Healthcare Realty Trust Reports Results for the Second Quarter
August 04 2021 - 5:10PM
Healthcare Realty Trust Incorporated (NYSE:HR) today announced
results for the second quarter ended June 30, 2021. The
Company reported net income of $23.1 million, or $0.16 per diluted
common share, for the quarter ended June 30, 2021. Normalized
FFO for the three months ended June 30, 2021 totaled $60.8 million,
or $0.43 per diluted common share.
Salient quarterly highlights include:
- Normalized FFO per share totaled $0.43, an increase from $0.42
in the second quarter of 2020.
- Same store cash NOI for the second quarter increased 2.9% over
the second quarter of 2020. For the trailing twelve months ended
June 30, 2021, same store cash NOI grew 2.3%.
- Predictive growth measures in the same store portfolio include:
- Average in-place rent increases of 2.87%
- Future annual contractual increases of 3.1% for leases
commencing in the quarter
- Weighted average cash leasing spreads of 2.8% on 285,000 square
feet renewed:
- 8% (<0% spread)
- 9% (0-3%)
- 59% (3-4%)
- 24% (>4%)
- Tenant retention of 74.9%
- Portfolio leasing activity in the second quarter totaled
485,000 square feet related to 141 leases:
- 331,000 square feet of renewals
- 154,000 square feet of new and expansion leases
- During the second quarter, the Company acquired eight medical
office buildings for $216.9 million totaling 467,000 square feet.
- In San Diego, a 160,000 square foot building for $102.7 million
on BBB rated Palomar Health's Medical Center Poway campus, the
Company's fourth property in the San Diego market.
- In Los Angeles, two buildings totaling 131,000 square feet for
$55.9 million on AA- rated MemorialCare Health System's Saddleback
Medical Center campus. The buildings were acquired under the TIAA
joint venture. The Company now owns five buildings on or near this
campus and nineteen properties in the Los Angeles market.
- In Baltimore, an off campus 33,000 square foot building for
$14.6 million located near A rated University of Maryland Medical
System's Upper Chesapeake Medical Center. The Company owns two
other buildings on this campus.
- In San Antonio, an off campus 45,000 square foot building for
$13.6 million leased to a diverse mix of specialty and primary care
providers, including Baptist Health System, and acquired under the
TIAA joint venture. The Company now owns seven buildings in the San
Antonio market.
- In Houston, a 45,000 square foot building for $13.5 million
adjacent to AA rated Houston Methodist Willowbrook Hospital, the
Company's eleventh property in the Houston market.
- In Greensboro, an off campus 25,000 square foot building for
$9.4 million anchored by AA- rated Cone Health. The Company owns
four other buildings adjacent to the nearby Moses H. Cone Memorial
Hospital campus.
- In Colorado Springs, an off campus, 28,000 square foot building
for $7.2 million leased to a diverse mix of tenants. This property
was acquired through the TIAA joint venture.
- The Company funded $178.5 million in these properties, net of
TIAA's 50% joint venture contribution.
- Subsequent to the end of the quarter, the Company acquired six
medical office buildings for $119.4 million totaling 371,000 square
feet.
- In Denver, three buildings totaling 260,000 square feet for
$70.4 million on AA- rated AdventHealth's Porter Adventist Hospital
campus, operated by Centura Health. The Company now owns sixteen
properties in the Denver market.
- In Colorado Springs, a 70,000 square foot building for $33.4
million on BBB+ rated CommonSpirit Health's Penrose Hospital
campus, operated by Centura Health.
- In Colorado Springs, an off campus 24,000 square foot property
for $9.1 million, which included a three-acre land parcel for
future development. The building is anchored by Centura Health and
is located near the Penrose Hospital campus. The investment was
made through the TIAA joint venture and is the Company's eighth
property in the Colorado Springs market.
- In Greensboro, an 18,000 square foot building for $6.4 million
adjacent to AA- rated Cone Health's Alamance Regional Medical
Center campus. The Company owns one other building on this campus
and now owns eight buildings in the Greensboro market.
- The Company funded $114.8 million in these properties, net of
TIAA's 50% joint venture contribution.
- Year-to-date, the Company acquired twenty-one buildings
totaling 1.1 million square feet for $412.8 million ($362.7 million
net of joint venture contributions) at a weighted average cap rate
of 5.3%.
- Year-to-date, the Company sold eleven medical office buildings
totaling 547,000 square feet for $114.6 million at a weighted
average cap rate of 4.1%.
- In July, the Company commenced the development of a new 106,000
square foot medical office building located on AA+ rated Ascension
Health's St. Thomas Midtown Hospital campus in Nashville. The
project consists of the demolition of an existing building, and
construction of a new medical office building, parking garage and
shared hospital front entrance. The project has a total budget of
$44 million, including a $5 million non-cash allocation for the
existing land value. The Company owns an additional 333,000 square
feet on or adjacent to this campus.
- During the second quarter, the Company settled 3.8 million
shares through its forward equity program, generating $116.1
million in net proceeds.
- The Company currently has approximately 3.7 million shares to
be settled through forward equity contracts and expects gross
proceeds of approximately $114.8 million, before cost of borrowing
under the forward contracts.
- In June, the Company repriced its $150 million term loan due
June 2026, reducing the interest rate to LIBOR plus 95 basis
points, representing a savings of 65 basis points. The Company also
added a sustainability-linked incentive.
- As of June 30, 2021, the Company had cash of $18.7 million and
$687 million available on its revolver.
- Net debt to adjusted EBITDA was 5.1 times at the end of the
quarter, down from 5.3 times at the end of the first quarter.
- A dividend of $0.3025 per share was paid during the quarter,
which equaled 90.2% of FAD. Year to date, dividends paid equaled
85.3% of FAD.
- A dividend of $0.3025 per share is payable on August 31, 2021
for stockholders of record on August 16, 2021.
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 June 30, 2021, the Company was invested
in 236 real estate properties in 24 states totaling 16.9 million
square feet and had an enterprise value of approximately $6.0
billion, defined as equity market capitalization plus the principal
amount of debt less cash. The Company provided leasing and property
management services to 13.4 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, the
matters discussed in this press release may contain forward-looking
statements that involve risks and uncertainties. These risks are
discussed in filings with the Securities and Exchange Commission by
Healthcare Realty Trust, including its Annual Report on Form 10-K
for the year ended December 31, 2020 under the heading "Risk
Factors," and other risks described from time to time thereafter in
the Company's SEC filings. Forward-looking statements represent the
Company's judgment as of the date of this release. The Company
disclaims any obligation to update forward-looking statements. A
reconciliation of all non-GAAP financial measures in this release
is included herein.
Consolidated Balance Sheets 1 |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
ASSETS |
|
|
|
|
JUNE 30, 2021 |
|
DECEMBER 31, 2020 |
Real
estate properties |
|
|
|
Land |
$ |
375,374 |
|
|
$ |
362,695 |
|
Buildings, improvements and lease intangibles |
|
4,249,352 |
|
|
|
4,220,297 |
|
Personal property |
|
11,589 |
|
|
|
11,195 |
|
Investment in financing receivable, net |
|
104,642 |
|
|
|
— |
|
Construction in progress |
|
1,147 |
|
|
|
— |
|
Land held for development |
|
27,226 |
|
|
|
27,226 |
|
Total real estate properties |
|
4,769,330 |
|
|
|
4,621,413 |
|
Less accumulated depreciation and amortization |
|
(1,285,251 |
) |
|
|
(1,239,224 |
) |
Total real estate properties, net |
|
3,484,079 |
|
|
|
3,382,189 |
|
Cash
and cash equivalents |
|
18,739 |
|
|
|
15,303 |
|
Assets held for sale, net |
|
21,065 |
|
|
|
20,646 |
|
Operating lease right-of-use assets |
|
121,288 |
|
|
|
125,198 |
|
Financing lease right-of-use assets |
|
19,450 |
|
|
|
19,667 |
|
Investments in unconsolidated joint ventures |
|
117,935 |
|
|
|
73,137 |
|
Other assets, net |
|
182,123 |
|
|
|
176,120 |
|
Total assets |
$ |
3,964,679 |
|
|
$ |
3,812,260 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
JUNE 30, 2021 |
|
DECEMBER 31, 2020 |
Liabilities |
|
|
|
Notes
and bonds payable |
$ |
1,614,479 |
|
|
$ |
1,602,769 |
|
Accounts payable and accrued liabilities |
|
74,927 |
|
|
|
81,174 |
|
Liabilities of properties held for sale |
|
942 |
|
|
|
1,216 |
|
Operating lease liabilities |
|
92,110 |
|
|
|
92,273 |
|
Financing lease liabilities |
|
18,648 |
|
|
|
18,837 |
|
Other liabilities |
|
67,319 |
|
|
|
67,615 |
|
Total liabilities |
|
1,868,425 |
|
|
|
1,863,884 |
|
Commitments and contingencies |
|
|
|
Stockholders' equity |
|
|
|
Preferred stock, $.01 par value; 50,000 shares authorized; none
issued andoutstanding |
|
— |
|
|
|
— |
|
Common stock, $.01 par value; 300,000 shares authorized; 145,530
and 139,487shares issued and outstanding at June 30, 2021 and
December 31, 2020,respectively |
|
1,455 |
|
|
|
1,395 |
|
Additional paid-in capital |
|
3,818,592 |
|
|
|
3,635,341 |
|
Accumulated other comprehensive loss |
|
(13,580 |
) |
|
|
(17,832 |
) |
Cumulative net income attributable to common stockholders |
|
1,246,617 |
|
|
|
1,199,499 |
|
Cumulative dividends |
|
(2,956,830 |
) |
|
|
(2,870,027 |
) |
Total stockholders' equity |
|
2,096,254 |
|
|
|
1,948,376 |
|
Total liabilities and stockholders' equity |
$ |
3,964,679 |
|
|
$ |
3,812,260 |
|
- 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 |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
|
|
|
|
|
|
|
THREE MONTHS ENDED JUNE 30, |
SIX MONTHS ENDED JUNE 30, |
|
|
2021 |
|
2020 |
|
|
2021 |
|
2020 |
Revenues |
|
|
|
|
|
Rental income |
$ |
128,486 |
|
$ |
122,358 |
|
|
$ |
256,874 |
|
$ |
245,001 |
|
Interest from financing receivable, net |
|
510 |
|
|
— |
|
|
|
510 |
|
|
— |
|
Other operating |
|
2,427 |
|
|
1,332 |
|
|
|
4,378 |
|
|
3,496 |
|
|
|
131,423 |
|
|
123,690 |
|
|
|
261,762 |
|
|
248,497 |
|
Expenses |
|
|
|
|
|
Property operating |
|
51,509 |
|
|
46,580 |
|
|
|
103,724 |
|
|
96,134 |
|
General and administrative |
|
8,545 |
|
|
7,434 |
|
|
|
17,044 |
|
|
16,199 |
|
Acquisition and pursuit costs |
|
670 |
|
|
431 |
|
|
|
1,414 |
|
|
1,181 |
|
Depreciation and amortization |
|
49,826 |
|
|
47,691 |
|
|
|
99,905 |
|
|
95,188 |
|
|
|
110,550 |
|
|
102,136 |
|
|
|
222,087 |
|
|
208,702 |
|
Other
income (expense) |
|
|
|
|
|
Gain
on sales of real estate assets |
|
20,970 |
|
|
68,267 |
|
|
|
39,860 |
|
|
68,218 |
|
Interest expense |
|
(13,261 |
) |
|
(14,442 |
) |
|
|
(26,523 |
) |
|
(28,402 |
) |
Impairment of real estate assets |
|
(5,078 |
) |
|
— |
|
|
|
(5,912 |
) |
|
— |
|
Equity loss from unconsolidated joint ventures |
|
(146 |
) |
|
(116 |
) |
|
|
(220 |
) |
|
(127 |
) |
Interest and other income (expense), net |
|
(262 |
) |
|
250 |
|
|
|
238 |
|
|
344 |
|
|
|
2,223 |
|
|
53,959 |
|
|
|
7,443 |
|
|
40,033 |
|
Net Income |
$ |
23,096 |
|
$ |
75,513 |
|
|
$ |
47,118 |
|
$ |
79,828 |
|
|
|
|
|
|
|
Basic
earnings per common share - Net income |
$ |
0.16 |
|
$ |
0.56 |
|
|
$ |
0.33 |
|
$ |
0.59 |
|
Diluted earnings per common share - Net income |
$ |
0.16 |
|
$ |
0.56 |
|
|
$ |
0.33 |
|
$ |
0.59 |
|
|
|
|
|
|
|
Weighted average common shares outstanding -
basic |
|
141,917 |
|
|
133,634 |
|
|
|
140,354 |
|
|
133,335 |
|
Weighted average common shares outstanding -
diluted |
|
142,049 |
|
|
133,696 |
|
|
|
140,468 |
|
|
133,420 |
|
- 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 |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED |
|
|
|
|
|
|
|
|
THREE MONTHS ENDED JUNE 30, |
|
SIX MONTHS ENDED JUNE 30, |
|
|
2021 |
|
2020 |
|
|
2021 |
|
2020 |
Net
income |
$ |
23,096 |
|
$ |
75,513 |
|
|
$ |
47,118 |
|
$ |
79,828 |
|
Gain
on sales of real estate assets |
|
(20,970 |
) |
|
(68,267 |
) |
|
|
(39,860 |
) |
|
(68,218 |
) |
Impairment of real estate asset |
|
5,078 |
|
|
— |
|
|
|
5,912 |
|
|
— |
|
Real
estate depreciation and amortization |
|
51,199 |
|
|
48,577 |
|
|
|
102,510 |
|
|
97,109 |
|
Proportionate share of unconsolidated joint venture
adjustments |
|
1,354 |
|
|
80 |
|
|
|
2,168 |
|
|
160 |
|
Funds from operations (FFO) |
$ |
59,757 |
|
$ |
55,903 |
|
|
$ |
117,848 |
|
$ |
108,879 |
|
Acquisition and pursuit costs 1 |
|
670 |
|
|
431 |
|
|
|
1,414 |
|
|
1,181 |
|
Lease
intangible amortization |
|
(6 |
) |
|
(16 |
) |
|
|
(78 |
) |
|
729 |
|
Forfeited earnest money received |
|
— |
|
|
— |
|
|
|
(500 |
) |
|
— |
|
Debt
financing costs |
|
283 |
|
|
— |
|
|
|
283 |
|
|
— |
|
Proportionate share of
unconsolidated joint ventures |
|
55 |
|
|
— |
|
|
|
82 |
|
|
— |
|
Normalized FFO |
$ |
60,759 |
|
$ |
56,318 |
|
|
$ |
119,049 |
|
$ |
110,789 |
|
Non-real estate depreciation and amortization |
|
641 |
|
|
822 |
|
|
|
1,314 |
|
|
1,645 |
|
Non-cash interest amortization 2 |
|
897 |
|
|
1,035 |
|
|
|
1,791 |
|
|
1,781 |
|
Provision for bad debt, net |
|
57 |
|
|
945 |
|
|
|
(22 |
) |
|
862 |
|
Straight-line rent income, net |
|
(1,194 |
) |
|
(390 |
) |
|
|
(2,289 |
) |
|
(1,057 |
) |
Stock-based compensation |
|
2,627 |
|
|
2,405 |
|
|
|
5,647 |
|
|
5,003 |
|
Proportionate share of unconsolidated joint venture |
|
(354 |
) |
|
8 |
|
|
|
(711 |
) |
|
15 |
|
Normalized FFO adjusted for non-cash items |
|
63,433 |
|
|
61,143 |
|
|
|
124,779 |
|
|
119,038 |
|
2nd generation TI |
|
(4,748 |
) |
|
(6,005 |
) |
|
|
(9,937 |
) |
|
(12,045 |
) |
Leasing commissions paid |
|
(3,804 |
) |
|
(2,258 |
) |
|
|
(4,997 |
) |
|
(5,082 |
) |
Capital additions |
|
(6,077 |
) |
|
(4,777 |
) |
|
|
(8,096 |
) |
|
(8,247 |
) |
Maintenance cap ex |
|
(14,629 |
) |
|
(13,040 |
) |
|
|
(23,030 |
) |
|
(25,374 |
) |
Funds available for distribution (FAD) |
$ |
48,804 |
|
$ |
48,103 |
|
|
$ |
101,749 |
|
$ |
93,664 |
|
FFO per common share -
diluted |
$ |
0.42 |
|
$ |
0.42 |
|
|
$ |
0.83 |
|
$ |
0.81 |
|
Normalized FFO per
common share - diluted |
$ |
0.43 |
|
$ |
0.42 |
|
|
$ |
0.84 |
|
$ |
0.83 |
|
FFO weighted average
common shares outstanding - diluted
3 |
|
142,914 |
|
|
134,464 |
|
|
|
141,323 |
|
|
134,221 |
|
- Acquisition and pursuit costs include third party and travel
costs related to the pursuit of acquisitions and developments.
- 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
865,304 and 854,797, respectively for the three and six months
ended June 30, 2021.
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 and include redevelopment projects of existing same store
properties. Accordingly, stabilized properties exclude properties
that were recently acquired or disposed of, properties classified
as held for sale, reposition properties and newly developed
properties. The Company utilizes the reposition classification for
properties experiencing a shift in strategic direction. Such a
shift can occur for a variety of reasons, including a substantial
change in the use of the asset, a change in strategy or closure of
a neighboring hospital, or significant property damage. Such
properties may require enhanced management, leasing, capital needs
or a disposition strategy that differs from the rest of the
portfolio. To identify properties exhibiting these reposition
characteristics, the Company applies the following Company-defined
criteria:
- Properties having less than 60% occupancy that is expected to
last at least two quarters;
- Properties that experience a loss of occupancy over 30% in a
single quarter; or
- Properties with negative net operating income that is expected
to last at least two quarters.
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 properties will be included in the same
store pool eight full quarters after substantial completion. Any
additional square footage created by redevelopment projects at a
same store property is included in the same store pool immediately
upon completion. Any property included in the reposition property
group will be included in the same store analysis once occupancy
has increased to 60% or greater with positive net operating income
and has remained at that level for eight full quarters.
Kara SmithInvestor Relations ManagerP: 615.269.8175
Healthcare Realty (NYSE:HR)
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Healthcare Realty (NYSE:HR)
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From Jul 2023 to Jul 2024