years, but certainly over the last 12 months to 18 months, we've seen far more tenants putting their own dollars in. We've tried to be very consistent with our application of CapEx. We've always felt that we want tenants to put dollars in. We're not trying to boost any of our rents by putting TI -- additional TIs in, so we try to keep to that 13% or as Robert said 10% to 15%, but I think the middle is probably much closer to where we're going to be. But we've seen some larger tenants with larger leases come forth with some additional TI dollars when they wanted the things that are above that sort of internal guidance that we put for ourselves.
Daniel Bernstein -- Capital One -- Analyst
And I imagine also the -- that range depends upon the length of the lease. In 4Q it looks like your lease length went up to like 7.5 years on renewals. Was there anything specifically unique to the renewals? Or is there some kind of trend that maybe larger tenants, hospital tenants are looking for longer leases? Just trying to again understand the trend there.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Yeah, I think we've seen more the larger leases and leases we're discussing now that are out there, they are 10-year. It's probably up from five or seven, but we're seeing more 10, not more than that. And so you might see that move out a little bit, but that also gives us the ability to get some of these rent spreads that you're seeing. We picked up in the fourth quarter and we're continuing to see good activity and the ability to move those rent spreads.
Daniel Bernstein -- Capital One -- Analyst
Okay. And then just one more question for me and I'll get back in the queue. It's actually just question for Amanda. You've brought a lot of management in-house. You controlled the expenses. So I'm trying to understand what's maybe the next iteration of your operational platforms, investments in technology, more automation, energy something like that. Just trying to understand what that next phase of operational improvement might be.
Amanda Houghton -- Executive Vice President-Asset Management
Sure. So I think as we're looking into 2019 and we've really started a lot of this in 2018. We see a lot of opportunity with increased efficiencies in our buildings and in particular energy spend. So we brought this up on the last call, but we believe that there is significant savings opportunity as we're looking in our building and bundling services. We brought on a head of facilities who actually is solely focused on evaluating control systems and making them more efficient within the building. So we think that as we continue to kind of go through our portfolio there's going to be additional significant savings there.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
We actually embarked upon a sustainability program. We've allocated certain assets and prioritized them and reaching out to tenants and giving them an idea of what that means. It means better efficiency within the building, it means energy savings, it means -- but there's also some components to the fact that in some cases certain tenants are getting energy for free so to speak on the spaces that should actually be reimbursed and not passed on to other tenants. So that's part of the program that we're embarking on.
But to answer your question about what can we improve, we also put together a internal -- we handle all of, most all of our calls from our tenants. So we have a tenant connect service where we have five folks, six folks, who handle all our internal calls, push them out to our engineers, push them out to our property managers and we're putting in a system to be able to analyze the efficiency, the timing, how we go about utilizing services and what the cost of those services are. And so we're continuing to, what I think is, put together a platform that is -- that we hope to be state-of-the-art from a perspective of technology, efficiency, generating revenue for shareholders, but also passing along and generating cost savings for tenants.
Daniel Bernstein -- Capital One -- Analyst
Okay, appreciate all the color. And I'll hop off and get back in the queue.
Operator
And our next question comes from Karin Ford of MUSG Securities. Please go ahead.
Karin Ford -- MUFG Securities -- Analyst
Hi, good morning. Thanks for the detail that you provided about what the forecast is baked into it in terms of spreads and retention this year. Can you just give us any other details on the assumptions underlying, the 2% to 3% same-store NOI growth in terms of what you're expecting for occupancy and expenses et cetera?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think from a same-store growth, there'll be quarterly fluctuations as you'd expect. But our anticipation is for occupancy to pick up slightly throughout the year, I think as we're looking at our overall targets, our expectation would be 25 basis points, 50 basis points by year-end, as we move through a multi-year progression to get a point or so of occupancy growth. So it's mostly driven by annual escalators with some additional releasing spreads and then probably another 20 basis points of margin expansion really as we work on some of the bundling tactics working on the energy savings, but having some of that offset by increases in property taxes that we're seeing in certain jurisdictions.
Karin Ford -- MUFG Securities -- Analyst
That's helpful. Do you anticipate any new development starts this year?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
We do. We're very fortunate right now that we've been engaging with and having conversations with several healthcare systems that are very interested in commencing some development. We'll announce those, I think certainly as we get forward to the end of the first quarter earnings call. We've really integrated this development platform now and feel really good about the ability to get in front of healthcare systems; get in front of larger physician groups, and be able to bring the expertise and the capital that's needed to the equation. So, yeah, it's -- we're very excited about that part of the platform that we have.
Karin Ford -- MUFG Securities -- Analyst
Great. And then just last one. What do you think is driving the acceleration in rent spreads that you saw this year? Can you talk about any changes you're seeing in tenant demand is it in specific markets, specific sub-sector asset classes? Did you change how your leasing people are compensated at all?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Well, I think one of the -- the leasing spreads we've picked up and we've pushed leasing spreads, but I think it's very important to note that we've kept our capital consistent to where it's been over the last three or four years. So we're not pushing rent spreads at the cost of capital utilization or capital allocation, which is important. We've got -- we've got the size now in the market, we've got 500,000 square feet in 15 markets, we're able to get some synergies, we've been able to cross market some space to folks that already have a space with us. And so we see a better marketplace frankly.
Amanda Houghton -- Executive Vice President-Asset Management
And in addition to that I think that with some of the releasing spreads you're starting to see the impact of the expect savings take place and manifest within the actual rental rate. So when a tenant is looking at a rent they're looking at their all-in cost structure, and if we've been able to save expenses over the past several years, I can increase that rent and effectively they'll be paying a very similar amount to what they were paying in the past. So the two really do go hand-in-hand and that's why we've continued to focus on the expense side. And I think you're starting to see the benefit of that in rent as we get that rollover.
Karin Ford -- MUFG Securities -- Analyst
Thank you very much.
Operator
Our next question comes from Tayo Okusanya of Jefferies. Please go ahead.
Tayo Okusanya -- Jefferies -- Analyst
Hi, yes. Good morning, everyone. Just following up on Karin's question about developments, Scott, I know you haven't put out any formal guidance on this, but from your presentation you talk about potentially starting about $75 million worth of development? Could you just, kind of, talk a little bit about that?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes. So most of what we talked about from a start perspective is our projects that we've already announced, primarily the two projects of -- our WakeMed project in Cary, North Carolina, where we're putting up 125,000 square feet new MOB there, as well as our Coral Reef project down in Miami MSA. So I think those are the two projects where we expect to break ground on those this year. But I think our anticipation is certainly that we'll announce new development wins throughout the year, and I think that's where, I think, we are excited to see that pipeline build.
Tayo Okusanya -- Jefferies -- Analyst
Got you. Okay. That's helpful. And then thank you very much for providing guidance. I think that's helpful to everyone. From an acquisition's perspective the $250 million that you talk about, could you just give a little sense around again at this point what you're thinking timing-wise how quickly that may hit. Whether it's a whole bunch of one-off deals that kind of hit throughout the whole year, it's a one big transaction you expect at a particular point in time?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Well, I think it's more the one-offs or the smaller group of assets. We've seen some of the larger portfolios trade here recently and there might be a couple more out there, but I'm not specifically aware of any what I would consider to be really high-quality key market type of portfolios that would necessarily either gain our attention or be at a valuation that probably would make it attractive. We've really underwrote the Duke transaction and it's performing for us and we want to continue to have those yields continue to move up as we continue to get better at the integration from our asset management platform. So I think that's where I see as a consistent acquisition in our markets adding to our platform and being able to get those efficiency that we show, that we can get when we bring assets in-house. Robert anything on --
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think from a timing perspective we -- that's obviously what's going to drive the bulk of the range of our estimate within there. The midpoint hasn't pretty evenly spread throughout the year. And I think as we look to deploy capital that's going to be kind of a driving force on there. We're coming into the year certainly with a good place from our balance sheet with 5.4 times debt-to-EBITDA down significantly over 101 (ph) full turns since we completed the Duke transaction. But we also have a $125 million of cash on the balance sheet. So really as we look to redeploy that is when you'll start to see the earnings accretion pickup.
Tayo Okusanya -- Jefferies -- Analyst
Got it. And then one more for me, if you don't mind. I know you guys have been very focused on this idea of building scale in some key markets. But again just kind of take a look at, again, the top 30 MSAs out there, any sense that you guys may decide to kind of break into another MSA, because you like the demographics or you kind of like the growth prospects of that market?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
There is. I think there is two or three markets that we think very highly of -- that we have done our homework in reached out to folks and we want to make sure that the biggest thing that I think our investments philosophy is that the assets are critical meaning that they're key from a delivery perspective of healthcare. Number two that they're in the right location and are going to be in the right location for the next 5, 10, 15 years. And number three that we can get size. I mean -- and we need 500,000 square feet. We need some scale, because I think over the next 15 years the differentiation on a platform perspective cap rates for acquisitions ebbs and flows, but performance doesn't. I mean, the bottom line, cash NOI on a consistent basis dropping to the bottom line with earnings that's really going to be the differentiator.
And I think that we're very proud of what we've done over the last five years and we're focused on if we enter a market being able to then have that continuity and have that consistency and being committed to get that size, it's going to add to the overall value of our enterprise value, because one of the things we don't want to do and we haven't done and you haven't seen us do, you haven't seen us have to really divest ourselves of assets that have changed substantially in value over time. I mean, I think we bought well, we bought very disciplined and these assets that we have are continuing to perform.
Tayo Okusanya -- Jefferies -- Analyst
That's helpful. Thank you.
Operator
Our next question comes from Jonathan Hughes of Raymond James. Please go ahead.
Jonathan Hughes -- Raymond James -- Analyst
Hey, good morning. Thanks for the time and thank you for providing guidance, I appreciate that. You did give formal acquisition guidance, so that was helpful, but can you just elaborate a little more on the transaction market? Maybe talk about the one-off deals you're looking at? Where are you seeing pricing trend over the past six to nine months? And then any color on those recent large deals -- the recent large deal that traded and the other big one that's currently marketed out there?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Well, I think one-offs are in markets that we're looking at. Prices have moved or certainly haven't gone down. I think that's the good indicator for us. 2018, I think was a very difficult year to get a judgment of where interest rates were going to be, where cap rates were going to be versus where they should be and where they're going to move and what's medical office going to be affected significantly and some of the other healthcare asset classes have been impacted. We really didn't see that. What we have seen is other than a couple of buyers out there, who have really been -- who have really liked certain assets and went after them pretty aggressively, we've seen a more stable type of pricing environment.
And I think that allows us in 2019 at this point to feel a little more positive about being able to accretively acquire these assets do it diligently, bring it into our platform, bring it into the markets that we've now been in for a number of years. We've got leasing folks that have been with us, we've got Amanda mention we have a number of leasing folks, so we've got seven of them who really have been with us now great longer than five years. They've got relationships with tenants, they've got relationships with healthcare systems, it helped us on development side, but it also helps on the acquisition side, because you hear things or you get a chance to have an introduction and so forth.
And I think the platform that we have in 2019 is going to be a very productive year for HTA. We did take a break in '18, but it was really a break not based on opportunity really not based upon being able to see things. It was saying being cautious about where cap rates were, what we need to do as a company and being positioned in a good position when you felt more comfortable about being able to deploy capital and make good capital decisions.
Jonathan Hughes -- Raymond James -- Analyst
Have you -- you mentioned cap rate spreads between on-campus, off-campus had compressed over the past couple of years. Has that remained stable or even maybe expanded a little in the past say three to six months?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think you're seeing recognition of MOBs being driven more by real estate qualities now. So, you know, certainly the good on-campus assets you've seen a lot of trophy type pricing still. I think you're seeing really good off-campus assets trade more aggressively and within a tight window with the on-campus. So I think we see that being relatively stable. I think the hardest thing always to do is as you're looking at the cap rates is really get a read-through of the quality of what you're seeing. Everybody reports cap rates and what is going on out there, but it's really hard to see the quality. I think for us as we're looking at the assets with the stability, it's really making sure those assets will produce the 2% to 3% same-store growth. And I think that's where we're seeing continued stability.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
(inaudible) continue to step further. I think when you buy an asset, the asset quality is important, the tenant mix is very important, but the rent that you get, the capital you put in to sustain the 2% to 3% same-store growth, I think that's all -- that all has to be connected. It isn't that one, you can take one without the other. I think our same-store growth is something that we take very seriously, but it all comes back down to the buying well and then ensuring that the amount of capital that you have to put into those assets or the amount of capital that goes into renewals is the appropriate amount in order to get the greater returns that drop to the bottom line. That's really what shareholders are looking for is cash that drops -- revenue increases that drop to the bottom line.
Jonathan Hughes -- Raymond James -- Analyst
Okay. And then just one more. I mean, you've got a great -- you're in a great spot in terms of balance sheet. Obviously have a good amount of cash sitting there. Are you looking at the big portfolio transaction out there? Would that meet your underwriting quality? Just curious your thoughts on that portfolio?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
We've looked at that, we've known that portfolio of course for six, seven, eight years. Probably it does not fit what we would look for from an acquisition perspective and so we're not one of those that are looking at that.
Jonathan Hughes -- Raymond James -- Analyst
Okay, all right. Thanks for the color. That's it for me.
Operator
Our next question comes from Michael Mueller of JP Morgan. Please go ahead.
Michael Mueller -- JPMorgan -- Analyst
Yes, hi. Two quick questions here. I don't think there's any equity in your forecast for 2019. Just want to confirm that first.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
That's correct. Yeah, that's correct. As we look at the use of capital there $250 million of acquisitions, $75 million of dispositions, we've got $125 million on the balance sheet, so I think it's pretty leverage neutral without the use of equity.
Michael Mueller -- JPMorgan -- Analyst
Got it. And then, I think, it was mentioned that the Forest Park rents where you're looking to fill the remainder of the space with 20% higher than the portfolio average. How do those rates compare to the prior rates for the same buildings though?
Amanda Houghton -- Executive Vice President-Asset Management
Yeah, they're pretty similar.
Michael Mueller -- JPMorgan -- Analyst
Okay. So kind of flattish?
Amanda Houghton -- Executive Vice President-Asset Management
Yes. I mean we're 18 months past when they expired, so there is little bit of a difference. But if you adjust for that then they're pretty similar.
Michael Mueller -- JPMorgan -- Analyst
Okay, OK, that was it. Thank you.
Operator
Our next question comes from John Kim of BMO Capital Markets. Please go ahead.
John Kim -- BMO Capital Markets -- Analyst
Thank you. Scott given your relationship that you have and that you're targeting with academic universities. Is that something you could extend beyond MOBs into research and lab space?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Well, we really like the academic university concentration, the relationship with healthcare in the future and I think everybody now is pretty much saying the same thing. For us it really would need to be a type of asset that has multiple uses within the asset. We have something up in Boston that really about four years ago really illustrated to us as a management team, and also all the way from our investment committee the blend between a university, the blend between the hospital and the ability to have different types of uses in a very nice sized building. And I think lot of folks have gone up and seen this building, because we've had it on tour. But I don't think we're into lab space 100%. I don't think of it, that we would move into a direction that takes it away for medical office. We like clinical space, we like space that is needed.
So we are interested in assets that have that blend and can drive that uniqueness. And the asset we have in Boston, for example, it actually has delivery tubes to the hospital for a blood testing. That's something that is unique. It was built that way and it's just critical and it's very hard to imagine that, that function would ever be eliminated. And so that's a good opportunity for us to do that and we did that. And so we would look at things like that.
John Kim -- BMO Capital Markets -- Analyst
(inaudible) because of the CapEx or because of the definitive (ph) relationships with university?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think typically it's more of a relationship. I don't think it's necessarily a capital perspective. We like being able to service the academic university medical center tenants and relationships. And to the extent they have clinical buildings many of them also have some of that combine the teaching and the lab space on and we're comfortable with those. I think what you won't see us do is is go out and be more directed toward pharmaceutical companies or biotechnology companies or anything like that.
John Kim -- BMO Capital Markets -- Analyst
Okay. And then wanted to get your thoughts on your updated use on section 603 and what you think this may have, as far as impacting rents, asset values and potentially transaction values or volume for off-campus MOBs?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes. I think as we've looked across our healthcare relationships and you really follow the broader healthcare sector, the predominance of the discussions among them is how do we compete in a more cost-effective manner. The competition is maybe less among the hospitals themselves and more with how do they compete with other players that are pushing things more off-campus at lower cost. So when you have conversations with these large healthcare systems they're saying how do we get closer to the customer? How do we get closer to our patients to make it more convenient and really bring them into the system?
So to them, they'd obviously rather get paid more than less, but from a real estate perspective we're not seeing any impact from that. I think, you might see different groups go on-campus versus off, but the overall emphasis of the health systems continues to remain the same. And so I think you see that really reflected on our portfolio selection. We do like good on-campus assets that have got significant activity, but you also -- we see some of our highest demand in core off-campus locations where they're in great communities, they've got great kind of traditional real estate metrics and you really seeing those health systems compete there. And so that leads to high retention, high levels of rent growth everything that you would expect as a real estate company.
John Kim -- BMO Capital Markets -- Analyst
Okay. I have a final question that's sort of a two-part on your development cap, page 16 of your supplement. It looks like you still have a fair amount of costs or CapEx on some of the recently completed MOBs, and wondering why that's the case. And then second of all, during the quarter you only spent about $1 million of CapEx during the quarter, which is slower than your run rate in prior quarters. And just wanted to hear your thoughts on that.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yeah. I think the projects that have been substantially completed many of them still have TIs left to be built out in there and that's the bulk of the cost to complete. So as the health system goes in, we complete the building, there's still going to be a lag as we continue to complete the project more from a tenant moving perspective. I think we've got fixed rent schedules in there. It's just a matter of getting them in the building and operating.
John Kim -- BMO Capital Markets -- Analyst
And what's the occupancy of those projects?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
The occupancy of the projects for instance Memorial Hermann is actually 100%. The hospital is taking the entire space. It's just a phased take down of the space. That's going to drive the TI expenditures on those. And that's just kind of the top one that you're looking at that I think has most of the costs to complete there. So that's actually 100% leased, it's just not a 100% occupied at this point.
John Kim -- BMO Capital Markets -- Analyst
And my second question was on the $1 million spend during the quarter?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yeah. I think the $1 million spend from a development perspective, I think you'll see two things pick up on that one. You will see some of the TIs get expensed on the Memorial Hermann project, but you also will start to see us break ground, I think in the development projects that we've recently announced down in Cary you'll start to see cost pick up in really the second and third quarter with the one in Miami most likely breaking ground in the third quarter. So you'll see that development expenditures start to pick up in the back half of the year.
John Kim -- BMO Capital Markets -- Analyst
Got it, OK. Thank you.
Operator
Our next question comes from Chad Vanacore of Stifel. Please go ahead.
Tom Roderick -- Stifel -- Analyst
Hi, good morning. This is Tom for Chad.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Good morning.
Tom Roderick -- Stifel -- Analyst
Hi. I'm wondering, if you could help me break down the FFO guidance. So it looks like excluding the $0.02 accounting change impact and you're getting $0.05 in FFO growth at the midpoint for 2019. So if my math is correct, so using the acquisition and disposition guidance you provided that would generate maybe $0.02 to $0.04 depending on timing. And also due to some stock repurchase in 2018, I think that would also contribute like $0.005 or $0.01 to that. So that doesn't seem to leave much organic growth at the midpoint of guidance. So how should we reconcile that with the 2%, 3% same-store NOI growth? Is that a result of deal timing or is it a relatively more conservative guidance?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think as we look at it, it's more deal timing. We've historically seen our same-store growth really translate to the bottom line. So most of the difference in our guidance is going to be around deal timing.
Tom Roderick -- Stifel -- Analyst
Okay. So just to follow-up on that. Could you talk about the same-store pooling in 2019? What goes into that and what comes out?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
There's going to be the majority of our assets in there as it typically is. Our policy around the same-store pool is for any assets that we've owned for five full periods, it goes in the same-store pool unless it's been pulled out for being held for sale or for redevelopment, which is what you see the bulk of the assets pulled out in our pool at the end of the fourth quarter. So given the fact that we weren't a big buyers in 2018 you'll see the bulk of our assets in the pool.
Tom Roderick -- Stifel -- Analyst
Okay. Great. Thanks for the additional details. Last one for me, so you mentioned that the private capital interest remain high in the MOB space, but many of the company REITs that have reported so far also increased their acquisition guidance for 2019. So are you seeing more competition from public side as well in this year?
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Well, I think we've always been in a very competitive space. We've been public now almost six years and the first question, I was asked when we were going public was how are you going to compete and how would you ever think that you're going to grow your portfolio. And I think we've been very -- very confident at being able to find good acquisitions and continuing to build our portfolio. And as you see we become now the largest owner of MOBs. So we are in a even better position today than we were five years ago. I think that when you look at HTA people should sit back and say what are the fundamentals that they have in order to be able to execute their business plan. And we have today in every category from employees, from management to key cities, to balance sheet, to development, to leasing, to our leasing personnel we have a better quality infrastructure in every component that we have today than we had five or six years ago.
So the opportunities are, I think are even better for us going forward over the next three to five years than they've ever been. And that's really what gets us excited in 2019. As I said 2018 was a year that I think everybody was cautious, I think that it was at the right thing to be. We specifically needed to rebalance our balance sheet and get ourselves in a position where we wanted to start 2019. We're there and we're excited about 2019, 2020, and I think you've seen it now in the fourth quarter results that we released.
Tom Roderick -- Stifel -- Analyst
That's very helpful. Thank you for taking my questions.
Operator
Our next question is a follow-up from Karin Ford of MUFG securities. Please go ahead.
Karin Ford -- MUFG Securities -- Analyst
Hi, just one quick additional one. You talked about wanting to get FFO growth back up to 4% to 6% to that range in the medium term. This year you're doing like you said about 3%. I guess it's due to the lingering effects of last year's balance sheet work. Is there any reason why you shouldn't be able to get back up there in 2020?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
We don't see any issues, kind of, as we look to 2020. Really as we're looking at 2019, as we pointed out, we made dispositions in the back half of the year, that certainly flows into the first part of the next year both in the 2019 run rate, but also as a 2018 comp. So our long-term experience running the MOB business with steady and consistent same-store growth in modest acquisitions has been to get to that 4% to 6% range, and we expect that to continue.
Karin Ford -- MUFG Securities -- Analyst
Great. Thank you.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Scott Peters for any closing remarks.
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
All right. Thank you everybody for joining the call. We look forward to 2019 and we appreciate any calls, any questions anyone has, please just don't hesitate to reach out to us. Thank you.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Duration: 55 minutes
Call participants:
Caroline Chiodo -- Senior Vice President, Finance
Scott D. Peters -- Chairman of the Board, Chief Executive Officer and President
Amanda Houghton -- Executive Vice President-Asset Management
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Daniel Bernstein -- Capital One -- Analyst
Karin Ford -- MUFG Securities -- Analyst
Tayo Okusanya -- Jefferies -- Analyst
Jonathan Hughes -- Raymond James -- Analyst
Michael Mueller -- JPMorgan -- Analyst
John Kim -- BMO Capital Markets -- Analyst
Tom Roderick -- Stifel -- Analyst
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