Healthcare Realty Trust Incorporated (NYSE:HR) today announced
results for the second quarter ended June 30, 2022. The
Company reported net income of $6.1 million, or $0.04 per diluted
common share, for the quarter ended June 30, 2022. Normalized
FFO for the three months ended June 30, 2022 totaled $67.0
million, or $0.45 per diluted common share. Please note that all
information is presented on a pre-merger basis, unless otherwise
noted.
Salient quarterly highlights include:
- Normalized FFO per share totaled $0.45, an increase of 4.7%
from $0.43 in the second quarter of 2021.
- Same store cash NOI for the second quarter increased 3.3% over
the prior year. For the trailing twelve months ended June 30, 2022,
same store cash NOI grew 2.8%.
- Predictive growth measures in the same store portfolio include:
- Average in-place rent increases of 2.94%
- Future annual contractual increases of 3.1% for leases
commencing in the quarter
- Weighted average cash leasing spreads
of 3.4% on 205,000 square feet renewed:
- 4% (<0% spread)
- —% (0-3%)
- 83% (3-4%)
- 13% (>4%)
- Tenant retention of 78.4%
- Portfolio leasing activity in the second quarter totaled
447,000 square feet related to 145 leases:
- 291,000 square feet of renewals
- 156,000 square feet of new and expansion leases
- The Company previously announced the acquisition of eight
medical office buildings totaling 219,000 square feet for $117.6
million in the second quarter of 2022.
- Also during the second quarter, the Company acquired five
medical office buildings for $46.2 million totaling 141,000 square
feet.
- In Raleigh, three buildings for $27.5 million totaling 85,000
square feet, including two medical office buildings for $20.5
million totaling 68,000 square feet that are adjacent to A2 rated
WakeMed's Cary Hospital campus. Including HTA properties, the
Company now owns 13 buildings in this cluster totaling 478,000
square feet and 1.1 million square feet in this market.
- In Tampa, two medical office buildings for $18.7 million
totaling 56,000 square feet and located adjacent to Aa2 rated
BayCare's St. Joseph Hospital campus. Including HTA properties, the
Company now owns 20 buildings in this market totaling 1.0 million
square feet.
- Subsequent to the end of the quarter, the Company acquired an
11,000 square foot medical office building in Seattle for $4.9
million. This building is located adjacent to Aa3 rated
EvergreenHealth Medical Center. The Company now owns two buildings
in this cluster and 1.6 million square feet in this market.
- Net debt to adjusted EBITDA was 5.7 times at the end of the
quarter.
- A dividend of $0.31 per share was paid in May, which equaled
82.6% of FAD. For the trailing twelve months, dividends paid
equaled 86.4% of FAD.
- A prorated dividend of $0.2010 per share was paid on
July 19, 2022 for stockholders of record on July 14,
2022. The remainder of the $0.31 per share quarterly common stock
dividend, equal to $0.1090 per share, is payable on August 30, 2022
to stockholders of record on August 15, 2022.
HTA pre-merger quarterly highlights:
- Net income for the three months ended June 30, 2022 was
$14.2 million or $0.06 per diluted common share.
- Normalized FFO per share totaled $0.43.
- Same store cash NOI for the second quarter increased 1.6% over
the prior year.
- Portfolio leasing activity in the second quarter totaled
833,000 square feet related to 240 leases:
- 550,000 square feet of renewals
- 283,000 square feet of new and expansion leases
- HTA's second quarter 2022 Supplemental Information is available
on the Company's website (www.healthcarerealty.com)
Strategic transaction update:
- On July 20, 2022, the Company completed its strategic
combination with Healthcare Trust of America ("HTA"), creating the
preeminent medical office building REIT.
- The Company borrowed from its $1.1 billion asset sale term loan
to temporarily fund the $4.82 per share special cash dividend to
HTA shareholders. The Company will repay the term loan with
proceeds from asset sales and joint ventures. To date, the Company
has closed $433 million in joint ventures and asset sale
transactions. Transactions totaling $613 million are under contract
and expected to close in August. Combined, the weighted average cap
rate of these transactions is just under 4.8%. By the end of the
third quarter, the Company expects to complete the remaining sales
that will bring the total to over $1.1 billion.
- On July 20, 2022. the Company entered into its amended and
restated credit facility, including the following components:
- a $1.5 billion revolving credit facility;
- $1.5 billion of term loans, including $650 million of new
capacity
- On July 20, 2022, the Company combined the surviving Healthcare
Realty subsidiary with HTA's existing operating partnership to
maintain its UPREIT structure going forward. The UPREIT structure
aligns the combined company's unsecured debt obligations in the
operating partnership and provides tax efficient strategies for
future acquisitions.
- On July 22, 2022, the Company exchanged $1.1 billion of former
Healthcare Realty senior notes for newly issued notes of Healthcare
Realty Holdings, L.P. to align all corporate level debt under the
operating partnership. The Company has $3.7 billion of unsecured
notes in eight tranches with expirations through 2031.
- On August 2, 2022, the Company’s Board of Directors authorized
the repurchase of up to $500.0 million of outstanding shares of the
Company’s common stock either in the open market or through
privately negotiated transactions, subject to market conditions,
regulatory constraints, and other customary conditions.
Healthcare Realty Trust is a real estate investment trust that
integrates owning, managing, financing and developing
income-producing real estate properties associated primarily with
the delivery of outpatient healthcare services throughout the
United States. As of the closing of the Healthcare
Realty-Healthcare Trust of America merger on July 20, 2022, the
Company was invested in over 700 real estate properties totaling
more than 40 million square feet and provided leasing and property
management services to over 30 million square feet nationwide.
Additional information regarding the Company, including this
quarter's operations, can be found at www.healthcarerealty.com.
Please contact the Company at 615.269.8175 to request a printed
copy of this information. In addition to the historical information
contained within, this press release contains certain
forward-looking statements with respect to the Company.
Forward-looking statements are statements that are not descriptions
of historical facts and include statements regarding management’s
intentions, beliefs, expectations, plans or predictions of the
future, within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Because such statements include risks,
uncertainties and contingencies, actual results may differ
materially and in adverse ways from those expressed or implied by
such forward-looking statements. These risks, uncertainties and
contingencies include, without limitation, the following: failure
to realize the expected benefits of the Merger; significant
transaction costs and/or unknown or inestimable liabilities; the
risk that HTA’s business will not be integrated successfully or
that such integration may be more difficult, time-consuming or
costly than expected; risks related to future opportunities and
plans for the Company, including the uncertainty of expected future
financial performance and results of the Company; the possibility
that, if the Company does not achieve the perceived benefits of the
Merger as rapidly or to the extent anticipated by financial
analysts or investors, the market price of the Company’s common
stock could decline; general adverse economic and local real estate
conditions; changes in economic conditions generally and the real
estate market specifically; legislative and regulatory changes,
including changes to laws governing the taxation of REITs and
changes to laws governing the healthcare industry; the availability
of capital; changes in interest rates; competition in the real
estate industry; the supply and demand for operating properties in
the Company’s proposed market areas; changes in accounting
principles generally accepted in the US; policies and guidelines
applicable to REITs; the availability of properties to acquire; the
availability of financing; pandemics and other health concerns, and
the measures intended to prevent their spread, including the
currently ongoing COVID-19 pandemic; and the potential material
adverse effect these matters may have on the Company’s business,
results of operations, cash flows and financial condition.
Additional information concerning the Company and its business,
including additional factors that could materially and adversely
affect the Company’s financial results, include, without
limitation, the risks described under Part I, Item 1A - Risk
Factors, in the Company’s 2021 Annual Report on Form 10-K and in
its other filings with the SEC.
|
Consolidated Balance Sheets 1 |
ALL DATA IS PRESENTED ON A PRE-MERGER BASIS, UNLESS OTHERWISE
NOTED |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
ASSETS |
|
|
|
|
|
JUNE 30, 2022 |
|
DECEMBER 31, 2021 |
|
Real estate properties |
|
|
|
Land |
|
$456,306 |
|
$387,918 |
|
Buildings, improvements and lease intangibles |
|
|
4,673,026 |
|
|
4,458,119 |
|
Personal property |
|
|
11,799 |
|
|
11,761 |
|
Investment in financing
receivables, net |
|
|
118,446 |
|
|
186,745 |
|
Financing lease right-of-use
assets |
|
|
71,632 |
|
|
31,576 |
|
Construction in progress |
|
|
16,728 |
|
|
3,974 |
|
Land
held for development |
|
|
22,952 |
|
|
24,849 |
|
Total real estate investments |
|
|
5,370,889 |
|
|
5,104,942 |
|
Less
accumulated depreciation and amortization |
|
|
(1,402,509 |
) |
|
(1,338,743 |
) |
Total real estate investments, net |
|
|
3,968,380 |
|
|
3,766,199 |
|
Cash and cash equivalents |
|
|
34,312 |
|
|
13,175 |
|
Assets held for sale, net |
|
|
— |
|
|
57 |
|
Operating lease right-of-use
assets |
|
|
126,204 |
|
|
128,386 |
|
Investments in unconsolidated
joint ventures |
|
|
210,781 |
|
|
161,942 |
|
Other
assets, net |
|
|
209,200 |
|
|
189,160 |
|
Total assets |
|
$4,548,877 |
|
$4,258,919 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
JUNE 30, 2022 |
|
DECEMBER 31, 2021 |
|
Liabilities |
|
|
|
Notes and bonds payable |
|
$2,063,755 |
|
$1,801,325 |
|
Accounts payable and accrued
liabilities |
|
|
84,210 |
|
|
86,108 |
|
Liabilities of properties held
for sale |
|
|
— |
|
|
294 |
|
Operating lease
liabilities |
|
|
94,748 |
|
|
96,138 |
|
Financing lease
liabilities |
|
|
62,195 |
|
|
22,551 |
|
Other
liabilities |
|
|
66,102 |
|
|
67,387 |
|
Total liabilities |
|
|
2,371,010 |
|
|
2,073,803 |
|
Commitments and
contingencies |
|
|
|
Stockholders' equity |
|
|
|
Preferred stock, $.01 par
value; 50,000 shares authorized; none issued and outstanding |
|
|
— |
|
|
— |
|
Common stock, $.01 par value;
300,000 shares authorized; 151.637 and 150,457 shares issued and
outstanding at June 30, 2022 and December 31, 2021,
respectively |
|
|
1,516 |
|
|
1,505 |
|
Additional paid-in
capital |
|
|
4,002,526 |
|
|
3,972,917 |
|
Accumulated other
comprehensive loss |
|
|
(1,250 |
) |
|
(9,981 |
) |
Cumulative net income
attributable to common stockholders |
|
|
1,314,515 |
|
|
1,266,158 |
|
Cumulative dividends |
|
|
(3,139,440 |
) |
|
(3,045,483 |
) |
Total stockholders' equity |
|
|
2,177,867 |
|
|
2,185,116 |
|
Total liabilities and stockholders' equity |
|
$4,548,877 |
|
$4,258,919 |
|
- The Consolidated Balance Sheets do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements.
|
Consolidated Statements of Income 1 |
ALL DATA IS PRESENTED ON A PRE-MERGER BASIS, UNLESS OTHERWISE
NOTED |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
|
|
THREE MONTHS ENDED JUNE 30, |
SIX MONTHS ENDED JUNE 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues |
|
|
|
|
|
Rental income |
|
$140,632 |
|
$128,486 |
|
$279,121 |
|
$256,874 |
|
Interest from financing
receivables, net |
|
|
1,957 |
|
|
510 |
|
|
3,887 |
|
|
510 |
|
Other
operating |
|
|
2,738 |
|
|
2,427 |
|
|
5,213 |
|
|
4,378 |
|
|
|
|
145,327 |
|
|
131,423 |
|
|
288,221 |
|
|
261,762 |
|
Expenses |
|
|
|
|
|
Property operating |
|
|
57,010 |
|
|
51,509 |
|
|
114,474 |
|
|
103,724 |
|
General and
administrative |
|
|
10,540 |
|
|
8,545 |
|
|
21,576 |
|
|
17,044 |
|
Acquisition and pursuit
costs |
|
|
1,352 |
|
|
670 |
|
|
2,655 |
|
|
1,414 |
|
Merger-related costs |
|
|
7,085 |
|
|
— |
|
|
13,201 |
|
|
— |
|
Depreciation and
amortization |
|
|
55,731 |
|
|
49,826 |
|
|
109,772 |
|
|
99,905 |
|
|
|
|
131,718 |
|
|
110,550 |
|
|
261,678 |
|
|
222,087 |
|
Other income (expense) |
|
|
|
|
|
Gain on sales of real estate
assets |
|
|
8,496 |
|
|
20,970 |
|
|
53,280 |
|
|
39,860 |
|
Interest expense |
|
|
(15,543 |
) |
|
(13,261 |
) |
|
(29,204 |
) |
|
(26,523 |
) |
Loss on extinguishment of
debt |
|
|
— |
|
|
— |
|
|
(1,429 |
) |
|
— |
|
Impairment of real estate
assets |
|
|
— |
|
|
(5,078 |
) |
|
25 |
|
|
(5,912 |
) |
Equity loss from
unconsolidated joint ventures |
|
|
(307 |
) |
|
(146 |
) |
|
(652 |
) |
|
(220 |
) |
Interest and other income (expense), net |
|
|
(125 |
) |
|
(262 |
) |
|
(206 |
) |
|
238 |
|
|
|
|
(7,479 |
) |
|
2,223 |
|
|
21,814 |
|
|
7,443 |
|
Net Income |
|
$6,130 |
|
$23,096 |
|
$48,357 |
|
$47,118 |
|
|
|
|
|
|
|
Basic earnings per common
share - Net income |
|
$0.04 |
|
$0.16 |
|
$0.32 |
|
$0.33 |
|
Diluted earnings per common
share - Net income |
|
$0.04 |
|
$0.16 |
|
$0.32 |
|
$0.33 |
|
|
|
|
|
|
|
Weighted average
common shares outstanding - basic |
|
|
149,676 |
|
|
141,917 |
|
|
149,321 |
|
|
140,354 |
|
Weighted average
common shares outstanding - diluted |
|
|
149,739 |
|
|
142,049 |
|
|
149,397 |
|
|
140,468 |
|
- The Consolidated Statements of Income do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements.
|
Reconciliation of FFO, Normalized FFO and FAD |
ALL DATA IS PRESENTED ON A PRE-MERGER BASIS, UNLESS OTHERWISE
NOTED |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
|
|
THREE MONTHS ENDED JUNE 30, |
SIX MONTHS ENDED JUNE 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income |
|
|
$6,130 |
|
$23,096 |
|
$48,357 |
|
$47,118 |
|
(Gain) on sales of real estate
assets |
|
|
(8,496 |
) |
|
(20,970 |
) |
|
(53,280 |
) |
|
(39,860 |
) |
Impairment of real estate
asset |
|
|
— |
|
|
5,078 |
|
|
(25 |
) |
|
5,912 |
|
Real estate depreciation and
amortization |
|
|
57,334 |
|
|
51,199 |
|
|
112,991 |
|
|
102,510 |
|
Unconsolidated JV depreciation and amortization |
|
|
2,807 |
|
|
1,354 |
|
|
5,176 |
|
|
2,168 |
|
Funds from operations (FFO) |
$57,775 |
|
$59,757 |
|
$113,219 |
|
$117,848 |
|
Acquisition and pursuit
costs 1 |
|
|
1,352 |
|
|
670 |
|
|
2,655 |
|
|
1,414 |
|
Merger-related costs |
|
|
7,085 |
|
|
— |
|
|
13,201 |
|
|
— |
|
Lease intangible
amortization |
|
|
584 |
|
|
(6 |
) |
|
893 |
|
|
(78 |
) |
Non-routine legal
costs/forfeited earnest money received 2 |
|
|
140 |
|
|
— |
|
|
231 |
|
|
(500 |
) |
Debt financing costs |
|
|
— |
|
|
283 |
|
|
1,429 |
|
|
283 |
|
Unconsolidated JV normalizing
items |
|
|
83 |
|
|
55 |
|
|
178 |
|
|
82 |
|
Normalized FFO |
$67,019 |
|
$60,759 |
|
$131,806 |
|
$119,049 |
|
Non-real estate depreciation
and amortization |
|
|
556 |
|
|
641 |
|
|
1,016 |
|
|
1,314 |
|
Non-cash interest
amortization 3 |
|
|
747 |
|
|
897 |
|
|
1,458 |
|
|
1,791 |
|
Provision for bad debt,
net |
|
|
16 |
|
|
57 |
|
|
159 |
|
|
(22 |
) |
Straight-line rent income,
net |
|
|
(1,327 |
) |
|
(1,194 |
) |
|
(2,536 |
) |
|
(2,289 |
) |
Stock-based compensation |
|
|
3,356 |
|
|
2,627 |
|
|
7,055 |
|
|
5,647 |
|
Unconsolidated JV non-cash items |
|
|
(242 |
) |
|
(354 |
) |
|
(513 |
) |
|
(711 |
) |
Normalized FFO adjusted for non-cash items |
|
|
70,125 |
|
|
63,433 |
|
|
138,445 |
|
|
124,779 |
|
2nd generation TI |
|
|
(5,051 |
) |
|
(4,748 |
) |
|
(9,950 |
) |
|
(9,937 |
) |
Leasing commissions paid |
|
|
(3,475 |
) |
|
(3,804 |
) |
|
(7,242 |
) |
|
(4,997 |
) |
Capital additions |
|
|
(4,557 |
) |
|
(6,077 |
) |
|
(7,177 |
) |
|
(8,096 |
) |
Maintenance cap ex |
|
|
(13,083 |
) |
|
(14,629 |
) |
|
(24,369 |
) |
|
(23,030 |
) |
Funds available for distribution (FAD) |
$57,042 |
|
$48,804 |
|
$114,076 |
|
$101,749 |
|
FFO per common share -
diluted |
$0.38 |
|
$0.42 |
|
$0.75 |
|
$0.83 |
|
Normalized FFO per
common share - diluted |
$0.45 |
|
$0.43 |
|
$0.88 |
|
$0.84 |
|
FFO weighted average
common shares outstanding -
diluted 4 |
|
|
150,545 |
|
|
142,914 |
|
|
150,203 |
|
|
141,323 |
|
- Acquisition and pursuit costs include third party and travel
costs related to the pursuit of acquisitions and developments.
- Non-routine legal costs include expenses related to two
separate disputes; one with a contractor on a $59 million completed
construction project and another with a tenant on a violation of
use restrictions. Forfeited earnest money received related to a
disposition that did not materialize.
- Includes the amortization of deferred financing costs and
discounts and premiums.
- The Company utilizes the treasury stock method which includes
the dilutive effect of nonvested share-based awards outstanding of
806,310 and 806,487, respectively for the three and six months
ended June 30, 2022.
|
Reconciliation of Non-GAAP Measures |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED |
Management considers funds from operations ("FFO"), FFO per
share, normalized FFO, normalized FFO per share, funds available
for distribution ("FAD") to be useful non-GAAP measures of the
Company's operating performance. A non-GAAP financial measure is
generally defined as one that purports to measure historical
financial performance, financial position or cash flows, but
excludes or includes amounts that would not be so adjusted in the
most comparable measure determined in accordance with GAAP. Set
forth below are descriptions of the non-GAAP financial measures
management considers relevant to the Company's business and useful
to investors.
The non-GAAP financial measures presented herein are not
necessarily identical to those presented by other real estate
companies due to the fact that not all real estate companies use
the same definitions. These measures should not be considered as
alternatives to net income (determined in accordance with GAAP), as
indicators of the Company's financial performance, or as
alternatives to cash flow from operating activities (determined in
accordance with GAAP) as measures of the Company's liquidity, nor
are these measures necessarily indicative of sufficient cash flow
to fund all of the Company's needs.
FFO and FFO per share are operating performance measures adopted
by the National Association of Real Estate Investment Trusts, Inc.
(“NAREIT”). NAREIT defines FFO as “net income (computed in
accordance with GAAP) excluding depreciation and amortization
related to real estate, gains and losses from the sale of certain
real estate assets, gains and losses from change in control, and
impairment write-downs of certain real assets and investments in
entities when the impairment is directly attributable to decreases
in the value of depreciable real estate held by the entity.” The
Company defines Normalized FFO as FFO excluding acquisition-related
expenses, lease intangible amortization and other normalizing items
that are unusual and infrequent in nature. FAD is presented by
adding to Normalized FFO non-real estate depreciation and
amortization, deferred financing fees amortization, share-based
compensation expense and provision for bad debts, net; and
subtracting maintenance capital expenditures, including second
generation tenant improvements and leasing commissions paid and
straight-line rent income, net of expense. The Company's definition
of these terms may not be comparable to that of other real estate
companies as they may have different methodologies for computing
these amounts. FFO, Normalized FFO and FAD do not represent cash
generated from operating activities determined in accordance with
GAAP and are not necessarily indicative of cash available to fund
cash needs. FFO, Normalized FFO and FAD should not be considered an
alternative to net income as an indicator of the Company’s
operating performance or as an alternative to cash flow as a
measure of liquidity. FFO, Normalized FFO and FAD should be
reviewed in connection with GAAP financial measures.
Management believes FFO, FFO per share, Normalized FFO,
Normalized FFO per share, and FAD provide an understanding of the
operating performance of the Company’s properties without giving
effect to certain significant non-cash items, including
depreciation and amortization expense. Historical cost accounting
for real estate assets in accordance with GAAP assumes that the
value of real estate assets diminishes predictably over time.
However, real estate values instead have historically risen or
fallen with market conditions. The Company believes that by
excluding the effect of depreciation, amortization, gains or losses
from sales of real estate, and other normalizing items that are
unusual and infrequent, FFO, FFO per share, Normalized FFO,
Normalized FFO per share and FAD can facilitate comparisons of
operating performance between periods. The Company reports these
measures because they have been observed by management to be the
predominant measures used by the REIT industry and by industry
analysts to evaluate REITs and because these measures are
consistently reported, discussed, and compared by research analysts
in their notes and publications about REITs.
Cash NOI and Same Store Cash NOI are key performance indicators.
Management considers these to be supplemental measures that allow
investors, analysts and Company management to measure unlevered
property-level operating results. The Company defines Cash NOI as
rental income and less property operating expenses. Cash NOI
excludes non-cash items such as above and below market lease
intangibles, straight-line rent, lease inducements, lease
termination fees, tenant improvement amortization and leasing
commission amortization. Cash NOI is historical and not necessarily
indicative of future results.
Same Store Cash NOI compares Cash NOI for stabilized properties.
Stabilized properties are properties that have been included in
operations for the duration of the year-over-year comparison period
presented. Accordingly, stabilized properties exclude properties
that were recently acquired or disposed of, properties classified
as held for sale, properties undergoing redevelopment, and newly
redeveloped or developed properties.
The Company utilizes the redevelopment classification for
properties where management has approved a change in strategic
direction for such properties through the application of additional
resources including an amount of capital expenditures significantly
above routine maintenance and capital improvement expenditures.
These properties are described in additional detail in Footnote 6
to the Condensed Consolidated Financial Statements.
Any recently acquired property will be included in the same
store pool once the Company has owned the property for eight full
quarters. Newly developed or redeveloped properties will be
included in the same store pool eight full quarters after
substantial completion.
Corporate CommunicationsP: 615.269.8175
Healthcare Realty (NYSE:HR)
Historical Stock Chart
Von Mär 2024 bis Apr 2024
Healthcare Realty (NYSE:HR)
Historical Stock Chart
Von Apr 2023 bis Apr 2024