Healthcare Realty Trust Reports Results for the Third Quarter
November 03 2021 - 4:39PM
Healthcare Realty Trust Incorporated (NYSE:HR) today announced
results for the third quarter ended September 30, 2021. The
Company reported a net loss of $2.1 million, or $0.02 per diluted
common share, for the quarter ended September 30, 2021.
Normalized FFO for the three months ended September 30, 2021
totaled $62.4 million, or $0.43 per diluted common share.
Salient quarterly highlights include:
- Normalized FFO per share totaled $0.43, an increase of 6.4%
from $0.41 in the third quarter of 2020.
- Same store cash NOI for the third quarter increased 1.8% over
the third quarter of 2020. For the trailing twelve months ended
September 30, 2021, same store cash NOI grew 2.1%.
- Predictive growth measures in the same store portfolio include:
- Average in-place rent increases of 2.91%
- Future annual contractual increases of 3.0% for leases
commencing in the quarter
- Weighted average cash leasing spreads of 3.0% on 360,000 square
feet renewed:
- 6% (<0% spread)
- 12% (0-3%)
- 62% (3-4%)
- 20% (>4%)
- Tenant retention of 84.2%
- Portfolio leasing activity in the third quarter totaled 626,000
square feet related to 179 leases:
- 395,000 square feet of renewals
- 231,000 square feet of new and expansion leases
- During the third quarter, the Company acquired ten medical
office buildings in eight transactions for $164.6 million totaling
532,000 square feet. Subsequent to the end of the third quarter,
the Company acquired one 57,000 square foot medical office building
for $23.0 million.
- In Denver, the Company acquired five buildings for $113.7
million totaling 400,000 square feet. The Company now owns eighteen
properties in the Denver market.
- Three buildings totaling 260,000 square feet for $70.4 million
on AA rated AdventHealth's Porter Adventist Hospital campus,
operated by Centura Health.
- An 84,000 square foot property for $20.3 million on AA rated
AdventHealth’s Parker Adventist Hospital campus, operated by
Centura Health.
- An off campus 57,000 square foot property for $23.0 million
leased to a diverse mix of tenants. The investment was made through
the TIAA joint venture.
- In Colorado Springs, the Company acquired two buildings for
$42.5 million totaling 93,000 square feet. The Company now owns
eight properties in the Colorado Springs market.
- A 70,000 square foot building for $33.4 million on BBB+ rated
CommonSpirit Health's Penrose Hospital, operated by Centura
Health.
- 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.
- In Raleigh, the Company acquired two buildings for $15.8
million totaling 47,000 square feet. The Company now owns four
properties in the Raleigh market.
- A 29,000 square foot building for $10.0 million adjacent to A2
rated WakeMed Cary Hospital.
- An 18,000 square foot property for $5.8 million, less than one
mile from WakeMed Cary Hospital.
- In Birmingham, a 30,000 square foot building for $9.3 million
adjacent to publicly traded Community Health System’s flagship
Grandview Medical Center. The Company now owns two buildings in the
Birmingham market.
- In Greensboro, an 18,000 square foot building for $6.4 million
adjacent to AA- rated Cone Health's Alamance Regional Medical
Center. The Company now owns eight buildings in the Greensboro
market.
- Year-to-date, the Company has acquired twenty-six buildings in
twenty-one transactions totaling 1.3 million square feet for $481.1
million at a weighted average cap rate of 5.3%. Of this, the
Company's joint venture partner, TIAA, has funded $61.6 million in
seven buildings.
- Year-to-date, the Company has sold twelve medical office
buildings totaling 642,282 square feet for $127.9 million at a
weighted average cap rate of 4.1%.
- During the third quarter, the Company settled 2.0 million
shares through its forward equity program, generating $61.3 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 $115.9 million, before cost of borrowing
under the forward contracts.
- As of September 30, 2021, the Company had cash of $16.0 million
and $609.5 million available on its revolver.
- Net debt to adjusted EBITDA was 5.3 times at the end of the
quarter.
- A dividend of $0.3025 per share was paid during the quarter,
which equaled 90.6% of FAD. Year to date, dividends paid equaled
87.0% of FAD.
- A dividend of $0.3025 per share is payable on November 30, 2021
for stockholders of record on November 15, 2021.
- On October 25, 2021, the Company released its third annual
Corporate Responsibility Report. The Company also participated in
the 2021 GRESB Assessment and was recognized as a Green Star rated
entity.
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 September 30, 2021, the Company was
invested in 245 real estate properties in 24 states totaling 17.4
million square feet and had an enterprise value of approximately
$6.1 billion, defined as equity market capitalization plus the
principal amount of debt less cash. The Company provided leasing
and property management services to 13.8 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 |
|
|
|
SEPTEMBER 30, 2021 |
DECEMBER 31, 2020 |
Real estate properties |
|
|
Land |
$375,342 |
|
$362,695 |
|
Buildings, improvements and lease intangibles |
|
4,383,314 |
|
|
4,220,297 |
|
Personal property |
|
11,555 |
|
|
11,195 |
|
Investment in financing
receivable, net |
|
104,806 |
|
|
— |
|
Construction in progress |
|
1,546 |
|
|
— |
|
Land
held for development |
|
27,232 |
|
|
27,226 |
|
Total real estate properties |
|
4,903,795 |
|
|
4,621,413 |
|
Less
accumulated depreciation and amortization |
|
(1,322,577 |
) |
|
(1,239,224 |
) |
Total real estate properties, net |
|
3,581,218 |
|
|
3,382,189 |
|
Cash and cash equivalents |
|
16,000 |
|
|
15,303 |
|
Assets held for sale, net |
|
13,603 |
|
|
20,646 |
|
Operating lease right-of-use
assets |
|
128,945 |
|
|
125,198 |
|
Financing lease right-of-use
assets |
|
20,760 |
|
|
19,667 |
|
Investments in unconsolidated
joint ventures |
|
122,345 |
|
|
73,137 |
|
Other
assets, net |
|
186,328 |
|
|
176,120 |
|
Total assets |
$4,069,199 |
|
$3,812,260 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
SEPTEMBER 30, 2021 |
DECEMBER 31, 2020 |
Liabilities |
|
|
Notes and bonds payable |
$1,691,433 |
|
$1,602,769 |
|
Accounts payable and accrued
liabilities |
|
79,381 |
|
|
81,174 |
|
Liabilities of properties held
for sale |
|
766 |
|
|
1,216 |
|
Operating lease
liabilities |
|
95,913 |
|
|
92,273 |
|
Financing lease
liabilities |
|
20,460 |
|
|
18,837 |
|
Other
liabilities |
|
65,913 |
|
|
67,615 |
|
Total liabilities |
|
1,953,866 |
|
|
1,863,884 |
|
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; 147,542 and 139,487 shares issued and
outstanding at September 30, 2021 and December 31, 2020,
respectively |
|
1,475 |
|
|
1,395 |
|
Additional paid-in
capital |
|
3,882,572 |
|
|
3,635,341 |
|
Accumulated other
comprehensive loss |
|
(12,413 |
) |
|
(17,832 |
) |
Cumulative net income
attributable to common stockholders |
|
1,244,551 |
|
|
1,199,499 |
|
Cumulative dividends |
|
(3,000,852 |
) |
|
(2,870,027 |
) |
Total stockholders' equity |
|
2,115,333 |
|
|
1,948,376 |
|
Total liabilities and stockholders' equity |
$4,069,199 |
|
$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 SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Revenues |
|
|
|
|
Rental income |
$131,746 |
|
$123,384 |
|
$388,620 |
|
$368,385 |
|
Interest from financing
receivable, net |
1,917 |
|
— |
|
2,426 |
|
— |
|
Other
operating |
2,969 |
|
1,868 |
|
7,347 |
|
5,364 |
|
|
136,632 |
|
125,252 |
|
398,393 |
|
373,749 |
|
Expenses |
|
|
|
|
Property operating |
55,518 |
|
50,171 |
|
159,241 |
|
146,305 |
|
General and
administrative |
8,207 |
|
7,299 |
|
25,251 |
|
23,498 |
|
Acquisition and pursuit
costs |
974 |
|
440 |
|
2,388 |
|
1,621 |
|
Depreciation and
amortization |
50,999 |
|
47,143 |
|
150,904 |
|
142,331 |
|
|
115,698 |
|
105,053 |
|
337,784 |
|
313,755 |
|
Other income (expense) |
|
|
|
|
Gain on sales of real estate
assets |
1,186 |
|
2,177 |
|
41,046 |
|
70,395 |
|
Interest expense |
(13,334 |
) |
(14,154 |
) |
(39,857 |
) |
(42,556 |
) |
Impairment of real estate
assets |
(10,669 |
) |
— |
|
(16,581 |
) |
— |
|
Equity loss from
unconsolidated joint ventures |
(183 |
) |
(66 |
) |
(404 |
) |
(194 |
) |
Interest and other income (expense), net |
— |
|
74 |
|
239 |
|
419 |
|
|
(23,000 |
) |
(11,969 |
) |
(15,557 |
) |
28,064 |
|
Net Income (loss) |
($2,066 |
) |
$8,230 |
|
$45,052 |
|
$88,058 |
|
|
|
|
|
|
Basic earnings per common
share - Net income |
($0.02 |
) |
$0.06 |
|
$0.31 |
|
$0.65 |
|
Diluted earnings per common
share - Net income |
($0.02 |
) |
$0.06 |
|
$0.31 |
|
$0.65 |
|
|
|
|
|
|
Weighted average
common shares outstanding - basic |
143,818 |
|
134,309 |
|
141,521 |
|
133,662 |
|
Weighted average
common shares outstanding - diluted |
143,818 |
|
134,357 |
|
141,613 |
|
133,736 |
|
|
|
|
|
|
|
|
|
|
- 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 SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Net income (loss) |
($2,066 |
) |
$8,230 |
|
$45,052 |
|
$88,058 |
|
Gain on sales of real estate
assets |
(1,186 |
) |
(2,177 |
) |
(41,046 |
) |
(70,395 |
) |
Impairment of real estate
asset |
10,669 |
|
— |
|
16,581 |
|
— |
|
Real estate depreciation and
amortization |
52,390 |
|
48,215 |
|
154,899 |
|
145,324 |
|
Proportionate share of unconsolidated joint venture
adjustments |
1,558 |
|
80 |
|
3,726 |
|
240 |
|
Funds from operations (FFO) |
$61,365 |
|
$54,348 |
|
$179,212 |
|
$163,227 |
|
Acquisition and pursuit costs
1 |
974 |
|
440 |
|
2,388 |
|
1,621 |
|
Lease intangible
amortization |
48 |
|
(35 |
) |
(30 |
) |
694 |
|
Forfeited earnest money
received |
— |
|
— |
|
(500 |
) |
— |
|
Debt financing costs |
— |
|
— |
|
283 |
|
— |
|
Proportionate share of
unconsolidated joint ventures |
54 |
|
— |
|
136 |
|
— |
|
Normalized FFO |
$62,441 |
|
$54,753 |
|
$181,489 |
|
$165,542 |
|
Non-real estate depreciation
and amortization |
586 |
|
785 |
|
1,900 |
|
2,430 |
|
Non-cash interest amortization
2 |
720 |
|
934 |
|
2,511 |
|
2,715 |
|
Provision for bad debt,
net |
25 |
|
(144 |
) |
3 |
|
718 |
|
Straight-line rent income,
net |
(1,171 |
) |
(543 |
) |
(3,459 |
) |
(1,600 |
) |
Stock-based compensation |
2,538 |
|
2,445 |
|
8,183 |
|
7,449 |
|
Proportionate share of unconsolidated joint venture |
(341 |
) |
8 |
|
(1,051 |
) |
23 |
|
Normalized FFO adjusted for non-cash items |
64,798 |
|
58,238 |
|
189,576 |
|
177,277 |
|
2nd generation TI |
(6,219 |
) |
(5,323 |
) |
(16,156 |
) |
(17,368 |
) |
Leasing commissions paid |
(4,531 |
) |
(1,999 |
) |
(9,528 |
) |
(7,081 |
) |
Capital additions |
(5,443 |
) |
(4,580 |
) |
(13,539 |
) |
(12,827 |
) |
Maintenance cap ex |
(16,193 |
) |
(11,902 |
) |
(39,223 |
) |
(37,276 |
) |
Funds available for distribution (FAD) |
$48,605 |
|
$46,336 |
|
$150,353 |
|
$140,001 |
|
FFO per common share -
diluted |
$0.42 |
|
$0.40 |
|
$1.26 |
|
$1.21 |
|
Normalized FFO per
common share - diluted |
$0.43 |
|
$0.41 |
|
$1.27 |
|
$1.23 |
|
FFO weighted average
common shares outstanding - diluted
3 |
144,807 |
|
135,159 |
|
142,488 |
|
134,537 |
|
|
|
|
|
|
|
|
|
|
- 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
911,594 and 874,189, respectively for the three and nine months
ended September 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
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