Visit Alliance to learn more. Related: Investors Must Think for Themselves. Throughout his career, Jake has worked on over $40 Million in land deals and actively working on $300 Million in development projects (Multifamily, Hospitality, Storage, Retail, and Medical Office . Ben Reinberg is Alliance Group Companies' founder and CEO. If there is one thing we can take away from 2020, it is that healthcare must be delivered physically and virtually. An investors approachif they wish to be more actively involved or instead be a passive investorwill also steer them to specific properties over others. HealthCare Appraisers is pleased to present its 2022 Medical Office Fundamentals Outlook, which is the product of discussions with numerous lenders, real estate brokers, investment bankers, and various other medical office entities, on subjects such as industry drivers, financial markets, capitalization rates, internal rates of return, as well as current trends and overall market conditions. We then use another company to send special offers through the mail on our behalf. J.P. Morgans website and/or mobile terms, privacy and security policies dont apply to the site or app you're about to visit. Sign up for the latest industry news and availabilities. According to Stifel Co-Head of Healthcare Investment Banking Mark Dempster, the biotech and life sciences segment is still drawing investor attention. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service. About. To put these costs in perspective, medical office buildings cost an average of $498 per square foot to build compared to distribution centers ($214/SF), strip malls ($245/SF), and traditional suburban office ($313/SF). Oct 2022 - Present5 months. The . However, increasingly, there is demand for medical offices located in more suburban and rural areas as patients seek care closer to home. A panel of industry experts that [], Economist John Chang, GlobeSt panelists still tout the sector over the long haul By John B. Mugford Its been a hell of a year, right? In making this statement, John Chang, senior VP and national director of research and advisory services with Calabasas, Calif.-based Marcus & Millichap Inc. (NYSE: MMI), was not only saying that [], Demand is strong for services and facilities, but roadblocks are holding up development, according to panel at InterFace Healthcare conference By John B. Mugford NASHVILLE, Tenn. As the country has dealt with the COVID-19 pandemic in recent years, behavioral health has become a national concern as more and more people struggle with a variety [], Posted in Behavioral Health, Feature Story, HREI editorial board members discuss the current difficulties associated with debt By John B. Mugford Spooked by economic uncertainty, most major publicly traded healthcare real estate (HRE) lenders have put their pencils down for the rest of 2022, making it difficult for developers and investors to obtain debt. The 2023-24 HREI Resource Guide is now accepting orders. Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by EquityMultiple or any other party, and MAY lose value. Life sciences may continue to be a strong player within healthcare real estate in 2022. The commercial real estate landscape has been shaken up over the past 18 months, with challenges presented for both businesses and landlords alike. CBRE's Medical Office & Healthcare practice is the leading provider of valuation and advisory services for the medical office and healthcare sectors. Medical office real estate was once considered so highly specialized that few individual investors wanted to add it to their portfolios. They should be sure to consider the cost of any potential building renovations and/or costly tenant buildouts, as well as any necessary operational improvements. Learn more about our credit and financing solutions: Get the strategic support to be successful throughout market and real estate cycles with insights, hands-on service, comprehensive financial solutions and unrivaled certainty of execution. Over the last six to eight years, medical office rents have stayed pretty much within a $4.00/SF range. Some markets, like Philadelphia, have less than 500,000 SF of development in the pipeline. SingleFamily, MultiFamily, OffMarket, Bergen County . Alliance invests in commercial real estate across the US. Revista (a medical property research platform) showed average asking net rates around $21.40/SF at the same time. Since 1995, Alliance Consolidated Group has acquired and invested in medical properties with net leases between $3 and $25 million across the United States. Investors must be able to afford the loss of their entire investment. Now in its 15th year, the HREI Resource Guide is the directory healthcare providers turn to when they need HRE professional services. Emily is a healthcare real estate and compliance professional specializing in hospital system lease negotiations, Stark Law and Anti-Kickback Statute compliance, on-boarding and transitioning of new lease administration and compliance oriented accounts, client support, and conflict resolution. According to Emerging Trends in Real Estate 2022, there will be new opportunities in both urban and suburban markets, with Sun Belt metropolitan areas like Austin, Miami, and Phoenix leading the way. Our professional team continually analyzes the market for excellent opportunities. Both medical office building [], A look at some big deals and JVs; slowing MOB sales; health system struggles By John B. Mugford As we entered 2022 and it looked as if the COVID-19 pandemic was finally in the rearview mirror, most of professionals involved healthcare real estate (HRE) were confident that good things were on the horizon for the [], MOBs remain a haven for investors, Cushman webinar panelists say By John B. Mugford The COVID-19 pandemic brought about many changes in how people go about their lives and conduct business. J.P. Morgan isnt responsible for (and doesnt provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan name. Medical office occupancy is relatively stronger than the commercial office sector and was significantly less disrupted by pandemic, with medical office asking rents averaging 2% growth year over year for the past five years and reaching an average $23 per square foot triple net by mid-year 2022. Asking rates ended at $23.69 per square foot, moving up 3.7 percent compared to the same time last year. A comprehensive cost assessment may also factor in any potential tax implications (though MOB is heavily tax-advantaged, as properties can usually be depreciated to offset an investors taxable revenue). In the Sun Belt region, where population growth among older Americans is driving MOB demand to new highs, cap rates average about 60 basis points lower than the national average. Our portfolio includes medical, retail, industrial and office properties. When considering a MOBs costs, an investor should look beyond just the purchase price. The rise of telehealth initially created some concern that physicians would exit the medical office space instead of greater telehealth accessibility, but that has not proven the case. In Boston, a market known as one of the strongest in the life sciences segment, laboratory vacancy rates are about 1.7%. Source: Real Capital Analytics, February 2021. Click on title to download: Q3 2022 U.S . As a magazine writer, she covers lifestyle and travel trends. Marketbeat analyzes quarterly market activity including supply, demand and pricing trends. Saudi commercial real estate in 2022. This should all be considered when buying a MOB or trying to figure out what types of physicians to attract to medical office property. Are you considering commercial real estate investments? Access Q4 2022 commercial real estate results for the office sector. According to the 2021 Emerging Trends in Real Estate survey by PwC and the Urban Land Institute, real estate investors are calling medical office one of the expected best bets in 2021. There is a case to be made for medical office tenants clustering together. Researched assets in the Real Estate, Healthcare . Properties can range in size, quality and scale. There is more than 50 million sq. Below is a primer on what investors need to know about medical office buildings. New emerging healthcare models like CloudClinics may inspire more unique healthcare spaces to enter the market. The healthcare sector was one of the beneficiaries of the pandemic. Updated infrastructure: An initiative to create and update infrastructure could enhance roads and bridges, which would help shorten commutes, enable quicker e-commerce last-mile deliveries and improve the economy. Transaction volume and investment activity are strong indicators about the prospects of any real estate asset class. 2023 Alliance Consolidated Group of Companies LLC | All rights reserved | Privacy Policy, The Medical Office Building Market: Trends Both Past and Present. Therefore, MOB developers tend to be highly disciplined and do not build on spec; instead, they work to create an ecosystem of healthcare tenants that compliment one another (e.g., dentists, physicians, physical therapists and other specialty care providers). As yields for traditional real estate asset classes compress, we expect to see more investors institutional and retail investors alike pour capital into the medical office sector in search of higher yield and a relatively safe investment alternative. Health care employment fell by as much as 6.4% in 2020, and medical offices recorded their first quarterly negative net absorption in more than a decade. Another way to evaluate MOB competition is by looking at rental rates in the market. Navigating interest rate disruption: How real-time data can facilitate better CRE decisions amid volatility. Fort Lee, New Jersey, United States. According to Colliers, office vacancies were at 12.6% in mid-2020 vs. just 8.6% for medical office buildings. Economic headwinds have given investors pause at the start of 2023, fueling cautious strategies and a heightened focus on tenant quality. However, we should note that labor, inflation, and rising interest rates may present a few challenges. Such Investments are only suitable for accredited investors who understand and willing and able to accept the high risks associated with private investments. This shows that despite economic swings, medical office rents are reliable. Medical Office Real Estate Trends 2022 1. These are the top-performing office markets over the past 12 months, according to the NAR: Vacancy rate (December 2022) Myrtle Beach, SC Salisbury, MD York, PA Pensacola, FL Youngstown, OH Net absorption Boston, MA San Jose, CA Dallas-Fort Worth, TX Austin, TX Atlanta, GA Rent growth Miami, FL Palm Beach, FL Sarasota, FL Las Vegas, NV Ogden, UT It is unclear how technology will impact the full scope of healthcare real estate in the future. Trends that Shaped the Real Estate Market in 2022 are Here to Stay, with Many Leaving Lasting Impacts . In the third quarter, CoStar (a commercial real estate database) MOB rates averaged a slight decline with average asking net rates of $22.30 per square foot (PSF). That doesnt mean that MOB properties are any less nuanced today than they were pre-pandemic. We are incredibly proud of the success the business experienced this year a feat [], Posted in Breaking News, Companies & People, FOR IMMEDIATE RELEASE Chicago, IL (February 20, 2023) RX Health and Science Trust (RXHST), an internally managed, real estate investment trust (REIT) focused on the acquisition and development of medical office facilities across the U.S., announced today the acquisition of Union Park in the Atlanta, GA MSA. In the third quarter, CoStar (a commercial real estate database) MOB rates averaged a slight decline with average asking net rates of $22.30 per square foot (PSF). Note that Houston, which has more new construction and delivery activity than most of the top 10 cities, results in a slightly higher vacancy rate. Moving forward, keep an eye out for the pandemics lingering impacts, including: inflation, interest rate hikes, labor shortages and increased costs for construction materials. FOURTH QUARTER 2022 HIGHLIGHTS INVESTMENT ACTIVITY Invested $310.3 million at a weighted average initial cash capitalization rate of 6.7%, including the acquisition of 17 properties with [], Posted in Breaking News, Capital Markets, Companies & People, REIT Report, Newmark acted as exclusive advisor to the portfolio owner and borrower, Montecito Medical Real Estate Newmark Senior Managing Director John Nero, Executive Managing Director Ben Appel and Senior Managing Directors Jay Miele and Michael Greeley of Newmarks Healthcare Capital Markets group led the transaction. Learn more about our commercial real estate solutions: Global opportunities mean global challenges. Click here to register for our FREE healthcare real estate and/or life sciences real estate e-newsletters. EquityMultiple is not registered as a broker-dealer. New acquisitions of medical office buildings by institutional investors reach a record high in 2020. Feature Story: Health systems are hurting, Feature Story: The cloudy economy has a silver lining: higher cap rates, Life Sciences: Bellwether firm Alexandria delivers strong Q4 results, Feature Story: Another MOB sales record: $25 billion in 2022, Companies: Montecito is off to a fast start in 2023, News Release: 2022 HREI Insights Awards Finalists announced (UPDATED), Transactions: Woodside, Heitman recapitalize a 423,000 s.f. Financial Results. portfolio, Feature Story: HRE developers see plenty of opportunities in 2023, Feature Story: The top 10 healthcare real estate stories of 2022, Feature Story: Outpatient is the place to be as demand rises, Feature Story: Expert advice Be patient and proactive, Feature Story: The economy is taking its toll on HRE, for now, Feature Story: Behavioral health takes center stage, Feature Story: Lending lull in the HRE sector, News Release: Newmark Facilitates $72.7 Million Sale of Medical Office Building Portfolio, News Release: Grand Opening Planned For Highland Bridge Medical Office, News Release: Just Closed Union Park (Atlanta), News Release: Caddis Construction Groundbreaking Ceremony For New Class A Medical Office Building In Frisco, Texas, News Release: Medical Properties Trust, Inc. Reports Fourth Quarter and Full-year Results, News Release: Pantheon Expands Real Estate Strategy With Investment in Healthcare Platform; Adds Senior Hire to Real Estate Team, News Release: CBRE Group, Inc. Reports Financial Results for Q4 and Full Year 2022, News Release: Broadstone Net Lease Announces Fourth Quarter and Full Year 2022 Results, News Release: Newmark announces the successful closing of a $50.4 million financing secured for a national medical office building portfolio, News Release: Physicians Realty Trust Supplemental Q4 2022 financial report, News Release: Physicians Realty Trust Reports Fourth Quarter 2022 Financial Results, News Release: Sabra Reports Fourth Quarter 2022 Results, News Release: TCC and Beacon Capital Partners Begin Vertical Construction on Hyde Park Labs in Chicago, News Release: NNN Pro Group Leads the Way in 2022 with Record Setting $5.6 Billion in Net Lease Investment Sales, News Release: RX Health & Science Trust Enters Atlanta Market thru Acquisition of Union Park, News Release: Class A medical office building near Denver sells for $5.65M, News Release: Alexandria Real Estate Equities, Inc. Reports: 4Q22 and 2022 Net Income per Share Diluted of $0.31 and $3.18, respectively; and 4Q22 and 2022 FFO per Share Diluted, As Adjusted, of $2.14 and $8.42, respectively, News Release: Goldman Sachs Asset Management and Lane Partners Announce Recapitalization of Southline Phase I with Beacon Capital Partners, News Release: LTC Invests $51 million for Refinance of Seniors Housing Campus in Upscale Atlanta Area, News Release: First Citizens Bank Provides $50.3 Million Financing for Recapitalization of Medical Office Building Portfolio, News Release: A Joint Venture Between Onyx Equities And Machine Investment Group Acquires Two Million Sf Biologics Research And Development Campus In Kenilworth, N.J., From Merck Sharp & Dohme LLC With Plans To Continue Sites Current Use, News Release: Outpatient healthcare services and facilities set for enormous growth, Thought Leaders: JLL Healthcare Perspectives Capital Markets, Life Sciences: U.S. Life Sciences Real Estate Market Shifted in Q3 from White-Hot to Red Hot. Facebook Linkedin Twitter Youtube Instagram TikTok. As with any investment, MOBs offer unique opportunities and considerations. Seasoned in a wide range of real estate transactions, including hospital and physician acquisitions, divestitures, and basic medical and commercial leases. Competition is evaluated using a few different metrics in the medical office space. The amount of space currently under construction nationwide totals less than 1% of the existing MOB stock. As youll see, medical offices are on an upward trajectory and in turn, competition for these assets is on the rise. These deals range in value from $1M to $25M. Al Brooks, Head of Commercial Real Estate, Commercial Banking. Important Things To Know About Investing In Commercial Real Estate, Why This Is The Time to Invest in Healthcare REITs. MOB facilities located in retail environments are also attractive to patients and staff. As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate. Hong Kong Medical Office Building Development Opportunity. The disciplined nature of MOB developers means that there is very little in the construction pipeline. In other words, medical office rents do not experience the same peaks and valleys that other asset class rents are prone to. Alliance is a commercial real estate investment firm that focuses on building relationships founded in trust. Your article was successfully shared with the contacts you provided. Leasing activity fell 10.8% in the fourth quarter to 40.7 million s.f. Tenants still planned relocations, but COVID-19 may delay some tenants from moving in on the dates they had planned. This will provide insight into the types of physicians looking to lease MOB space in that vicinity and the kind of healthcare practice that will dictate how much space those physicians need. One source lists several health tech trends that will either emerge or continue in 2022. In addition to the low vacancy rate, CRE spaces have been converted into laboratory spaces to meet demand. Wealth Management is part of the Informa Connect Division of Informa PLC. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by EquityMultiple of the linked or reproduced content. In a recent survey, Tether Advisors found that on average, "Nearly 80 percent of private equity, commercial real estate and retail healthcare respondents believe MedTail investment will. Even during the Great Recession when medical office vacancies were at their highest, MOB vacancies never exceeded 10.4%. She specializes in the marketing and sale of hospitals, surgical centers and healthcare properties including office, retail, industrial buildings and land. The rents that other MOB landlords receive should be put in the context of their building and tenant quality, including but not limited to the age of the building and the extent of the tenant fit-outs. JLL Healthcare provides a full range of real estate and facilities . The average cap rate for individual MOB sales dropped to 6.61% during this same time (dipping below the previous record lows of 6.7% in Q3 2016). The information represents EquityMultiples view of the current market environment as of the date appearing above. Published: Feb. 26, 2023 at 5:26 a.m. Facebook Linkedin Twitter Youtube Instagram TikTok. Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business. At any stage, we bring you the expertise and analysis needed to help you think ahead and stay informed. Number 8860726. One of the biggest complaints patients usually have about healthcare visits is long wait times. At the other end of the spectrum is Class C medical office, which is older buildings (perhaps 1970s or 1980s vintage) that likely have lower ceilings, fewer windows, and more occasional patient and employee amenities. By co-locating in a more traditional retail environment, healthcare providers gain greater visibility, better access, and branding opportunities that give them a competitive advantage over those located in more isolated suburban office parks. Nevertheless, for those willing to understand the sectors nuances, a medical office can be a tremendous addition to an investors portfolio. In 2022, we can continue to expect technology to be at the forefront of healthcare delivery. This allows physician practices to refer patients to one another (e.g., a primary care doctor referring a patient to a specialist), which has become increasingly common as healthcare becomes more technical and specialized. No communication by EquityMultiple, Inc. or any of its affiliates (collectively, EquityMultiple), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Receive our weekly newsletter with the latest posts and insights. The REITs wellness infrastructure portfolio includes seniors housing, skilled nursing facilities, hospitals and medical office buildings. And as investor appetite has grown, medical office buildings have emerged as the most popular property type within the niche. 2022 HealthCare Appraisers, Inc. | All rights reserved. This is significant because as multifamily prices continue to rise, MOB properties will become a more attractive alternative for those looking for potentially greater returns. . Learn more today. These recapitalizations are often the start, or the seeding, of new [], Posted in Companies & People, Transactions, Headwinds are likely to slow activity, but the need for projects will remain strong By John B. Mugford With so many economic headwinds facing almost all business sectors, even the recession-resistant healthcare real estate (HRE) sector, why is a group of development professionals involved in the HRE space remaining so optimistic? ET. The last three to four years, medical office and office buildings have run in tandem. This website provides preliminary and general information about the Investments and is intended for initial reference purposes only. Heres what real, In the current real estate market, healthcare properties are in high demand. Year-over-year transaction volume dropped to $2.94 billion from . Medical or Healthcare Market report estimated to grow highest CAGR and growth revnue by 2027. Currently, both property types are averaging about 6.6-6.7% cap rates. Notably, portal usage among tenants grew 180% from June 2019 to 2021, largely because of an increase in electronic rent payments. There is more than 50 million sq. The Gateway Pundit previously reported that the Arizona Senate and House Elections Committees held a joint 1,000+ advisors. Those who have significant resources, time, and energy to invest in a property may pursue a value-add strategy at a Class B or Class C property. According to CoStar, a commercial real estate database, MOB asking rents average around $22.30 per square foot (NNN). The costs associated with purchasing a MOB facility can vary widely and are influenced by many factors, such as whether the property is affiliated with a hospital or not. During the depths of the COVID crisis, MOB annual investment volume declined by 12.7%, according to Real Capital Analytics. HealthCare Appraisers is actively involved in the medical office investment market from both the health system side as well as investor side, and remains current in investor pricing requirements, lender underwriting criteria, investment broker relationships, and intricacies of sales transactions. The fourth quarter brought some relief from mounting macroeconomic challenges as inflationary pressures wane, but office tenants remain cautious as they adjust to rising costs of capital and falling valuations. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Several factors are driving this growth in demand for MOBs. As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate. Sometimes, but not always, these MOB facilities have an affiliation with a hospital in a larger metropolitan area, which allows the hospital network to provide one single continuum of care. According to one source, telehealth usage is 38 times higher than before the pandemic. Among respondents, 84 percent indicated plans to be net buyers in the market in 2022, compared to only 14 percent with plans to be net sellers. The awards are presented by Minnetonka-based HREI,the [], Posted in Breaking News, Companies & People, Current Edition, HREI Insights Awards, The estimated $140M deal seeds a programmatic partnership between the two firms By John B. Mugford Portfolio recapitalizations have been taking place at a rapid clip in the healthcare real estate (HRE) sector in recent years, including a record-setting 10-plus such deals in 2021. These reports can be especially telling as they indicate the types of healthcare the local population is most likely to need and will influence the types of tenants a MOB investor tries to attract to a building. At the InterFace Healthcare Real Estate (HRE) West conference in Los Angeles in February 2022, a panel discussion devoted to HRE investing was titled, Whos Buying, Whos Selling and Transaction [], Hospitals have taken a pounding but remain optimistic, InterFace panelists say By John B. Mugford For one prominent West Coast health system, the current economic climate and healthcare landscape are presenting a bit of a dichotomy. Posted BY: Jordan Conradson "#ArrestKatieHobbs" is trending on Twitter following bombshell allegations made last week about a phony mortgage and real estate transaction scam used by the Sinaloa Cartel to bribe elected officials and control the state of Arizona. Users gain access to excellent real estate deals and build a diversified global, high performing portfolio. They are generally located in prime locations with significant roadside visibility. Nationally, there was 15.3 million square feet of net absorption in 2020 with just 13.7 million square feet of space delivered. That is a slightly higher percentage than it has been over the last decade. Payment processing is provided by Dwolla, Inc. Investment advisory services are provided by EM Advisor, LLC, an investment advisor registered with the Securities and Exchange Commission. First, expect more outpatient sectors. Office Space Real Estate Trends. Available office and lab real estate in Boston Q2 2022, by district and type The most important statistics Recommendations to buy, hold, or sell a retail property in the U.S. 2023, by city What does this mean for CRE professionals? Another prominent trend is the conversion of vacant retail stores into medical office properties. Our portfolio includes medical, industrial, retail, and office properties, with deals ranging from $1M to $25M. Copyright Wolf Marketing & Media LLC 2002-2023 Healthcare Real Estate Insights. During an investors due diligence process, theyll also want to consider a feasibility study. After breaking ground in December 2022, the healthcare facility is opening its doors to the community. The 2022 Medical Office Fundamentals Outlook explores and illustrates timely real estate-related topics for medical office buildings, including rental rates, development trends, preferred product type, COVID-19 impacts, and pricing parameters. Today, the medical office has emerged as a darling among commercial real estate asset classes. Investors in search of yield are increasingly looking to medical office given its strong underlying fundamentals. Medical office properties are expected to see a strong rebound in demand this year once the COVID-19 virus recedes. In its 2022 review report, consultancy CBRE said occupier demand remained strong over the last quarter of 2022. The sheer variety of medical office properties is what makes the space so compelling from an investment standpoint. Multifamily Industry Trends Report, Summer 2021, owner/operators to embrace digital rent collection solutions, Aerospace, Defense and Government Services. An investor who is otherwise well capitalized may opt instead to invest in Class A, already stabilized property that costs more but requires fewer property improvements or management. Master of Business Administration (MBA)Finance. Those patents are now lining up for visits, which has created a backlog of demand for healthcare services. The full content of this article is only available to paid subscribers. Our focus on this niche sector allows us to gain the unique skills necessary to serve this specialized market segment. On the surface, this may seem high, but it is lower than any other major property type. A once in a lifetime bull market for advice. Medical and commercial leases record high in 2020 are Here to Stay, with Leaving. To afford the loss of their entire investment Lasting Impacts the healthcare facility is opening its doors to the.! Special offers through the mail on our behalf office vacancies were at 12.6 % in pipeline... Offers through the mail medical office real estate trends 2022 our behalf some markets, like Philadelphia, less! Estate across the US on the rise laboratory spaces to enter the market relationships founded in trust excellent.! Connect Division of Informa PLC if there is one thing we can take away 2020... Been shaken up over the past 18 months, with challenges presented for both businesses and landlords alike office! Asset class market activity including supply, demand and pricing trends the office.... 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Telehealth usage is 38 times higher than before the pandemic prone to interest rates may present a few challenges stayed. Group Companies ' founder and CEO 15th year, the biotech and life sciences may continue to be actively... Away from 2020, it is that healthcare must be delivered physically and virtually the high associated...
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