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Healthcare Trust of America Inc (HTA)
Q4Â 2019 Earnings Call
Feb 14, 2020, 12:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day and welcome to Healthcare Trust of America Fourth Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to David Gershenson. Please go ahead.
David Gershenson -- Chief Accounting Officer
Thank you, and welcome to Healthcare Trust of America's year-end 2019 earnings call. We filed our earnings release and our financial supplement yesterday after the close. These documents can be found on the Investor Relations section of our website or with the SEC.
Please note that this call is being webcast and will be available for replay for the next 90 days. We'll 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 the 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 could 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, CEO and President
Good morning and thank you for joining us today for Healthcare Trust of America's fourth quarter and full year 2019 earnings conference call.
Joining me on the call today are Robert Milligan, our Chief Financial Officer; Amanda Houghton, our Executive Vice President of Asset Management; and Caroline Chiodo, our Senior Vice President of Acquisitions and Development.
As we begin 2020, HTA has positioned itself to be the sector leader in the ownership, leasing and operation of medical office buildings. We have a key market focused portfolio that is irreplaceable with almost 25 million square feet. Our portfolio is comprised of a fully integrated full-service operating platform and HTA has positioned itself with a fortress investment grade balance sheet that positions us to uniquely pursue investments and deliver earnings growth and shareholder returns over the next three to five years.
As Healthcare enters the new decade, it continues to move toward an integrated outpatient experience that is cost effective and convenient for patients. This delivery will take place in three settings. One, on-campus, where HTA is the largest owner of MOBs in the country; two, off campus, in the community locations where all leading healthcare providers are focusing and growing their presence; and three, in academic university locations, where academic and healthcare combinations are critical.
Over the last 13 years, we have built a portfolio of MOBs that reflects these trends, where they focus on finding core critical real estate in great markets that will deliver high levels of tenant retention and rental growth opportunities over future years.
Our experience has demonstrated that properties with the strongest performance occur both on and off campus with the primary drivers more related to market quality, patient demand, building characteristics and increasingly critical tenant synergies.
Strategically, HTA has targeted key fast-growing markets that we believe will outperform other markets throughout the country. Our targeted market approach allows HTA to maximize returns by creating size and scale in markets.
We now have 17 markets with over 500,000 square feet and 10 markets with approximately 1 million square feet or more. This scale allows us to effectively create a deeper and more strategic local operating platform with relationships and operating capabilities that are unique. This approach is a key pillar for our growth strategy going forward.
In 2019, we saw the positive attributes of our platform and portfolio start to work in ways that generates both internal and external growth opportunities. Led by: one, same-store growth of 2.7%, driven by rental revenue growth of 2.3% and margin expansion from increased utilization of our property management platform and certain expense savings. This includes fourth quarter same-store growth of 2.5%; two, leasing where we leased almost 15% of our portfolio or more than 3.6 million square feet with full year releasing spreads of 3.5% and same-store tenant retention of 84%.
Total acquisitions of $558 million and a blended cap rate of 6.1% after taking into account expected synergies from our asset management platform. This includes over $330 million closed in the fourth quarter. These are well located MOBs located primarily in our existing markets where we are adding scale and will utilize our operating platform to drive additional value for shareholders. Although the acquisition markets remain very competitive for larger deals, we are focusing on one-off opportunities that fit in our portfolio but where we have been able to acquire at yields that allow for immediate accretion.
Finally, four, development. We have announced $110 million of development and redevelopments in 2019, including two on-campus developments with HCA and Dignity, now called CommonSpirit. We have strong relationships with both of these entities over the years and continue to work with them for future developments. We now have four developments in process with total investments of over $150 million that will start to be delivered in 2020.
We've also announced the redevelopment of two MOBs on our St. Joseph Health Mission Viejo Campus in Orange County California. That will include up to $20 million of capital investment.
Our balance sheet has never been stronger with leverage of 29% of total capitalization and 5.7 times debt-to-EBITDA. This leverage goes down to 5 times and 25% of total capitalization when factoring in the approximately $300 million in equity available to us to take down on a forward basis over the next six months.
We purposely built our capital availability in the fourth quarter of 2019 given the deal flow we are seeing and expect to deploy this capital over the next two quarters.
Earnings growth as a result of our performance and acquisition activity, we were able to grow our normalized funds from operations to $1.64 per share and $0.42 in the fourth quarter. Note, that in 2019 we had more than $0.02 per share in costs that were capitalized that HTA must now expense. These costs were associated with our in-house leasing teams.
As we look ahead of 2020 HTA is focused on driving performance in a way that hits the bottom line. From an asset management perspective, we are focused on using our platform to drive occupancy growth to a 100 -- by 100 to 200 basis points, while continuing to maintain releasing spreads that we achieved in 2019. From an investor perspective, our focus continues to be on finding and closing on acquisitions and development opportunities that meet our discipline criteria in our key markets, taking advantage over the increase in opportunities that we are seeing now to both our acquisition and development platforms that have been in place now for 5 to 10 years.
From a balance sheet perspective, we are focused on maintaining a strong balance sheet with leverage between 5.5 times and 6.0 times, investing the equity we have raised on a forward basis from an accretive perspective.
From a guidance point of view for 2020, we are expecting normalized FFO per share to reach between $1.69 and $1.73 per share, with growth of over 4% as the midpoint of the range. We expect our same-store growth to range between 2% to 3% for the year, with a focus on growing occupancy to achieve the top side of the range. We will fully deploy our existing equity capital with acquisitions projected between $500 million and $600 million for the year with expected yields after synergies of 5.5% to 6.25%.
Finally, we will start to deliver on the developments, which with our first project in Cary, North Carolina, being delivered at the beginning of the third quarter. Robert will give some additional color in his comments.
Finally, I wanted to point out the Healthcare Trust of America's first sustainability report that was published in January. Since we started our operating platform in 2010, we have focused on the efficiency of our buildings and our footprint in the communities in which we invest.
I will now turn the call over to Amanda.
Amanda Houghton -- Executive Vice President, Asset Management
Thanks, Scott. In 2019, our team remained focused on delivering high-quality operating and leasing results in our existing portfolio, while integrating new properties onto our platform and capturing the efficiencies and synergies anticipated as part of these acquisitions.
Over the last decade, our in-house asset management team has shown repeatedly our ability to add between 25 and 35 basis points of incremental yield, as we bring new properties into our platform. The most visible example of this being the Duke portfolio, which we acquired in 2017 and over a 12-month period, we generated savings between $7 million and $8 million, largely as a result of replacing third-party management and engineering staff with our own teams and capturing the markups and profits previously passed to third-party managers.
This transition from third-party management to our in-house platform is seamless from a tenant perspective as they see no net financial impact that allows our shareholders to benefit from profits previously passed on to third parties. With over 200 property management, engineering, and leasing staff across over 20 offices, HTA remains uniquely suited in the REIT space to benefit from the synergies and savings a full-service operating platform provides.
We believe, as a company, we are still in the very early stages of recognizing the full benefit of our platform. As we grow in market, we are able to hire more specialized and skilled staff to do additional services previously done by third parties. By way of example, at 500,000 square feet in the market and housing mechanical, electrical and plumbing services begins to make sense from a cost standpoint.
With a focus on growing our key markets and continue training our in-house staff, we expect over the next three to four years, investors will continue to see margin expansion and value creation from our platform.
Turning now to the fourth quarter. Our same-store growth this quarter came in at 2.5% driven by a 1.4% base revenue growth and 100 basis points of rental margin expansion. On a year-to-date basis, same-store NOI growth increased 2.7%, driven by full year revenue growth of 2.3%.
During the quarter we signed approximately 1 million square feet of leases. This included 180,000 square feet of new leases and almost 830,000 square feet of renewal. Our total tenant retention for same-store portfolio was 77%, while releasing spreads on renewals remained strong at 3.4%.
Annual escalators for leases signed in the period were 2.9%, continuing our trend of increasing escalators toward 3% as we continue to roll our leases. TIs remained consistent at $1.96 per square foot per year of term on renewals and $4.11 per square foot per year of term on new.
For the year, we have now leased 3.6 million square feet or almost 15% of our total portfolio GLA. Same-store retention for the year is 83%, while our releasing spreads and renewals are strong 3.5%. Further, contractual increases on both new and renewal leases signed during the year averaged 2.6%, strengthening our recurring revenue stream and quality growth our investors have come to expect.
New trends to note on our renewals, we have seen a notable increase level of early renewals with over 1 million square feet of leasing for the year related to leases that expire in 2020 and beyond. This is driven by tenants seeking to lock in their space for the long-term, as they consolidate practices and invest in their infrastructure.
We have also seen an increased interest in longer-term renewals, as evidenced by the average renewal term in 2019 of 7.2 years, nearly 25% higher than our 2018 renewal term average of 5.8 years. And these are both positive trends that we believe will continue into 2020 as tenants are trying to lock in key real estate for their healthcare delivery strategies.
On the expense front, we continue to show the benefit of our economies of scale and specialty service offering. For the quarter, we were able to keep expenses relatively flat over the fourth quarter of 2018 and down over 2% sequentially. Despite an overall increase in property taxes during 2019, primarily in Texas, our teams have largely been able to offset this impact through efficiencies in our platform and continued focus on utility savings.
In the fourth quarter, we did begin to see some of the favorable outcomes of our property tax appeals and believe we will continue to have success with our appeal efforts in the coming quarters.
2019 performance is a great reflection of the resiliency of our portfolio and ability to continue to deliver quality NOI growth through changing external and internal environment. We came into 2019 with a slightly higher amount of expirations than in years past, 12.8% of our portfolio versus our historical 10% average.
We also had several asset transitions, the largest of which included our Mission Viejo medical office buildings, four MOBs that we owned fee-simple on a St. Joseph Health Mission Viejo campus in Orange County, California.
These buildings were constructed in 1972 and are coming off a 20-year hospital master lease. We're moving forward with redevelopment on two buildings that will modernize the facilities and allow us to command rent significantly above their current rent and more in line with this market.
While these factors contributed to an overall decrease in year-over-year same-store occupancy and lease percentage, much of which was manifested in the third quarter, our same-store leased rates remained steady in the fourth quarter and occupancy grew 10 basis points to 90.9% over Q3.
As we look to 2020, we have approximately 9% of our portfolio expiring with another 6% in month-to-month status. Given current discussions with tenants, we expect tenant retention to be around 80% with renewal spreads in the 2% to 4% range. Our new leasing efforts continue to be strong with over 40% of our pipeline comprised of large deals greater than 10,000 square feet.
While these deals do generally take longer to sign and ultimately build out, we expect to see the benefits of these deals through meaningful increase lease and occupancy level toward the second half of 2020, with an overall outlook of moving occupancy between 100 and 200 basis points within the next 12 to 24 months.
I will now turn the call over to Robert.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Thanks, Amanda. 2019 ended up being a very active year for us in the investment and capital market front, which when combined with our continued same-store growth, allowed us to demonstrate an accelerating level of earnings growth.
In the fourth quarter, we generated same-store growth of 2.5%, with full year same-store growth coming in at 2.7%. This continues to be generated by both steady consistent revenue growth and margin expansion through increased performance and utilization of our operating platform.
From an infrastructure perspective, we remain very efficient. With G&A for the quarter coming in at $10.2 million, with the year-over-year increase driven primarily by the expensing of internal leasing cost on which we have capitalized $1.2 million in the year ago period. For the year, we came in at $41.3 million which remains extremely efficient relative to our peers.
As a result, we generated normalized FFO per diluted share in the fourth quarter of $0.42, up 5% from prior year as we continue to generate same-store growth and closing our acquisitions, redeploying the capital raised in last year's Greenville sale into better assets and markets.
Funds available for distribution increased $72.3 million in the quarterm which includes $17.6 million of recurring capital expenditures or approximately 14% of NOI. Our run rate for the year, however, remains around 12.5% of NOI. Our recurring capex is slightly higher than normal given the relatively high amount of total leasing we've entered into in 2019, close to 15% of our portfolio. We're almost 25% more than we completed in 2018. We expect some of this will continue into 2020 given the lag in tenant improvement utilization. From an investment perspective, we're seeing an increased number of opportunities that meet our disciplined underwriting criteria, and have an improved cost of capital that allows us to close and lock in attractive day one accretion for shareholders.
For 2019, we were able to find and close on over $550 million of investments at yields of over 6.1%, including day one synergies from our operating platform. In the fourth quarter, we closed on $330 million in investments, including a mix of sales from developers, private owners and healthcare providers.
Our investment criteria remain straightforward: Identifying assets that are positioned to grow over the next 5 to 10 years by focusing on core critical real estate that'll be in high demand as healthcare delivery continues to evolve. Mix of on and off campus buildings, as well as those on academic medical center locations. They're located in key markets that are growing faster than U.S. average, where we can increase our scale and relevancy and assets where we can utilize our platform to drive additional value and yield to our investments. And finally, we're focused on achieving accretive opportunities to drive day one returns, as well as long term growth.
Our 2019 investments met all of these criteria's. They were all located in our key markets in core critical locations with the opportunity to drive additional value over time, through an increase in occupancy and the opportunity to push rents.
The properties were almost 60% on or adjacent to campus while still acquired entirely on fee simple basis, which we think is critical to long-term performance.
From a portfolio construction perspective, we continue to grow our scale in key markets. Increasing that number of markets with more than 500,000 square feet to over 17. As we increase our geographic concentration, we gain the brand relevancy with health systems, academic universities and large physician groups and improve operational efficiencies as we leverage the platform.
Our balance sheet philosophy has remained lowly levered and raise capital the time we make acquisitions to lock in the earnings accretion and ensure we are always in a position to pursue transactions opportunistically. This is especially true in volatile markets where we have the ability to pursue growth accretively and drive quickly.
We financed our acquisitions in 2019 by raising approximately $637 million of equity, including $585 million in the fourth quarter at average prices around $29.70 or an implied low 5% cap rate that is at least 65 basis lower than our acquisition price.
We raised the capital through our ATM, allowing for very efficient transactions and took slightly more than $300 million on a forward basis, which will serve as dry powder for acquisitions as we head in 2020.
I will note that we have a number of ways in which we can raise equity and are always evaluating the opportunities in any given market. In the fourth quarter, we chose to use a forward given the potential for market volatility in election year and the pipeline of opportunities that were seen. This gives us the strength of a 5 times leverage balance sheet without the immediate earnings dilution that comes from raising the equity on a traditional basis, something we believe will be valued by shareholders.
As a result, our balance sheet continues to be in terrific shape to finance growth in 2020. We ended the year at 5.7 times debt-to-EBITDA with $1.2 billion of liquidity including the equity forwards and very limited near-term maturities.
In the third quarter, we took the opportunity to extend these maturities at very attractive rates. When you factor in the forward equity into our liquidity and our balance sheet standing at 5.0 times debt-to-EBITDA, we have the capacity by over $700 million in acquisitions, while remaining within our targeted leverage range of 5.5 to 6 times.
Turning to 2020, we have provided our initial earnings guidance that is in the range of $1.69 to $1.73 of normalized FFO per share. This guidance assumes same-store growth of 2% to 3% with the high end of the range based on achieving increasing levels of occupancy by the end of the year. G&A of $44 million to $46 million as we grow our platform capabilities to increase our occupancy. Acquisition of $500 million to $600 million at a blended cap rate of 5.5% to 6.25%, including synergies. The utilization of our $300 million of equity forward toward the end of the second quarter, resulting in average shares of approximately $226 million with the remainder of our capital financed on our revolver and a $2.5 million to $3 million headwind as a result of our redevelopment of properties at Mission Viejo, with the expectations that they will achieve positive cash flow toward the end of 2020.
Our maintenance capex for the year will be 13% to 14% of NOI, as a relatively higher levels of leasing in 2019 heads into 2020. We could also see nonrecurring capital increase slightly as we look to increase our occupancy levels by 100 to 200 basis points during the year, which will position us for solid growth into 2021.
In total, we think 2020 will be the year we return to our normal levels of growth you should expect from HTA and the MOB sector.
I will now turn it back over to Scott.
Scott D. Peters -- Chairman of the Board, CEO and President
Thank you, Robert. Thank you, Amanda. We will now open up for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from Tayo Okusanya with Mizuho. Please go ahead.
Omotayo Okusanya -- Mizuho -- Analyst
Hi. Yes. Good afternoon, solid quarter, great guide. Question around same-store guidance for 2020. I just kind of giving your goal of increasing occupancy of 100 basis points just a little bit surprised that the same-store NOI guidance has been higher.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Well, I think as we look at how we should perform and how the MOB sector should certainly perform, we think 2% to 3% is a pretty consistent range that we're going out with.
Our view is from an occupancy perspective, we saw a slight decline in the third quarter from an occupancy perspective that's carried into the fourth. We'll see that carry into the first -- certainly the first quarter of next year which will provide a little bit occupancy headwind to start, which we anticipate will potentially lead to occupancy tailwinds by the time we get to the end of the year. So, there's a little bit of a balance from an occupancy perspective as to how it relates to same-store.
Omotayo Okusanya -- Mizuho -- Analyst
Okay. That's helpful. And then I appreciate the commentary you made about your acquisition outlook and kind of what you're looking at relative to some other big transactions out there. But again, could you just generally talk about the overall kind of acquisition market, where cap rates are, whether there's a big difference between trying to buy on campuses versus off campus and things of that sort?
Scott D. Peters -- Chairman of the Board, CEO and President
Sure. This is Scott. I think that you know, we have seen over the last certainly 24 months and maybe even a little longer than that, that the quality of what we call community core or off-campus buildings if they have the right synergies, the right location and the right size, and I don't mean size necessarily by a single building but by a group of buildings and the tenant occupancy is critical, but we've seen that cap rate compression come down. And I think it continues to, in certain cases, get even closer to what traditionally has been on campus.
I think you're seeing, if you look closely and if -- you know you never know what the future brings, but I think we feel here, we started community core almost 10 years ago. We started academic university acquisition six, seven years ago. And if you look at the future of healthcare, you're seeing on-campus become far more selective. I think when you buy something on-campus, you used to be able to just buy it and assume that it's going to perform or the demand was going to be there and the healthcare system was going to be fully cooperative. I think the healthcare systems are now are focused out in communities. They're focused into locations where they can generate the greatest patient mix.
And from an ownership perspective, we've seen many situations, and I think our peers are seeing situations where traditionally what used to be called an off-campus community core location from an NOI perspective or a return perspective, compares favorably if not more favorably to what may have been a traditional on-campus.
So, I think you're going to continue to see the evolution and migration of continued services from on-campus to community core. And I go back to the fact that if you pick your key cities and those key cities or those key communities are growing and the infrastructure of those cities are continuing to expand, the only logical place for many of these healthcare systems to reach out to is back into the community core locations.
So, they're doing that and we're very happy with our cities that we've got some depth and breadth in and we can continue to see acquisition opportunities both on-campus and in the community core setting.
Omotayo Okusanya -- Mizuho -- Analyst
But what are those cap rate kind of around -- kind of what are those assets kind of trading for relative to maybe some other stuff you bought in the fourth quarter?
Scott D. Peters -- Chairman of the Board, CEO and President
I think the cap rate, haven't moved. I frankly haven't seen. I thought we got extremely aggressive with cap rates maybe 12 months ago, 16 months ago, on some larger portfolio transactions. And that got a lot of publicity. And so, therefore, the perception was that my individual asset or my one or two assets can take that type of pricing. That's backed off a little bit. We're finding -- as Robert talked about in this comments, we're finding very good strong opportunities in the 5.5% to 6.25%. And we like that. That seems to fit, right where we like to be and we're very optimistic about 2020. We've got the balance sheet that allows us to be disciplined and execute. So, we like where we are and I frankly like the environment that we see right now.
Omotayo Okusanya -- Mizuho -- Analyst
Great. Thank you.
Operator
Our next question comes from Daniel Bernstein with Capital One. Please go ahead.
Daniel Bernstein -- Capital One -- Analyst
Hi. I guess a follow-up question to Tayo on the occupancy and same-store NOI comp for 2020. So, is the right way to think about it may be NOI growth year-over-year will be roughly like 2% in the first half and then 3%, 3.5% in the second half of the year and that flows through into 2021? Is that the right way you -- to think about the NOI growth?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Well, I think we certainly target our same store growth in each of the quarters above the 2% range. But I think as we look at how the occupancy in the comparative periods lines out, our view would certainly be the first quarter, first half has a little bit more of the revenue year-over-year headwinds just given that occupancy with the potential for that to shift as you get into the back half of the year.
Daniel Bernstein -- Capital One -- Analyst
Okay. And it should benefit '21 year-over-year growth. You should see some acceleration in 2021 growth over 2020?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes. We're seeing -- when we look at this and I think we've tried to be pretty forthright with investors is we've positioned ourselves in 2020 for both the same-store where we like to see it 2% to 3%. We think we have occupancy and we're focused on occupancy and we've focused on our leasing platform.
We've got some redevelopment that's starting to take traction. And as Amanda pointed out in her comments, we've seen traction, frankly, with some large groups or large space, and it's catch 2022. If we had smaller spaces adding up to the larger spaces, I think they'd be done by now. But the larger spaces are just by the fact that who does them, they have more processes. They want to make sure that that this is the right location.
We're seeing good activity. So, we're very excited about the fact that we can see some occupancy gains. We've repositioned our portfolio. And the development that we're doing, I think is going to pay dividends from a pricing perspective and where we are with those assets.
Daniel Bernstein -- Capital One -- Analyst
Okay. And then in terms of dispositions, you only guided to $50 million. I don't know if that's lower or not. But it seems with cap rates fairly low and maybe slightly compressing and certainly technology of MOBs, the size of the MOBs, demands at the hospitals are changing as well. Are there -- is there a possibility that $50 million disposition number could be higher as you review the portfolio?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think that we're sort of fortunate. I was talking to someone the other day and we were talking about Healthcare Trust of America. We're 14 years old. So, we're not 30, 40 years old. We've gone through a process over the last 10 years and we've been public now about seven. There is a huge focus on us as far as the quality of product when we went public, and frankly, as we got bigger and bigger.
We've gone through a very diligent process with our investment committee. Our investment committee sees every acquisition that we buy, whether it's for a $1 or whether it's for $2 billion. So, we've been very selective in our cities. We've been selective in our assets. And when you go through and you say every company should dispose of things that don't fit their portfolio. But if you look at what we put together with the Duke acquisition, with the acquisitions that we've done since then, they're in our markets. They're purposeful. They're disciplined. There's not something that we say, "Okay, we bought 20 assets and we don't like 5 of them, so therefore we don't -- we're going to dispose of those 5."
We've been very diligent. We've been very disciplined. And so, I think the $50 million on average is probably the right number. But we've always said and I continue to say that everything is for sale at the right price. And we were fortunate to have an opportunity to do Greenville at the time that we thought it was good for both parties.
And so, if somebody came about and said, "Wow, you just bought it again, and should we think about that?" We would, but we don't have what I would consider to be a lot of assets that we don't like. What we do like is the opportunity for our platform to lease them up and to bring value to them if they're not 90% to 95% occupied.
Daniel Bernstein -- Capital One -- Analyst
Okay. That's good. I'll yield the floor. Thank you.
Operator
Our next question comes from Nick Joseph with Citi. Please go ahead.
Nicholas Joseph -- Citigroup -- Analyst
Thanks. When you're underwriting an acquisition, what additional benefit you typically bake in for putting an asset onto your offering platform?
Scott D. Peters -- Chairman of the Board, CEO and President
Well, everyone -- or not everyone, but certainly our platform gets that immediate bump. Traditionally, in most all cases, we've seen that there's been third-party or there's been third-party management of that asset. And so, we bring it in onboard. And in most cases now, we don't bring on extra people because we've got our markets built out and we've got them built out to a point where one or two assets in that market doesn't generate a huge change in how we're operating.
In fact, it brings synergies and benefits. So, the first part of the equation is pretty clear, pretty distinct. And we've proven it over the last three years certainly with the Duke acquisition.
But second and more importantly and where we're focused on and what we've talked to investors about and what we need to do a better job with, is the benefits of managing your own assets. When you have 500,000 square feet to 1 million square feet, we're building out teams now of engineers, property managers that are bringing the services that are traditional third-party services. We're bringing them in-house.
For a number of years, people said, "Well, how can you own a medical office building and what benefits can you bring to that building, can you bring to the tenants?"
Well, what you can do is you can do two things. One, you can train, put in systems, put in processes that make it consistent so that a tenant feels that they've got consistency. You get a reputation within the market because physician groups and physicians talk a lot.
But second, from an investor perspective, we can bring those synergies and get those benefits in bringing that third-party services in-house, have our people do it, have them do it quicker, faster. And of course, we're in early process of doing that. I mean, that's the nice thing, Amanda talked about it. I think we have years left where we can get more and more of these services in-house and remove them from third-party processes.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
And, Nick, just to be clear on the cap rate disclosure, the only thing that we're factoring into the year one cap rate to HTA is really the elimination of the third-party property management fee coming to us. We do see additional benefits beyond that, but we haven't factored that in.
So, it's typically the 20 to 30 basis points that come from that that we've included in the disclosure.
Nicholas Joseph -- Citigroup -- Analyst
Thanks. That's very helpful. And then, maybe just on G&A, the increase expected in 2020 guidance. Can you give us more color on what's driving that?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think as we look across our platform, you know that Scott and Amanda talked a lot about how we expect to and plan to build and grow the occupancy of the portfolio throughout the year. We've expanded the leasing team and the asset management team a bit as we head into this year, partly as we've gotten some more scale in our markets. It makes sense to get more leasing people there to really dive into the depths of how do we grow those relationships?
And we expect it to pay off, from an occupancy perspective, really as well as a depth in relationships that leads to other acquisitions and developments as well.
Nicholas Joseph -- Citigroup -- Analyst
Thank you.
Operator
The next question comes from Chad Manticore with Stifel. Please go ahead.
Chad Vanacore -- Stifel -- Analyst
All right. I'm going to trod on some territory that Tayo or Dan asked about occupancy, go a different direction. Since Amanda mentioned about 100, 200 basis points improvement potential, that makes me think you might target some specific opportunities, maybe give us an idea of what those would be on some of your maybe under occupied properties?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Well, I think as we've looked at our portfolio, as Amanda's talked through things certainly in the third quarter and this year, there's couple of properties where we've essentially acquired them. We knew we were going to transition from a tenant perspective, move some smaller tenants out, make way for some of the larger tenants to come in place. So, we saw the occupancy decline take place in the third quarter.
Now, we expect it through the course of the year, many of those same assets to get tenanted back up. So, she has mentioned properties in New Haven, some we've got in Charlotte that we bought, that were low -- more lowly occupied, some in Houston as well that we've kind of gone through this.
Amanda Houghton -- Executive Vice President, Asset Management
Also, our mission redevelopment campus, we're expecting to gain some traction there, so.
Chad Vanacore -- Stifel -- Analyst
All right. And then end of the year, what's your property tax been, experience been and how is that trending?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Well, property taxes are, certainly, as we've talked about and I'm sure other folks have talked about, a big issue. You buy something and it gets revalued. We go through a very diligent process and I don't think our process is any different than any of our peers. We go through and we actively try to appeal and get the property tax to the fairest value we can.
So, it is an issue. We look at it when we do an underwriting. We look at it when we do an acquisition. And when we do an acquisition, there's three or four things that we look at. One, of course, is location, synergies of tenants and synergies of healthcare systems. We're assuming, of course, it's in our market, so we have a pretty good depth of what that is.
Second, we look at rents. Because I think that right now there are -- when you see an asset and it may be overvalued, I think it's less overvalued relative to the cap rate that someone is asking for, is probably overvalued based upon the rent that you can get on roll over or you can get on a renewal.
So, we look very carefully at the rent. It is the rent proportionate to what we can see in escalator and what we can see in that growth over the next seven years.
And then third, we look at the property taxes. Because you're going to eventually, your relationship with the tenants, your relationship and the ability to renew, release, that communication is something that's going to impact them whether it's the first year you own it or the second year that that comes through or so. It is something that is a significant discussion point, both with us internally but also with our investment committee.
Chad Vanacore -- Stifel -- Analyst
All right, one quick last one. Any notable lease expirations a year in 2020 we should be thinking about?
Scott D. Peters -- Chairman of the Board, CEO and President
We were pretty consistent. I tend not to like to use that word much. But with a portfolio of almost 25 million square feet, you get ebbs and flows. We're very diligent right now on when leases of 5, 7, 10 years are rolling. We want to make sure the right tenant is there. We want to make sure it's the right grant, the right amount of TI both by us and by the occupant.
So, we've taken 2019, we're diligently focused in 2020 on putting the principles of our platform to play in decisions on both a one-off basis but on a cumulative basis, that adds up to focusing on the bottom line.
I mean, we are focused as an organization in moving the results to the bottom line for HTA.
Chad Vanacore -- Stifel -- Analyst
All right. That's it from me. Thanks.
Operator
Our next question comes from Connor Siversky with Berenberg. Please go ahead.
Connor Siversky -- Berenberg -- Analyst
Hey, all. Thanks for having me. Just a quick question on redevelopment. Could you provide any color in regard to how you identify the properties that may need renovation or modernization? And then, in terms of execution on that end, do you generally follow a preconceived strategy maybe in terms of MEP modernization or is each project strictly addressed on a case-by-case basis?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Well, I think as we go through our annual budgeting and asset management process, we certainly identify kind of our strategic positioning of assets within the market. And typically, if we find assets that are of lower quality and lower rent, but have the opportunity for a significant increase in either occupancy or rates, we'll take a pretty hard look at that and evaluate our plans for the building and any capital required to go into that.
Amanda has talked about Mission Viejo, I think this is a perfect example. We had some older buildings coming off long-term leases. The rents in those buildings, relative to campus were probably $10, $11. Which is, in this case, 25%, 35% below where the potential could be. So, we did identify improvements within there. And part of those improvements is typically going to be MEP. How do we make the buildings more efficient, how do we drive more energy controls through the buildings? Then that just becomes part of the overall redevelopment process.
Connor Siversky -- Berenberg -- Analyst
Got you. And then in terms of the development team in general, any plan to bring on any more people and maybe increase your bandwidth in that area?
Scott D. Peters -- Chairman of the Board, CEO and President
Well, we're always looking to add truly competent and great people. I mean, this is -- we think HTA is an opportunity for people to come aboard and really take a unique approach and improve their career and so forth. So, we're always looking in, quite specifically, as it relates to, do we need to add anyone or do we need to add additional people for our bandwidth? We're pretty well-positioned.
We're always looking at opportunities. We're very disciplined. I mean, we want to do development with medical office buildings that fit our criteria. We don't just want to build a building. We don't want to just build a building and have it pre-leased and then five or seven years from now say, "Okay, what am I going to do with that building?"
So, we're being very diligent. We've got opportunities. We continue to see development. We also continue to see most of our opportunities with our existing relationships. And I guess timing was pretty good for us with the Duke acquisition. We've been around for 11, 12 years. The size helped us get to a place where we were more recognizable. And then now, it's been a year, year-and-half. And our introductions to folks that we've already known and the completion of some of the development, leads to the discussion of: Okay, there's more development to be done and we'd like you to consider doing it, and we'll include you with the opportunity that's out there.
And so, we're in a good place. But, again, we're very disciplined in what we want to develop.
Connor Siversky -- Berenberg -- Analyst
Okay, thanks for that. Have a good weekend, everyone.
Operator
Our next question comes from Jonathan Hughes with Raymond James. Please go ahead.
Jonathan Hughes -- Raymond James -- Analyst
Hey. Good morning out there. I was hoping you could walk us through the progression of how you get to the 2.5% same-store NOI growth in the quarter. When I look at occupancy, it was down 70 bps, renewal spreads up mid-3 bps, but at 75% retention. So that gets you to the mid-1% revenue growth. Just where does this other 100 basis points come from to get to 2.5%?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think it's a combination of things. One, as we talked about, there's just the normal progression of what we've seen throughout the year of doing more within our property, our operating platform. I think we were able to achieve -- one of the focus areas we talked a lot about this year was focus on utility savings. As we've gone through and the teams gone through and recommissioned certain of the buildings, we certainly saw some pretty good increases or pretty good improvements there within the fourth quarter that we got some additional margin out of.
We also got some property tax appeals that came back. And as we go throughout that period, we had a couple hundred thousand dollar benefit from both property tax appeals, where we received refunds, as well as just where we were able to get valuations and assessments lower. That also drove probably another 20 basis point, 20 basis points, 30 basis point improvement there.
Jonathan Hughes -- Raymond James -- Analyst
Okay. So, mostly expenses. But, I mean, if -- say, like, if you didn't have that opportunity. And I realize it's part of the platform you built. But if -- say, expenses had been up like 2%. I mean, NOI growth would've been closer to flatter 1%, is that right?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Well, as you said, I mean, it's hard to discount the portfolio. We've -- over the last three years, we've outperformed our peers from expense perspective. Most expenses have been up in other platforms. Our platform has actually been lower. We've taken advantage of that. We continue to think we can take advantage of that.
So, it's fortunate that we take advantage of these things. I don't think that we will continue to not be able to have those advantages as we go forward. So, sort of asking a question of negative, negative. So, I wouldn't know how to answer that.
Jonathan Hughes -- Raymond James -- Analyst
Yes. Okay. And then my one follow-up. You started last year with $75 million of expected dispositions, ended up doing $5 million for the year. You're starting this year with $50 million of expected dispositions. Can you remind us what's the definition of requirement for a property to be classified as held for sale? And are all $50 million of expected dispositions in the intended for-sale adjustments to same-store NOI ends up?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes, the definition on that is simply that it's kind of a four-step process to qualify for that. First, we have to have Board approval to sell the assets, so walk the Board through the rationale for what and why and potential impact to that. Second thing is, we have to have actively marketed it. So, it's got to be taken to market, being shown to sellers typically through a brokered process, sometimes on a direct basis.
The third thing is, we actually have to receive an offer on it for us to -- at a price that we expect it to go through and actually proceed to sale on that.
So, when you look at what's out in the intended-for-sale bucket in the fourth quarter, there's only two properties that met that criteria, both of that PSA-signed and have gone through various parts of the diligence to get there. So, it's a very disciplined and, frankly, limited process to fall in that bucket.
Scott D. Peters -- Chairman of the Board, CEO and President
And as you know, we've talked about this before. We actually have a third-party due diligences and signs-off to our audit committee on both our same-store growth and our disposition process. So, HTA is probably the most disciplined, diligent company that I've been associated with from that perspective, from an internal consistency and criteria and monitoring perspective.
But we have gone through situations where we have put things up for sale, got an offer and try -- and folks have tried to retrade us and we don't retrade. We tend to buy what we buy. We tend to agree to sell what we sell. And there's been a couple of examples, where we've seen opportunities, where leases have come fruition and we wanted to get paid for them, and the buyer has decided not to pay for them. And so, we said, "Well, then, guess what? That's something we're not going to sell."
So, we make business decisions, as you would expect, where, as I said, our investment committees are reactive. And so, we are very cognizant of making the best decision that we can on a consistent basis for shareholders.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
And kind of just the final thing, just on that point. I think if you look and walk through the NOI walk that we have, if we had actually included our intended for sale properties into same-store pool, our same-store growth would have actually gone up. We would have reported I think a 2.6% versus 2.5% same-store. So, it's a very defined process that we go through and it works both ways.
Jonathan Hughes -- Raymond James -- Analyst
Okay. And so, the $50 million in dispositions guidance right now, I mean, you have PSAs for that $50 million? I think you said it's two properties, right?
Scott D. Peters -- Chairman of the Board, CEO and President
Yes, we've had PSAs or LOI's on those, yes.
Jonathan Hughes -- Raymond James -- Analyst
Okay. All right. That's it from me. Thanks for the time, guys.
Operator
Our next question comes from Rich Anderson with SMBC. Please go ahead.
Richard Anderson -- SMBC -- Analyst
Thank you and Happy Valentine's Day.
Scott D. Peters -- Chairman of the Board, CEO and President
Yes.
Richard Anderson -- SMBC -- Analyst
There's love in the air for HTA today.
Scott D. Peters -- Chairman of the Board, CEO and President
It's just love in the air, just period.
Richard Anderson -- SMBC -- Analyst
So, you guys mentioned -- Amanda, you mentioned longer lease duration in 2019 for leasing activity to seven -- over seven years. I'm wondering if you get -- by granting that, do you get a bigger escalator out of it? I'm wondering if that's part of -- and I'm sure it is, and part of negotiation? And how much more, so that you allow for a longer stay?
Amanda Houghton -- Executive Vice President, Asset Management
Are you talking about on the releasing spread or on the contractual annual escalators?
Richard Anderson -- SMBC -- Analyst
On the contractual annual escalator.
Amanda Houghton -- Executive Vice President, Asset Management
It's determined by the market. So, we typically try to have our annual escalators near the growth in the market, so that at the end of the lease term, we don't have a significant roll up or roll down. So, generally, we've been right around that 3% to 4% regardless of the term.
Richard Anderson -- SMBC -- Analyst
Okay.
Scott D. Peters -- Chairman of the Board, CEO and President
Rich, I think in some situations, what we have seen though is that the larger the space, a 30,000, 40,000, 50,000 square feet, the more cognizant the opportunity is that you're trying to get to negotiate the escalator.
The smaller leases, you get the escalator a lot quicker than you do on the larger leases. And that's just sort of the -- there's that feeling today in the market that larger groups, larger healthcare systems recognize their prominence in that negotiation.
I think that is one of the things that has changed substantially both in the acquisition market and the leasing market is that, medical office is no longer a surprise. Medical office is no longer something that is a distant asset group of brokers. And healthcare system executives are very, very competent, have expertise and have knowledge about what's going on in the market.
Richard Anderson -- SMBC -- Analyst
Okay. So, 2018 you didn't do much in the way of acquisitions. And, of course, you did a lot more this year. Is it as simple as a cost of capital conversation or is there something else that drove you to do much, much more? Clearly, your stock was -- has done much better in 2019. But nothing else has influenced this change in the external growth profile of the company last year and going into 2020, simply cost to capital?
Scott D. Peters -- Chairman of the Board, CEO and President
Well, I think there's three things. And first and foremost, cost to capital. I mean, it needs to be accretive. We need to find opportunities to do that. So, first and foremost is that fact. And the next one below that is probably a couple steps down, but the next one is: Are we finding -- are we comfortable with where cap rates are? Are we comfortable where the cap rates that other folks are asking or bidding for assets?
If you remember 2018, first part 2019, I thought it got very, very aggressive on certain cap rates for portfolios. First of all, they didn't necessarily meet what we wanted to buy, but it was aggressive and therefore people kind of got themselves in a place where they started out at a cap rate that was, oh, my goodness. I think that's mellowed out a little bit. I think that now there's a little more rationality in the markets that we are in, with the acquisitions that we're seeing.
So, it's cost to capital. It's then where cap rates and cap rates that we can find assets? And then, third, it was where is the interest rate environment? If I look back at 2018, and Robert and I were talking about -- he thought it was going to four to 10 year. And I thought it was going to one. And it ended up in between.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Somehow, Scott won that one.
Scott D. Peters -- Chairman of the Board, CEO and President
But that was a big decision point. And I think, management teams, boards of directors, had conversations about how did they want to use their balance sheet. And traditionally, over the last 30 years, if interest rates go up, cap rates go up, Rich. I mean, I don't know. That's -- I'm not sure that works like that anymore, but.
So, we were very cognizant of not wanting to be on the wrong end of a move that maybe we didn't see or was projected to come. I think that the feeling internally now is that interest rates are probably where they're going to be for a while, cap rates become more consistent and our cost to capital is something that we can find accretive acquisitions for.
Richard Anderson -- SMBC -- Analyst
Yes. Good stuff. Thanks. And then last from me. How much does your external growth expectation for 2020 impact your per-share guidance? In other words, if you did nothing this year, how much growth would we not see, if that makes any sense?
Scott D. Peters -- Chairman of the Board, CEO and President
It does. And I'll let Robert answer that.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes. I think it's $0.01 or $0.02. And I think some of that's frankly factored into the range that we provided. If we're unable to hit our acquisition targets, not deployed capital, I think we end at the low end of range. If we're able to certainly meet our acquisition targets and exceed them, I think we end up closer to the higher end of our earnings target range.
Richard Anderson -- SMBC -- Analyst
Okay. And I got one more for you, Robert. What are you assuming sort of the timing of the forward settle over the course of the year?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes, no -- so, we put in that. Our earnings estimates has an average of 226 million diluted shares which would imply that we settle it close to June 30 or spread it right around the midpoint of the year.
Richard Anderson -- SMBC -- Analyst
Okay, perfect. Thanks very much.
Operator
Our next question comes from Todd Stender with Wells Fargo. Please go ahead.
Todd Stender -- Wells Fargo -- Analyst
Thank you. My question piggybacks on that last one regarding the forward. So, that's all you have for the equity. But when you look at your stock price right now relative to where you price the forward, could you -- you can still tap your regular ATM, right? But you still have to balance the good FFO guidance as you've projected. How you're kind of thinking about using more equity than maybe what you have in the forward?
Scott D. Peters -- Chairman of the Board, CEO and President
We'll go back to the -- we're fortunate right now. I think we are seeing opportunities. We started to see those in the last half of the year. We wanted to put ourselves in 2020, 2021 where you and I have actually talked about it where we focus on our FFO growth and we focus on getting shareholder value back to where -- not back to, but to where we think it should be.
We're in a position to do that. I always try to put us in a position that if nothing else happens, we are at least successful from what we communicate to people when we talk to them. And I think we're there now. I think with the opportunities we have, the balance sheet we have, what we're seeing in our leasing pipeline, 2020 is a year where we just need to execute and do a decent job on that.
If we see other opportunities or if there are opportunities where we can make it accretive, make our FFO growth in addition to what we would normally have done, then we would take advantage of that. But right now, we're very well-positioned and we just need to execute.
Todd Stender -- Wells Fargo -- Analyst
Thank you, Scott. That's helpful. Because when you look at your debt-to-EBITDA at 5.7%, pro forma with the forward, it gets you down to 5%. But it may not necessarily go to 5% and that just assumes that you're going to have incremental debt coming with not new equities, is that fair to say, a little more debt maybe?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Well, I think what it assumes is that we stay kind of at the 5:7 range. So, as we make acquisitions, we'll draw down the equity that maintains our leverage in that 5.5 to 6 range that we're comfortable with. But the important thing is we do have the dry powder, the capital is already raised. We've got the certainty to pursue the acquisition pipeline that we see and the opportunities that we see despite any kind of volatility that we have that might come up throughout this year. So, we feel comfortable in how we're pursuing those.
Todd Stender -- Wells Fargo -- Analyst
Okay, thank you. And the last question, when you look at that -- when you look at the spread between FFO and FAD, you've got a recurring capex in there that can chew away at some of your per share growth. How are you guys thinking about capex for 2020, maybe on a percentage of NOI basis? Maybe just talk about that. Thank you.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
What we think from a maintenance perspective that we've outlined that we would expect it to be in, call it, 13% to 14% of NOI, consistently. And we expect that to be the case in 2020. I think where the opportunity is for it to go higher is if we actually start to -- if and when we start to get occupancy growth associated with that, you might see the capital associated with tick a little bit higher. Of course, that's kind of a onetime item and then you see the NOI increase on a corresponding basis.
So, we expect 13% to 14% with anything above that really driven by occupancy growth.
Todd Stender -- Wells Fargo -- Analyst
Okay, thank you.
Operator
Our next question comes from Sarah Tan with JPMorgan. Please go ahead.
Sarah Tan -- JPMorgan -- Analyst
Hi, I'm on for Michael Mueller. Just a question on development extensions. I'm wondering if there is a shadow pipeline of development and extensions that you have and how big is it in terms of dollars, given the two recent announcements, the additions you made to development pipeline the last quarter?
Scott D. Peters -- Chairman of the Board, CEO and President
Well, we -- the answer to that is, as I mentioned, yes. We do have opportunities that we see now or that we have discussions with, that are already inherent in our portfolio. I don't want to talk about them specifically, because we haven't either determined to move forward or transaction hasn't been concluded. So, we do have that opportunity.
Now, we also are looking for new opportunities that are out there that "Are more -- are competitive", where there's two or three of us looking to do the development and it's in a major market and it's with the right healthcare system and so forth.
So, we've got a combination of those, but we do have -- I always like to feel that we are -- we control our own success. And in the development side of the equation now, we have taken the last 18 months, 12 months, 6 months to find those opportunities, to develop those opportunities that are inherent in our portfolio. So, certainly for the next couple of years, we have the development that we can bring onboard to help us with that tool that adds on to our other abilities to generate earnings.
Sarah Tan -- JPMorgan -- Analyst
Thank you.
Operator
Our next question comes from Lukas Hartwich with Green Street Advisors. Please go ahead.
Lukas Hartwich -- Green Street Advisors -- Analyst
Thanks. On your yield guidance for '20 acquisitions, what is that before synergies and how long do you think it takes to get to the number you quoted?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
We baked in the typical 20 to 30 basis points that we typically achieve when we buy in our markets on that. So you can take about 25 basis points off to get what we had historically provided on just a straight cash arm's length transaction.
And for us to get those synergies, like I said, the only synergies were included are really the elimination of a third party property management fees. So, typically, that happens within the first 90 days of a new acquisition in our key markets.
Lukas Hartwich -- Green Street Advisors -- Analyst
Great. And then just one other quick one. Do you guys ever underwrite non-MOB acquisitions?
Scott D. Peters -- Chairman of the Board, CEO and President
Can you be more clear on that?
Lukas Hartwich -- Green Street Advisors -- Analyst
Just other segments of healthcare real estate, skilled nursing, senior housing? I know you guys have a smattering of that in your portfolio.
Scott D. Peters -- Chairman of the Board, CEO and President
We do.
Lukas Hartwich -- Green Street Advisors -- Analyst
I'm just curious if you underwrite new deals?
Scott D. Peters -- Chairman of the Board, CEO and President
Well, I think that -- we don't underwrite them. I would tell you that we are -- we try to be as knowledgeable about the whole healthcare sector as we possibly can. If you don't actually buy it, I'd step back and say those that do have far greater expertise than we do. But internally and externally, we try to be as in tune with transactions that happen across the whole spaces as I possibly can be. Caroline does the same thing, Robert, Amanda.
Our people in the -- our leasing teams, we've got some what we call senior vice presidents of leasing, they're very experienced. They have been with us now mostly five, six, seven years. So, we try to keep ourselves very much aware of where healthcare systems are going, what transactions are in the marketplace and what transitions may or may not be going on.
Lukas Hartwich -- Green Street Advisors -- Analyst
Perfect. Thank you.
Operator
Our next question comes from Vikram Malhotra with Morgan Stanley. Please go ahead.
Vikram Malhotra -- Morgan Stanley -- Analyst
Thanks for taking the questions. Robert, just to clarify, so the $1.50 million to $1.3 million you have baked in were asset intended for sale. How does that relate to the $50 million in dispositions? I'm assuming they're related, but it just seems like -- they seem different numbers.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I think there's a little bit of a difference here. We put $50 million out there as a -- this is the normal run rate given our experience in getting things to market what ultimately closes. Really it translates to a handful of dispositions that we think will ultimately close, given the process that Scott mentioned we go through.
Scott D. Peters -- Chairman of the Board, CEO and President
It's 12 months.
Vikram Malhotra -- Morgan Stanley -- Analyst
Well, let's say $5 million NOI would sound like more disposition volume?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I'm not sure with the $5 million of NOI. You're taking our intended --
Vikram Malhotra -- Morgan Stanley -- Analyst
Just annualizing, yes.
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
I got you. I understand what you're saying. Yes, I think there's a probability that things ultimately close in there that we weigh in the disposition guidance. If things -- dispositions go higher than that, I think you'd see a corresponding increase in expected acquisitions on that.
I think as you look at the intended for sale in the same store though, I think the important thing is there we try to remain conservative and consistent with our guidelines. Again, if we had included all the properties that are in the intended for sale bucket, we would be reporting higher same-store growth, not lower.
Vikram Malhotra -- Morgan Stanley -- Analyst
No. No. I'm not focusing on the growth. I'm just wondering $5 million NOI means a lot more volume than $50 million. So, I'm just wondering like over what timeframe are you looking to sell the intended for sale?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes. No, I think the cap rates that we'd see on the dispositions ends up being in that. I think we put in there kind of a 6% type range, 6% to 6.5%. And I think just from a guidance perspective, we're giving kind of the midpoint of what we ultimately expect will happen. But again, if it ends up being higher than that, I think you'll see a corresponding increase in the acquisitions
Vikram Malhotra -- Morgan Stanley -- Analyst
Okay. So, they could be really, really high cap rate deals?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
No. No, I think this is what I would say, is if you see us transact on the $1.2 million annualized, you'll see us have cap rates in that 6% plus or minus range. And you'll just see us increase the acquisition rate that we're doing.
Vikram Malhotra -- Morgan Stanley -- Analyst
Okay, got it. And then just to clarify. The operating synergies you baked. I'm just -- I want to make sure with the platform today you are getting the synergy day one, but you also reference that G&A is going up and you're still building out the leasing and asset management folks.
So, I guess they're different pieces, but I'm just wondering, is it fair to assume you've got that synergies day one as opposed to over time?
Scott D. Peters -- Chairman of the Board, CEO and President
Well, there's two buckets. One is, day one, as Robert pointed out, where you just take the third party, take it off. And Robert said, you can get it in 90 days. But traditionally now, when you buy an asset, the people go away, the third party goes away and maybe there's a 30-day transition because you've notified them and they come on to our platform.
The second bucket is when we put our engineers, we put our property managers on the asset where we rebudget or take the opportunity throughout the year or throughout the next couple of quarters to put their service contracts onto our contracts within the marketplace that we see that tend to be much more favorable than the contract that they're on. Typically, one-off assets with local representation or smaller or national developers that their business is not property management, their business is not owning 500,000 to 1 million square feet at the market. So, we can bundle. I mean, that's the opportunity that we get.
So, there are two steps that we get in. And we tend to get one right away and then we get the second one probably half the benefit in the first year and then we continue to get benefit the second year and then we continue after that to provide more and more services to the tenant at retail -- excuse me, at wholesale, not retail, and we get the benefit of that.
Vikram Malhotra -- Morgan Stanley -- Analyst
Okay. And then just last one. Robert, you and I briefly talked about this. But St. Vincent in downtown LA is either closed or deciding to close. I know you don't have an MOB on campus but you have an MOB close by. Can you talk about sort of your experience and kind of how you underwrote the original transaction? And any puts and takes there given the potential closure?
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Yes. This is the acquisitions that we made earlier this year in downtown LA and Third Street. For an underwriting perspective, we're always looking at what is the submarket? What is the market? What is the long-term demand for healthcare?
That submarket is one that is just exploding. If you look at downtown LA and all the investment that's taking place, you've seen something like $20 billion of investment go in there from a real estate perspective over the last 5 years and expect over the next 5, 10 years.
So, it's really an area that's growing, you're seeing a lot of the incomes come up. And so, we like that from just a demographic perspective. From a straight healthcare perspective on asset, we liked actually that none of the tenants are actually affiliated with the hospital. It's really with competitive practices that wanted to be in that area from their ability to attract patients in there.
So, when we did our underwriting, we looked at it from that perspective. Understood where the physicians and practices of the building were getting their demand from. Saw that as an area that was going to continue not just where it is, but really increase in value and demand there.
So, the hospital being next door was actually if anything negative at the time because we didn't see that as being additive at the moment. Now, the interesting thing is if the hospital closes, we're actually going to likely benefit.
We're not subject to ground leases. We're totally fee simple interest. And some of the tenants that are actually on campus are looking for space and we might see them come into our building. So, we see no immediate impact. We see the long-term fundamentals of our underwriting playing out, if not slightly outperforming where we thought we'd be at this point in time.
Scott D. Peters -- Chairman of the Board, CEO and President
And I will just reinforce. I went to the asset before we bought it. I see all the assets we buy. This is location, location, location and it's tenancy, UCLAs in the building. We've got some major tenants, they want to expand. This is a building where we love for investors to look at to see it, because what we bought it at and what it's going to be valued at today and what it's going to be valued at three, five years from now, I think our occupancies up 3% or 4%, we're 95%, guided at 90%, guided at 89%, 90%. It could get full here in the next couple of months, which is what Amanda is talking about. I wish I had a lot more though that type of asset in our portfolio.
But you've got to go look. You've got to make sure. If we had occupancy from the hospital, that would have been a problem. If it would have been on campus with ground leases, that would have been a problem. But we've checked the boxes, and this particular case it's turned out better and it is ahead of our underwriting than when we bought it.
Vikram Malhotra -- Morgan Stanley -- Analyst
Okay, great. Thank you.
Scott D. Peters -- Chairman of the Board, CEO and President
So, thanks for bringing that one up.
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, CEO and President
Well, thank you very much. I know that there are some conferences coming up in the next month or next two or three weeks. We'll be there and we look forward to talking to as many folks as we can and we're very excited about 2020. Thank you.
Operator
[Operator Closing Remarks]
Duration: 85 minutes
Call participants:
David Gershenson -- Chief Accounting Officer
Scott D. Peters -- Chairman of the Board, CEO and President
Amanda Houghton -- Executive Vice President, Asset Management
Robert A. Milligan -- Chief Financial Officer, Treasurer and Secretary
Omotayo Okusanya -- Mizuho -- Analyst
Daniel Bernstein -- Capital One -- Analyst
Nicholas Joseph -- Citigroup -- Analyst
Chad Vanacore -- Stifel -- Analyst
Connor Siversky -- Berenberg -- Analyst
Jonathan Hughes -- Raymond James -- Analyst
Richard Anderson -- SMBC -- Analyst
Todd Stender -- Wells Fargo -- Analyst
Sarah Tan -- JPMorgan -- Analyst
Lukas Hartwich -- Green Street Advisors -- Analyst
Vikram Malhotra -- Morgan Stanley -- Analyst
