ヘルスケア・リアルティ（HR）2026年第3四半期決算説明会：NOI 5.1%増でガイダンスを引き上げ

主要ポイント

• ヘルスケア・リアルティが発表した2026年第3四半期のノーマライズドFFOは1株あたり0.42ドル、FADは1株あたり0.32ドル、既存物件キャッシュNOI成長率は5.1%でした。
• 既存物件の入居率は前四半期比で30ベーシスポイント上昇し93.1%となり、8万5,000平方フィートを超える純増（純吸収）に支えられました。契約済み未入居の賃貸契約は48万平方フィートを超えました。
• 同社は約150万平方フィートの新規および更新賃貸契約を完了しました。キャッシュ・リーシング・スプレッドは8.6%に達し、過去約10年間で最高水準となりました。一方、テナント維持率は88%でした。
• 再開発ポートフォリオの賃貸率は前四半期比で500ベーシスポイント改善し72%となり、11万平方フィートを超える新規賃貸契約が寄与しました。
• 経営陣は2026年通期の業績予想を今年3回目となる上方修正を行い、ノーマライズドFFOの見通しを1株あたり1.65〜1.67ドルに、既存物件キャッシュNOI成長率の見通しを5.0%〜5.25%へと引き上げました。
• ヘルスケア・リアルティは7,500万ドルの自社株買いを当四半期および10月を通じて実施し、年初来の自社株買い総額は2億5,000万ドルに達しました。経営陣は引き続き、相対的なリターンに基づき自社株買いとジョイントベンチャーによる買収を優先する方針です。

主要財務データ

事業および営業業績

医療システムによる賃貸契約は60万平方フィート超の第3四半期総賃貸面積を占めた。Ascension St. Thomasは1万8,000平方フィートの新規賃貸契約を締結したほか、18万5,000平方フィートについてナッシュビルで10年間の更新契約を締結した。Healthcare Realtyはさらに3,500万ドル規模のAscension St. Thomas Westキャンパス内の3物件の再開発を計画している。

その他、シダーズ・サイナイ、トリニティ・ヘルス、インディアナ大学ヘルスとの主な賃貸契約が挙げられる。新規および更新契約の合計パイプラインは引き続き300万平方フィートを超えており、その約半数を医療システムが占めている。

経営陣は事業の勢いについて、外来需要の増加、医療用オフィスの新規建設の少なさ、代替スペースを求めるテナントのコスト上昇が要因であるとした。同社によると、契約上の賃料エスカレーション率は一般に少なくとも3%であり、追加資本が提供される一部の賃貸契約では4%に近づくという。

ヘルスケア・リアルティはポートフォリオ最適化の進展についても発表しました。 年初来で、同社は2億ドルを超える資産を売却・流動化し、さらに1億ドル超が契約締結済みまたは基本合意書（LOI）の対象となっています。経営陣は、2026年の平均売却利回りが5%台半ばになると予想しています。

同社とKKRは8棟のメディカル・オフィス・ビルを取得し、さらに1物件の契約を締結しました。総取引額は3億3,800万ドル（うち6,700万ドルがヘルスケア・リアルティの持分）。経営陣は、これらの投資が7%台半ばの初期キャッシュ利回りをヘルスケア・リアルティにもたらす（追加のプラットフォーム効果を除く）と述べました。

経営陣の見通し（ガイダンス）

経営陣は、見通しの上方修正について、好調な賃貸実績とポートフォリオ全体での1桁台半ばのキャッシュ賃料スプレッドを反映したものだと述べました。資金の調達と使途の計画は8,500万ドル増加し、追加の自社株買いやジョイントベンチャーによる物件取得のヘルスケア・リアルティ持分が織り込まれました。また、資産売却ガイダンスも同額引き上げられました。

このガイダンスには、これまでに発表された物件取得、再開発、その他の資本使途のみが含まれています。追加の物件取得や自社株買いは含まれていません。

リスクと注視すべきポイント

• 経営陣は、第4四半期の吸収需要（アブソープション）が直近の四半期より減少すると予想していますが、マイナスになるとは見込んでいません。また、同四半期は2025年後半の堅調な吸収需要の反動により、前年同期比の比較ハードルが高くなっています。
• 金利上昇に伴い、買い手と売り手がさらなる安定を待つ姿勢を強めるため、取引活動が減速する可能性があります。経営陣は、バリューアップ目的の買収主体のレバレッジ依存度が高いため、より脆弱な資産ほど影響を受けやすいと指摘しました。
• 再開発やリーシングによる収益貢献は後半の期間に偏っています。大型の外来クリニック向け賃貸契約のなかには、工事完了とテナント入居までに約18か月を要するものもあります。
• 建設コストやテナントの内装工事費用は高止まりしています。ヘルスケア・リアルティは、従来の賃貸契約では資本拠出を限定しているものの、再開発物件の賃貸ではより高額なテナント工事費用（TI費用）が必要となる場合があると述べました。
• 経営陣は、現在の環境下では新規開発は希薄化（ディリューティブ）をもたらすと説明し、コスト高や事前契約（プレリース）要件の厳格化により、メディカル・オフィス・ビルの建設は引き続き限定的になると予想しています。

アナリスト質疑応答のハイライト

賃料スプレッドと稼働率： 経営陣は、8.6%となったキャッシュ賃料スプレッドはアセンション（Ascension）のウェスト・キャンパスにおける取引が寄与したものの、それがなくても6%を超えていただろうと述べました。同社は5%以上程度のスプレッドを目標としており、ポートフォリオのマーク・ツー・マーケットの機会を1桁台半ばかそれよりやや高い水準とみています。契約済みで未入居の賃貸契約が開始されれば、既存物件稼働率は94%に近づく可能性があります。

長期的なNOI成長率： 入居率の上昇がなくても、経営陣はおよそ 3%の契約上の賃料自動引き上げおよび現金ベースの賃料改定差額（リース・スプレッド）を、3%〜4%の既存物件NOI成長の基盤と位置付けています。需要の吸収、利益率の改善、およびリース条件の強化により、成長率はこのレンジを超える可能性があります。

資本配分： ヘルスケア・リアルティは、相対価値に基づいて自社株買いとジョイントベンチャーによる物件取得の間で柔軟に資金を配分する方針です。経営陣は、レバレッジ目標を5倍台半ば付近に維持しながら、戦略的な資産売却によってこれら両方の優先課題に資金を充てることができると述べました。

FFO対FAD： 大規模リースの早期更新により、加重平均賃貸期間はおよそ 50カ月から65カ月に延長されました。経営陣は、これらの取引が当初はFFOに寄与し、現金賃料の支払いが始まるにつれてFADの成長がそれに続くと見込んでいます。

外来診療需要： 経営陣によると、入院から外来ケアへの移行が加速しており、医療用オフィススペースの需要を支えています。現在の医療システムに関する協議は、新規開発よりもヘルスケア・リアルティの既存ポートフォリオ内での効率的なリース運用に重点が置かれています。

2027年の賃貸契約満了： 経営陣は、満了予定のスペースに対する合理的な査定前提として80%台半ばから後半の契約維持率を見込んでおり、契約更新（ロールオーバー）を単なる空室リスクではなく、条件を改善する機会と捉えています。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Hello, everyone. Thank you for joining us, and welcome to Healthcare Realty Third Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] I will now hand the conference over to Doris Lo. Doris, please go ahead.

Doris Lo

Thank you for joining us today for Healthcare Realty's Third Quarter 2026 Earnings Conference Call. A reminder that except for the historical information contained within, the matters discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. These forward-looking statements represent the company's judgment as of the date of this call. The company disclaims any obligation to update this forward-looking material. .

Discussion of risks and risk factors are included in our press release and detailed in our filings with the SEC. Certain non-GAAP financial measures will be discussed on this call. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the quarter ended September 30, 2026. The company's earnings press release and earnings supplemental information are available on the company's website. I'd now like to turn the call over to our President and CEO, Pete Scott.

Peter Scott

Thanks, Doris. Joining me on the call today are Rob Hull, Dan Gabbay and Ryan Crowley. The third quarter was another strong quarter for Healthcare Realty. Higher interest rates have weighed on real estate stocks, including ours, but not on our fundamentals. Demand for our space is rising and so are our rents. Let me start with our results. Normalized FFO was $0.42 per share. Same-store NOI grew 5.1%. We signed 1.5 million square feet of leases including 430,000 square feet of new leases. Our redevelopment portfolio is now 72% leased, up 500 basis points sequentially.

Same-store occupancy improved to 93.1%. Cash leasing spreads were 8.6%, and we are raising guidance for the third time this year. Let's turn to capital allocation. We remain disciplined and everything we do is aimed at improving our earnings growth. Earlier this year, we executed on $1.1 billion of debt refinancings at a blended interest rate of approximately 4%. Our balance sheet gives us the flexibility to be nimble across our 2 main external capital allocation priorities, stock buybacks and joint venture acquisitions. On stock buybacks during the quarter and through October, we repurchased $75 million of stock at an average price of approximately $17.75 bringing our year-to-date total to $250 million.

Our philosophy on buybacks is simple. Our stock must compete for capital like any other investment. When we trade at a meaningful discount as we do today, buying back our stock is one of the most accretive uses of our capital. On joint venture acquisitions, year-to-date, we have acquired 8 medical office buildings and have 1 more under contract for a total of $338 million or $67 million at our share. That is within the $50 million to $100 million range we outlined earlier this year. These investments carry a mid-7% initial cash yield to Healthcare Realty before accounting for meaningful additional platform benefits.

Together with our partners at KKR, we will pace our acquisitions with discipline. We will also continue to evaluate select asset sales to help systems that want to own strategic real estate on their hospital campuses and to private buyers who remain attracted to the strong tailwinds benefiting our sector. Year-to-date, we have monetized over $200 million of assets with over $100 million more under contract or LOI. For the year, we expect our average disposition yield to be in the mid-5% range. Opportunistically selling assets to fund buybacks and joint venture acquisitions is significantly accretive to earnings.

Shifting to the MOB sector and why we are so well positioned. First, growth. Medical office can deliver mid-single-digit growth with the tailwinds we are experiencing and our results show it. Tenant demand continues to rise with the needs of an aging population, site of care continues to shift to outpatient settings, while new MOB supply remains muted due to elevated construction and debt financing costs. Second, pricing power. Sector-wide occupancy is now nearly 93% at historical peaks. Rising tenant demand and constrained new supply are driving rents higher in our buildings. The evidence is cash leasing spreads in excess of 5% year-to-date and nearly 90% retention rates.

We have a best-in-class portfolio predominantly located in the nation's fastest-growing markets, which positions us well to continue to benefit from these powerful dynamics. Third, return on capital. Our leasing model is designed to drive ROI across the portfolio. Every leasing decision is made on economic returns, not volume. That rigor is paying off. Since we introduced the new model, lease IRRs have improved nearly 3,000 basis points and payback periods are down 25%. With higher occupancy and retention our capital burden is reduced and our profitability improved.

Our plan is to continue repeating this quarter after quarter. Fourth, focus. Healthcare Realty is a pure play the only public REIT focused exclusively on medical office. For others, it's an afterthought. For us, it is 100% of what we do. Our capital, our people and our attention are never divided. This laser focus is leading to better results across the board. We are outperforming that is by design. In finishing, with fundamentals firmly on our side, we will keep executing, putting up strong numbers, allocating capital with discipline, following through on our commitments and focusing on the things we can control. Healthcare Realty offers much better growth than our share price reflects. This motivates us every day. With that, let me turn the call over to Rob.

Robert Hull

Good morning, everyone, and thank you, Pete. Strong operating momentum continued in the third quarter. We completed approximately 1.5 million square feet of new and renewal leasing and produced more than 85,000 square feet of positive same-store absorption. Increasing occupancy 30 basis points sequentially to 93.1%. Retention came in strong at 88%. In addition, we had more than 480,000 square feet of signed nonoccupied leases at quarter end providing a clear path to further occupancy gains in the fourth quarter and into 2027. Cash leasing spreads were another bright spot at 8.6%.

The highest level for the company in nearly a decade. Health Systems accounted for more than 600,000 square feet of leasing this quarter. Within this activity, Ascension St. Thomas in Nashville, signed new leases totaling 18,000 square feet and renewed 185,000 square feet for 10 years. Along with these leases, our planned $35 million redevelopment of 3 properties on the Ascension St. Thomas West Campus in Nashville, strengthens our relationship, complements the hospital's $120 million investment in the same campus and positions these properties for long-term growth.

Other notable health system leases this quarter were with Cedars-Sinai in Los Angeles, Trinity Health in Columbus, Ohio and Indiana University Health in Indianapolis, underscoring the value of these long-term partnerships. We also made meaningful progress on redevelopment leasing. New leasing within this portfolio was over 110,000 square feet, nearly twice the second quarter level and increased the redevelopment portfolio's lease rate from 67% to 72%. The broader supply/demand backdrop in our sector remains very favorable. New medical outpatient construction is limited, while demand continues to benefit from health systems moving more care into lower-cost outpatient settings. These dynamics support increasing levels of occupancy and reinforce the positive environment for rent growth, bolstering our confidence in the leasing outlook.

Our new and renewal pipeline remains robust at more than 3 million square feet, with health systems representing approximately half of that opportunity. I'll now turn the call over to Dan to discuss financial results.

Daniel Gabbay

Thanks, Rob. Let me turn back to our financial performance. Our results remain consistently strong quarter-over-quarter with normalized FFO per share of $0.42, same-store cash NOI growth of 5.1% and FAD per share of $0.32 and a 76% payout ratio. In September and October, we repurchased $75 million worth of shares at a weighted average price of $17.74. This represents an accretive FFO yield in excess of 9% and an important component of our long-term capital allocation framework. Repurchases were funded with previously announced and closed dispositions such as the Kennestone Cancer Center for $36 million and our nearly complete exit from the Chicago market.

Leverage as of September 30 ticked down slightly to 5.5x consistent with our mid-5x target in our 2026 guidance. We have over $1.2 billion liquidity on our line of credit after netting out our commercial paper balances, plus an additional $400 million delayed draw term loan that backstops our July 2027 bond maturity. Our only floating rate debt today is our commercial paper and a $100 million of unswapped term loans as we swap the other $400 million earlier this year until 2029 at a 3.3% SOFR rate. We maintained significant flexibility and our capital structure was effectively locked in for the duration of our strategic plan period.

Turning to guidance, which you can find on Page 10 of our supplemental report, we increased our full year normalized FFO per share guidance range to $1.65 to $1.67, up $0.02 at the midpoint to a $1.66. We also raised full year same-store cash NOI growth guidance to a range of 5% to 5.25%, up 75 basis points at the bottom end of the range and 25 basis points at the upper end. These results are driven by strong leasing outcomes and portfolio-wide mid-single-digit cash leasing spreads. Sources and uses of capital increased by $85 million to reflect the incremental share repurchases and JV acquisitions at share. Disposition guidance increased by the same amount.

Please recall our guidance only reflects acquisitions, redevelopments or other uses of capital announced to date. Operator, let's go ahead with Q&A.

Operator

[Operator Instructions] Your first question is from the line of Rich Anderson from Cantor Fitzgerald.

質疑応答

Richard Anderson

Okay. So I want to first talk about the cash releasing spread number of $8.6 million. Obviously, you're guiding to something slightly lower in that mid-single digits. But how repeatable do you think this is -- should we be putting 5% or 6% cash releasing spreads in our 2029 numbers? And same question on same-store NOI growth, how much of that just occupancy that will run its course and then you're left with something lower. I'm just curious what we should think about on these 2 measures, in particular, as a long-term run rate for medical office and specifically HR?

Peter Scott

Sure. Rich, it's Pete here. A decent amount in that question, and let me hit each of those. One, I don't want to lose sight of the fact that we had a great quarter, and we are having a great year just across the board. We've raised guidance 3x including by $0.02 each of the last couple of quarters. And if you look back 1.5 years ago, our FFO was $1.56 if I am pulling up the right number. Off the top of my head today, we're at $1.66, and same-store occupancy 1.5 years ago was at 89%. Today, it's at 93%. So I think we've done a lot better than maybe we even expected. And along the way, fundamentals have absolutely improved.

And remember, two, we also sold $1 billion of assets and delevered almost a turn and still put up those kind of numbers. So as we think about cash leasing spreads, I think we've always been pretty consistent over the last year, 1.5 years that it needs to be better than what it historically has been. 8.6% is a great number. It is a great, great number. We did benefit from the West Campus and Ascension. So if you strip that out, we're still above 6%. And I think what we've said to investors and we'll say on this call is that we're going to keep trying to get in the 5% area, if not better. And I'm trying not to put a ceiling on anything because if I put a ceiling on occupancy 1.5 years ago, we'd be above that ceiling right now just based upon how fundamentals have improved.

So big picture, we feel really good about the backdrop and we're obviously going to push in every single area where we feel like we have pricing power.

Richard Anderson

Okay. And so maybe as a sort of a addition to that question, my second question here is on site-neutral payments. Obviously, a factor that's helping move more into lower-cost settings like yours. Do you have an expectation of that expanding further? And is that a part of your calculus as you go forward to? Are you seeing any sort of sort of evidence of that playing a role in your ability to have more pricing power and so on. Just curious what your thoughts are on that broader topic.

Peter Scott

Yes. I mean, absolutely. And I know we've been continuing to put out the shift to outpatient versus inpatient that chart in our investor decks. And I think people look at those charts. I know I look at those charts. And I believe that, that trend is here to stay. And I was actually reading a report yesterday that was sent across by one of the banks and in the inpatient-only rule, which is effectively what you're referring to right now, the amount of procedures coming off the inpatient-only list is rising at a very, very significant pace. And where is it going? It's going into outpatient facilities.

And then A couple of other examples I would just point to, you've had a few not-for-profits, actually start to acquire outpatient businesses. You look at Ascension St. Thomas bought AmSurg not that long ago. And then Bon Secours announced just this past week or last week that they were going to buy surgery partners. So the push into outpatient settings is accelerating in our view. And I think, again, it's just part of the fundamental backdrop that's working in our favor.

Richard Anderson

Awesome. Good quarter.

Operator

Your next question comes from the line of Michael Stroyeck from Green Street.

Michael Stroyeck

Could you maybe just provide some color on what you're seeing out in the transaction market. Has there been any repricing given higher rates? Or are you seeing bidding in at all as levered buyers pull back?

Peter Scott

Michael, it's Pete here. And I saw your note reducing cap rates. I'm glad you asked that question because I would like to address that. Look, from our perspective, we're still seeing core cap rates in the 5.5% to 6% area and core plus in the 6% to 6.5%. And area. So they've actually held in quite, quite well. The private bid for MOBs, which you did reference in your report, does remain very deep. And it's increasing. Transaction volumes are going up because private buyers see a lot of the same positive fundamentals that we see. Where I think you are seeing a bit of an impact is on the weaker assets in the marketplace, which, frankly, we don't traffic in that.

And you're probably seeing more of a shift in cap rates there. And the reason for that is weaker assets are basically value-add buyers and they're heavily, heavily dependent upon leverage. So if interest rates increase, like they have, cap rates are going to get impacted a lot more in the core to core plus areas of the market, buyers are not nearly as reliant upon debt as well. I think transaction volumes may slow a little bit. My guess is they're going to slow across the entire real estate industry as buyers and sellers wait for things to stabilize and that's just a natural thing. But we'll see what happens. I mean over the last couple of weeks, the treasuries have rallied so you've got your benchmark rates coming in, but I'm just telling you everything I know up and until this point. And obviously, it's still fluid.

Michael Stroyeck

Understood. Appreciate the color. Maybe a similar question on the acquisition side. So you called out the mid-7% initial cash yield on the JV deals. Can you just remind us where pricing is on those deals, excluding any JV fees? And I assume based on your answer there, there hasn't been any change in expectations on future deals, but -- just curious if that's still the same ballpark you expect to transact at in the future?

Peter Scott

Yes. I would say the core plus cap rate range I just articulated, the 6% to 6.5% that would be the blended cap rate for all the assets that we bought within that range. And obviously, we get an asset management fee on top of that, which gets us into the seventh before you get any additional other platform benefits. We talked to KKR all the time. They are a wonderful partner, and we look forward to doing more with them. As I said before, I think the transaction market may slow a little bit towards the end of the year, but it can turn back on pretty quickly too, if you get stability in interest rates. So we do not guide to acquisitions. So anything we would do either from an acquisition standpoint or from a stock buyback standpoint, is not included in our guidance right now. .

Operator

Your next question is from the line of Omotayo Okusanya from Deutsche Bank.

Omotayo Okusanya

Yes. Solid quarter there. Question around tenant improvements and leasing commissions. I know you guys are kind of focusing on overall on improving at least in economics. Can you just kind of talk a little bit about what you're kind of seeing on that end and how you're kind of working to kind of have less drag from that in your bottom line cash flow numbers?

Peter Scott

Yes. I did mention a little bit of this in the prepared remarks, but I will touch on it again. About 1.5 years ago, we did completely revamp our leasing model within the organization, and it coincided with significant changes within our asset management group, and we are economics driven and not volume driven. And I think prior to that, there was a very big push within this organization to be volume-driven probably to the detriment of your question around capital costs. And we've been very, very mindful to limit the amount of capital that we put out into deals, it ticked up a little bit this quarter. We got a few questions on that, but I will point the fact everybody back to, we did a heck of a lot of leasing deals in our redevelopments, which are likely to have slightly higher tenant improvement costs associated with that just given the fact that these are buildings and I've said this before, that have been underinvested into for probably decades.

When I think about regular way TIs, we have been holding the line on that despite the fact that construction costs continue to go up across the board. And building out medical space is more and more expensive today. So where is the money coming from, if we're not providing it to them, the tenants are coming out of pocket for that. Again, that's another area where we think we have a little bit of pricing power today. And it's also another reason why you're seeing retention go up so much in this space is one that really is not a development option for tenants to go to with development having like dropped off a cliff.

And then two, if a tenant wanted to move the build-out of their space is very, very expensive. And if expensive to move equipment. So the retention is working in our favor from that perspective. And the more tenants you retain, the less capital you put out the door, the more profitable the lease deal is to us. And that's another reason why you're seeing our IRRs go up, as I said, probably nearly 3,000 basis points when you look at deals we're doing now versus what was done a couple of years ago.

Omotayo Okusanya

Got you. And then another quick one on occupancy again. 93.1% as you mentioned a little earlier the industry felt was at 93% so you're kind of in line. But I think again, you guys have always held yourselves out of owning kind of premium assets in great locations. So just curious in regards to the outflow you feel you can get occupancy-wise kind of relative to where the overall industry is.

Peter Scott

Yes. I think our portfolio is situated in a way that we'd like to do better than market. But remember, we were at 89% and now we're at 93%. And I'm talking same-store with those numbers, just to be clear. So we've made some pretty good strides over the last 1.5 years. As Rob said in his script, we've got a pretty good snow pipeline. If you think about our snow pipeline today, that would get us closer to 94% as those leases commence. So we would like to do better than market. Believe me, we don't sit around here within this organization. and say, let's get to market and then job well done. We'd like to do better than that. But there will be a little bit of natural vacancy. I don't think we're going to be able to get up to 100%, but I certainly think we can do better than 93%.

I would also point out, too, and I know you know this because I saw your forecasting and you've got the redevelopment lease-up in there. We also look at total occupancy, right? And total occupancy today is trending towards, I think, right around 91%. I want to get total occupancy up to the market level numbers, not just same-store occupancy, and that's going to be a big driver of earnings over the next 1 to 2 years.

Operator

Your next question is from the line of Nick Yulico from Scotiabank.

Nicholas Yulico

I wanted to just turn to the next slide you have in the investor presentation on Page 21, the portfolio optimization update. In terms of the lease-up unstabilized bucket and the redevelopment bucket, you gave the NOI at the strategic plan, 2025 and stabilized NOI. So the gap there was the upside. How much of that -- is any of that upside already been captured? And how should we think about incremental upside being able to capture sort of now through the end of next year. .

Daniel Gabbay

It's Dan here. I'll take that one. And great question. Page 21 in that deck is something that we will update on a regular basis and that NOI that's second to last row of NOI is how we're currently trending. As we've always talked about with the redevelopment, especially in the lease-up portfolio, over the course of the 3-year plan, is this was more back-end weighted. If I go back to Pete's original comments, we talked about $50 million of NOI in the strat plan that we were looking to recapture that was lost in some of these assets post merger. And some of that was going to come after the strategic plan. We're looking to get $40 million of that $50 million back over the course of the 3-year plan.

And it is more back-end weighted just when you think about, again, we're leasing these up. It takes time to put the improvements in place. We talked about some of the ASCs earlier this year that can take 18 months on some of those large leases we signed in the Redact portfolio. So it is a little bit more back-end weighted. It's an upward curve. And I think these are good indications where we're currently trending in the back half of this year, and we'll continue to provide more guidance on these numbers as we have more leasing updates. But think about it as back-ended over those 3 years. So as you think about getting later into '27 into '28, a lot more of this comes online.

Nicholas Yulico

Okay. And then my second question is just on the difference between FFO and FAD, where you're seeing more FFO benefit than FAD growth right now. I know Peter already talked about some of the leasing CapEx issues. But my other question is if you look on the adjustments there, like your straight loan adjustment is pretty large this year versus last year, even though revenue is down. So I don't know if there's a free rent issue sort of going on. But can you just talk about that line item and how think about that, if that impact reduces, which would also help going forward, which could help your FAD.

Peter Scott

Yes. it, I would probably I would encourage you to look at our lease expiration table alongside the straight-line rent comment. I do agree that you will start to see some nice FAD growth catch up to FFO. We had made a conscious effort to look out over the next couple of years. And look at large lease deals that we could accelerate. If you go back to the first quarter call, we talked about some significant large deals, almost 1 million square feet where they had maturities over the next couple of years, and we bundled them together and did one large renewal. We've been doing a lot of that within this organization. So if you look at our weighted average lease term, 1.5 years ago, it was like 50 months, today, it's somewhere in the range of like 65 months, and that's the result of getting out of some leases much earlier on before expiration. And you do get an initial FFO benefit and the FAD benefit is going to follow suit.

Operator

Your next question is from the line of Jamie Feldman from Wells Fargo.

Unknown Analyst

This is [ Jesus ] on for Jamie. Just with your current sources and uses already spoken for, how large is the remaining disposition pool that could fund additional JV investments or buybacks, particularly after the asset sales you've already completed in 2025 to strengthen the balance sheet.

Peter Scott

Yes. Maybe I'll jump in. I think I understand your question. As we think about additional JV investments and buybacks since we're right around that mid-5x net debt to EBITDA, a source of capital would certainly be strategic sales. We don't guide to that, just like we don't guide to capital allocation number. So as I said in my prepared remarks, we're certainly open-minded to selling more assets to the extent that we continue to trade at a discount to NAV and at the moment, a pretty significant discount to NAV, and we'll recycle that capital accretively into our 2 main external capital allocation priorities, that being buybacks and JV acquisitions, and it will be accretive.

Unknown Analyst

And the updated range implies roughly $0.40 to $0.42 of normalized FFO here in 4Q. What keeps the quarter for moving above that level despite all the additional buybacks and acquisition activity we've done. .

Daniel Gabbay

This is Dan. I'll take that question. It's a great question. I think as we've said all year long, we look to outperform. I think we've done that consistently through the course of the year. You're getting a little bit into the law of small averages as you get into fourth quarter. We feel good about our business across the board and have put out a range that we think is consistent with how we've been guiding over the course of this year. We feel good about our progress in Q4, and we'll look forward to providing those results as we get into February next year. We feel good about the business.

Operator

Your next question is from the line of Connor Mitchell from UBS.

Unknown Analyst

I'd kind of like to just continue on with that question line there. First, with the updated guidance, it seems like the same-store NOI may be a slight deceleration in the fourth quarter after some very healthy results at this point. Can you just provide some of the building blocks or maybe what will get you to the upside or even the downside for the updated guidance for NOI growth?

Peter Scott

Yes. I'll touch on that. I mean, look, we've had 6 straight quarters above 5%, which, for the way this business has historically generated same-store NOI, I'd say that's pretty good, right? And I think that's evidence that fundamentals have improved. When you think about the fourth quarter, I would just say that we're not forecasting as much absorption. I repeat that again. We are not forecasting as much, it's not that we're saying there's going to be no absorption or there's going to be negative absorption. It's just not as much in the fourth quarter. And perhaps that's a conservative number as we have a big snow pipeline and we try and get leases commenced.

And also, we have more pricing power today than we've ever had before with CLS. So with our CLS improving so I think that's probably the best way I can describe the way that our guidance works at the moment for the fourth quarter. And obviously, we always try and hit the high end of our guidance ranges.

Daniel Gabbay

And I'll just add, I mean, if you think about the building blocks, you commented on that. We talked about that a lot as well this year. It's 3% escalators in place and those cash leasing spreads. So if you're not picking up occupancy, we've always talked about delivering 3% to 4% same-store NOI. And the occupancy and pushing on our margins is how we drive above that as well as our leasing activity, absorption and cash leasing spreads. So just have the building blocks. I think we have a great fundamental business. But as Pete said, it's not as much absorption necessarily forecasted for Q4, and it's our toughest comp when you think about how much absorption we picked up in late last year as the new asset management model really gained steam after the change is middle of 2025.

Unknown Analyst

Okay. Really appreciate all the color. And then second, on the dispositions as well. I know you said that there's kind of a pipeline there, but it's not a commitment. But I'm just curious about kind of the process and that -- maybe how many of some of your targeted disposition assets are either ones that are either marketed or potentially just having conversations versus some that are more inbound request, either from the private buyers that you mentioned, or some of the partnerships with the health systems that are looking at the MOB assets that are on their campus already? Just kind of getting a sense of how that process and how the conversations kind of work for the dispositions.

Peter Scott

Yes. If you're selling back to a health system, you're not running a process and they're calling you, telling you their interest to buy back real estate. And I think it's probably as simple as that. We don't have any large portfolios or even small portfolios out with brokers at the moment. So we'd like to do our deals off market where we can, and I think that's the best execution. .

Operator

Your next question is from the line of Seth Bergey from Citi.

Seth Bergey

I just wanted to kind of go back to some of your comments on capital allocation. Just can you talk about kind of the decision with your JV partner to go out and acquire more assets? Is there just constraints on the amount of kind of capacity you can do? Or is it really kind of deal by deal specific in terms of what you would look to acquire in the future?

Peter Scott

Yes. Seth, I mean, obviously, our conversations are ongoing with our partner, and we screen everything that fits the underwriting criteria. It doesn't mean we're going to pursue it necessarily. I would maybe just focus a little bit on just numbers to date, right? So year-to-date, we've committed about $70 million into joint venture acquisition. That's our share. And year-to-date, we bought back $250 million worth of stock. So the way I look at those numbers is at times where we feel like our stock is trading a little bit better, we'll probably lean in more to doing JV acquisitions and at times where we feel like there's a disconnect between the public and private markets. We can shift and we can buy back stock, right?

We're not looking to be the largest platform out there. We're looking to do smart, disciplined capital allocation moves that maximize our earnings growth. and getting all of our asset sales done last year, deleveraging the balance sheet, putting ourselves in a position where we have flexibility to shift between one and the other was absolutely essential, and we're benefiting from that now.

Seth Bergey

Great. And I appreciate the comments earlier on the cash leasing spreads, but I know you kind of focus holistically on the rest of the lease economics as well. So as you kind of see fundamentals continuing to improve, where are you kind of pushing the most on lease economics and where are you focused on there?

Peter Scott

Yes. Good question. I mean, as we think about pricing power, it's not just cash leasing spreads. I think it's a combination of a few different things. Cash leasing spreads being one of them, escalators being another and then retention being another as well. And all 3 are moving in the right direction. On cash leasing spreads, we put up an 8.6% number this quarter, one of our strongest quarters ever. It's been a big focus of ours. That's up from 4.2% in the first quarter, and then we had 4.8% in the second quarter. So it's sequentially improving as the year has gone along.

On escalators, I'd say 3% is now the floor, not the ceiling. It's very rare for us to sign a deal below 3%. In fact, it's typically only because there's a renewal option in place, and the tenant had locked that in many, many years ago. But absent that, 3% is a minimum and in some select circumstances, if we have to provide additional capital, we're actually getting upwards close to 4%. And I think with inflation increasing, it's obviously something we're going to continue to try and push on our tenants. And I think on retention, I touched on it before, but we've averaged the high 80s. And again, I think that's really a function of the fact that there's not a lot of places for tenants to go at the moment. And it's also expensive for tenants to move. So it's working in our favor. So I think about pricing power is a combination of all of those and they're all trending in the right direction.

Operator

Your next question is from the line of Austin Wurschmidt from KeyBanc Capital Markets. [Operator Instructions]

Your next question comes from the line of Juan Sanabria from BMO Capital Markets.

Robin Haneland

This is Robin Haneland sitting in for Juan. I was just curious on health systems consolidation has definitely strengthened your outpatient demand. I'm just kind of curious where this consolidation is that could create overlapping locations, less space requirements and thus sort of strengthen tenant negotiation levels?

Peter Scott

Health system consolidation -- sorry, we couldn't hear you as well, but I think we understand the gist of the question. I can start and then if Rob wants to jump in. We have seen some consolidation. And also, as I mentioned before, we've also seen health systems expand their platforms with a couple of deals, I said with Ascension St. Thomas and Bon Secours earlier. I would say there's almost no overlap in this consolidation. It's not like they're consolidating to shut down business lines. It's consolidation to get bigger as an organization, consolidation to get synergies on their own cost side. But it's not about like getting out of a market, it's about expanding within that market. So I'd say it's complementary to what we are seeing out in the market.

And if anything, I think their profitability improving allows us, I think, to extract maybe even better lease deals. I would say these negotiations, though, with health systems, we do half our deals with health systems like it's not easy, right? Like it certainly work because we're changing what was a complacent market probably for many, many decades of everybody doing just like, hey, let's just do the cash leasing spread deal. So we're doing something different. It requires some explaining with the health systems. But from a consolidation perspective, I would say that we're seeing, if anything, only a benefit as a result of it.

Robin Haneland

That's helpful. And then as a follow-up on the 8.6% leasing spreads. Just curious what that suggests about the remaining sort of mark-to-market opportunity as we head into 2027?

Peter Scott

Yes. Look, as we think about the mark-to-market opportunity today, I would probably say somewhere in the mid-single digits, if not slightly better. And that's a number that we've been consistently quoting.

Operator

Your next question is from the line of -- from JP Morgan.

Unknown Analyst

Maybe following up on the occupancy question from earlier. Are there any particular markets where the remaining lease-up opportunities are concentrated to push the total portfolio and same-store number higher, as you mentioned? I don't know that I would say it's particularly concentrated. I would say that not all markets are equal in the medical office space. where we're having more success is certainly in the Southeast markets and a little bit up in Seattle. Where I think we've got some upside in front of us from an occupancy perspective. I would say Phoenix has always been little bit more of a challenging market. And then I would say some pockets down in Texas as well. So those would be 2 areas that we're certainly focused on. But I would say where we're seeing real outperformance is in our markets in the Southeast. And it's no coincidence that as you look at the assets we have been acquiring and it's typically in markets where we're having a lot of success.

Operator

Your next question is from the line of Dave Rodgers from Raymond James.

David Rodgers

Pete, you talked earlier about working the expiration schedule lower, I think, down to 3.1 million square feet for next year. So maybe you or Rob can give us a little bit of color now that you're getting kind of into that period of re-leasing or renewing space for 2027, what kind of the outlook, if you could give us a little peak into next year in terms of kind of the confidence around spaces, what you know is leaving and what you have pretty good confidence in keeping.

Peter Scott

Yes. Thanks, Dave. Good question. And we're proud of the fact that we've really worked our way through that lease expiration schedule. I got a lot of questions on that early on when I first started, and we've meaningfully improved it. I would say for next year, even though it would be great to sign every one of those leases tomorrow and have that number say 0, it just does take some time to get leasing done, but my view on retention would be no different than the retention numbers that I've quoted in the mid- to high 80s being a good underwriting assumption for what we think will happen with that expiring square footage. I also look at it sometimes people look at these tables and they think about it as like, Oh, there's a problem, I think just given what's happened in our space, lease roll is sometimes an opportunity as well. And so I'd say we're looking at it more as an opportunity and not as a problem that we're facing. So we feel quite good about it.

David Rodgers

Great. And then maybe just a follow-up on capital deployment. We've talked about, obviously, acquisitions and then the stock. Are there any other opportunities or avenues besides whether it's the JV wholly owned or back into your own stock? Are there opportunities to do development funding mortgage funding in the space, lending to some of the partners in a bigger way, the health systems as well. Any partnership opportunities you're seeing is obviously the capital markets tighten up a little bit.

Peter Scott

Yes. We've done a little bit of debt financing and in select circumstances. It makes sense for sure. I think if there was one area I would focus on, and we've said this a few times, I would expect us to increase our percent of NOI towards joint ventures going forward. Obviously, we want to grow the venture if we could do other joint ventures as well. And I'm not necessarily referring to this as like a recapitalization joint venture like we don't need to go and do that as a defensive move to delever. But if there was a way for us to utilize capital that likes this space, and we're a really good platform to bolt on to -- and we're one of the only public REIT that's actually looking to grow in the space.

We could be a really good partner for capital trying to enter the space. And so we will certainly continue to look at those types of opportunities because I think our assets trade pretty efficiently. And unless we're trading at a pretty significant premium to NAV, it's hard to make acquisitions accretive, right? And maybe one day, we will be trading at that kind of premium, and there's certainly plenty we can do. But in the interim, if we're not, if we want to grow our square footage, it's likely to come through additional joint ventures.

Operator

Your next question is from the line of Austin Wurschmidt from KeyBanc Capital Markets.

Austin Wurschmidt

All right. Great. So I guess, with tenants kind of having fewer options available today and just tying that back to the cash leasing spreads this quarter over 8% in the mid-single-digit kind of range you've pointed us to looking forward. How much is that mark-to-market narrowing versus where rents would underwrite on a new development, both on the starting rent. And then also, as you look to where that ends up 5 years or so down the line?

Peter Scott

Yes. That's a great question, Austin. Actually, we did add a slide to our investor presentation. this quarter. I know there's a lot of information that goes out when we put these earnings releases out. But I would point you to Page 17. And if anything, that spread just continues to widen and that's a function of construction costs continue to increase. So I see a lot of runway in front of us between new construction rental rates and in-place rental rates, and that's something we're going to draft off of. So it's a great question, and it is something we added additional disclosures on.

Austin Wurschmidt

I appreciate that. And then I'm also curious, just going back to the conversation around cap rates and some of the answers that you gave on core and core plus product, but when you talk to your partners, what's kind of your view on putting capital out at the cap rates you quoted for both of those product types. And then to the point -- on the last question, what are development yields today then that you would need, I guess, to justify the risk the risk of development and what's going on with interest rates as well?

Peter Scott

Yes. I think our development in -- the yields you are going to want to achieve is a function of the pre-leasing amounts, right? And I would say developers across the board have begun to require much higher preleasing amounts from health systems to do development. So I think a lot of health systems is doing them on their own today. But they're in effect, build-to-suit for themselves. And they've also got to be putting in typically expansion business lines that are very, very profitable to make that math pencil.

So as much as I'd like to say, developments will pick up. It's dilutive do developments right now. We have a few, we are working on at the moment. Nothing that's far enough along that we can announce but also no guarantee that we do those. But if we did, you should expect pretty good rental rates and a lot of pre-leasing within those developments. So I'm not too concerned about developments picking up anytime soon. I mean, especially with where construction costs have gone. I think it's going to remain quite low and depressed for a long time.

Operator

Your last question is from the line of Michael Carroll from RBC Capital Markets.

Michael Carroll

Pete, I have a bigger picture question. How are your discussions going on with your key health system relationships. And I'm just trying to understand what is their growth mindset and do the bigger better health systems? Do they want to grow? And if so, where is that focused at? Is that focused at the hospital campus or is that focused more off-campus?

Peter Scott

Yes, it's a combination of the 2, especially as you think about like outpatient surgery centers and so on and so forth. It's not always going to be on campus. So I would say they're looking at both avenues. I just thought -- it's a good question. Maybe I'll spend a second just broadly on health system relationships. One of the benefits of us being able to really get out in front of our strategic plan and putting up good numbers is, I've been able to spend a lot more time with health systems. I mean that's where I spend the majority of my time at the moment. And every conversation we have with the health system, we learned something new and we're able to come up with a lot of win-win type transactions.

And I think the evidence is in the volume of leases we've gotten done and then ultimately in the results that are coming out of those leases. So they are critical, important partners of us. We've highlighted deals we've done with Common Spirit. Deals we've done with Ascension recently in our latest investor deck. We continue to do a lot of lease deals. Baylor. We continue to do a lot of lease deals. I'm not going to name every health system, but like it's picked up a lot. And so I feel like that's one of the benefits we've had of getting through the cleanup faster than we thought is I can spend my time where shareholders want me to spend my time, which is with the health systems because better leasing turns into better profitability and better earnings, right, as opposed to dealing with like cleaning up a legacy portfolio. So I would say that, that's really been a big focus of ours, and the results underscore the benefits of all those conversations.

Michael Carroll

That's great. And then when you're partnering with these health systems, are you able to -- when you get a new relationship or you expand, are you able to utilize your existing portfolio where they can expand to? Or is it going to be more of like a development where our health system needs to go to some place where an asset doesn't exist and then HR needs to help them develop that or redevelop an existing building in that area.

Peter Scott

Yes. I think it's more the former than the latter at the moment. It's not to say that we aren't having conversations on the latter, but it's much more focused on how do we efficiently lease space inside of our existing portfolio.

Operator

There are no further questions at this time. I will now turn the call back to Peter Scott for closing remarks.

Peter Scott

Great. Thanks, everybody, for joining us for the third quarter call. Like I said, it was a great quarter. We're having a great year. I look forward to seeing many of you in Atlanta in the coming weeks, and we look forward to finishing out a strong year. Talk soon. Bye. .

Operator

This concludes today's call. Thank you for attending. You may now disconnect.