EX-99.1 2 exhibit991thirdquarter2024.htm EX-99.1 Document


Ron Hubbard
Vice President, Investor Relations
P: 615.269.8290
News Release
HEALTHCARE REALTY TRUST REPORTS RESULTS FOR THE THIRD QUARTER

NASHVILLE, Tennessee, October 30, 2024 - Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the third quarter ended September 30, 2024. Net (loss) income attributable to common stockholders for the three months ended September 30, 2024 was $(93.0) million, or $(0.26) per diluted common share.
KEY THIRD QUARTER HIGHLIGHTS
•Normalized FFO per share of $0.39, up 1.2% over the prior year period
•$875 million of proceeds from JV and asset sale transactions through October
•$447 million of share repurchases year-to-date through October
•159,000 square feet, or 49 basis points, of multi-tenant absorption
•431,000 square feet of signed new leases in the quarter, the fifth consecutive quarter above 400,000

CAPITAL ALLOCATION
•The Company closed joint venture and asset sale transactions since the second quarter totaling $478 million bringing proceeds to approximately $875 million through October, which includes the following:
◦$522 million from joint venture transactions
◦$353 million from asset sales
•The Company has additional transactions under contract and letters of intent that are expected to increase proceeds to approximately $1.1 billion for the year.
•Through October, the Company has repurchased 27.1 million shares totaling $446.8 million at an average price of $16.48 per share.
MULTI-TENANT OCCUPANCY AND ABSORPTION
•Multi-tenant sequential occupancy gains continue to track towards full year 2024 expectations provided in the February 2024 Investor Presentation as shown below:
3Q 2024 YTD 2024
Absorption (SF)158,720341,473
Change in occupancy (bps)+ 49+ 106

•The multi-tenant portfolio occupancy rate was 86.5% and the leased percentage was 87.8% at September 30.
•Multi-tenant occupancy has increased by 164 basis points over the trailing-twelve-month period. For the Legacy HTA properties, multi-tenant occupancy has increased by 230 basis points for the same period.


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•An updated multi-tenant occupancy and NOI bridge can be found on page 5 of the Key Highlights Investor Presentation located on the Company's website.
LEASING
•Portfolio leasing activity that commenced in the third quarter totaled 1,641,000 square feet related to 455 leases:
◦1,054,000 square feet of renewals
◦587,000 square feet of new and expansion lease commencements
•The Company signed new leases totaling 431,000 square feet in the quarter, the fifth consecutive quarter above 400,000.

SAME STORE
•Same Store cash NOI for the third quarter increased 3.1% over the same quarter in the prior year.
•Tenant retention for the third quarter was 80.5%.
•Operating expenses decreased 1.5% over the same quarter in the prior year.
•Third quarter predictive growth measures in the Same Store portfolio include:
◦Average in-place rent increases of 2.8%.
◦Future annual contractual increases of 3.1% for leases commencing in the quarter.
◦Weighted average MOB cash leasing spreads of 3.9% on 847,000 square feet renewed:
▪7% (<0% spread)
▪7% (0-3%)
▪58% (3-4%)
▪28% (>4%)
BALANCE SHEET
•As of September 30, 2024, net debt to adjusted EBITDA was 6.7 times. Net debt to adjusted EBITDA is expected to be 6.5 times at the end of the year.
•In October, the Company repaid the remaining $100 million outstanding of Unsecured Term Loan maturing July 2025.
•As of September 30, 2024, the Company had approximately $1.3 billion of availability under its credit facility.
DIVIDEND
•A dividend of $0.31 per share was paid in August 2024. A dividend of $0.31 per share will be paid on November 27, 2024 to stockholders and OP unitholders of record on November 12, 2024.










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GUIDANCE
•The Company's 2024 per share guidance ranges are as follows:
EXPECTED 2024
ACTUALPRIORCURRENT
3Q 2024YTDLOWHIGHLOWHIGH
Earnings per share $(0.26)$(1.49)$(1.50)$(1.40)$(1.60)$(1.59)
NAREIT FFO per share $0.21$0.23$0.77$0.82$0.58$0.59
Normalized FFO per share$0.39$1.16$1.53$1.58$1.55$1.56

•The Company's 2024 guidance range includes activities outlined in the Components of Expected FFO on page 29 of the Supplemental Information.


The 2024 annual guidance range reflects the Company's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, interest rates, and operating and general and administrative expenses. The Company's guidance does not contemplate impacts from gains or losses from
dispositions, potential impairments, or debt extinguishment costs, if any. There can be no assurance that the Company's actual results will not be materially higher or lower than these expectations. If actual results vary from these assumptions, the Company's expectations may change.

EARNINGS CALL
•On Wednesday, October 30, 2024, at 11:00 a.m. Eastern Time, Healthcare Realty Trust has scheduled a conference call to discuss earnings results, quarterly activities, general operations of the Company and industry trends.
•Simultaneously, a webcast of the conference call will be available to interested parties at https://investors.healthcarerealty.com/corporate-profile/webcasts under the Investor Relations section. A webcast replay will be available following the call at the same address.
•Live Conference Call Access Details:
◦Domestic Toll-Free Number: +1 404-975-4839 access code 470628;
◦All Other Locations: +1 833-470-1428 access code 470628.
•Replay Information:
◦Domestic Toll-Free Number: +1 929-458-6194 access code 780754;
◦All Other Locations: +1 866-813-9403 access code 780754.

Healthcare Realty (NYSE: HR) is a real estate investment trust (REIT) that owns and operates medical outpatient buildings primarily located around market-leading hospital campuses. The Company selectively grows its portfolio through property acquisition and development. As the first and largest REIT to specialize in medical outpatient buildings, Healthcare Realty's portfolio includes over 650 properties totaling nearly 40 million square feet concentrated in 15 growth markets.
Additional information regarding the Company, including this quarter's operations, can be found at www.healthcarerealty.com. 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: the Company's expected results may not be achieved; failure to realize the expected benefits of the









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Merger; significant transaction costs and/or unknown or inestimable liabilities; 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 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 2023 Annual Report on Form 10-K and in its other filings with the SEC.









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Consolidated Balance Sheets
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
ASSETS
3Q 20242Q 20241Q 20244Q 20233Q 2023
Real estate properties
Land $1,195,116 $1,287,532 $1,342,895 $1,343,265 $1,387,821 
Buildings and improvements 10,074,504 10,436,218 10,902,835 10,881,373 11,004,195 
Lease intangibles718,343 764,730 816,303 836,302 890,273 
Personal property9,246 12,501 12,720 12,718 12,686 
Investment in financing receivables, net 123,045 122,413 122,001 122,602 120,975 
Financing lease right-of-use assets 77,728 81,401 81,805 82,209 82,613 
Construction in progress125,944 97,732 70,651 60,727 85,644 
Land held for development52,408 59,871 59,871 59,871 59,871 
Total real estate investments12,376,334 12,862,398 13,409,081 13,399,067 13,644,078 
Less accumulated depreciation and amortization(2,478,544)(2,427,709)(2,374,047)(2,226,853)(2,093,952)
Total real estate investments, net9,897,790 10,434,689 11,035,034 11,172,214 11,550,126 
Cash and cash equivalents 1
22,801 137,773 26,172 25,699 24,668 
Assets held for sale, net156,218 34,530 30,968 8,834 57,638 
Operating lease right-of-use assets259,013 261,976 273,949 275,975 323,759 
Investments in unconsolidated joint ventures 417,084 374,841 309,754 311,511 325,453 
Other assets, net and goodwill491,679 559,818 605,047 842,898 822,084 
Total assets$11,244,585 $11,803,627 $12,280,924 $12,637,131 $13,103,728 
LIABILITIES AND STOCKHOLDERS' EQUITY
3Q 20242Q 20241Q 20244Q 20233Q 2023
Liabilities
Notes and bonds payable $4,957,796 $5,148,153 $5,108,279 $4,994,859 $5,227,413 
Accounts payable and accrued liabilities197,428 195,884 163,172 211,994 204,947 
Liabilities of properties held for sale7,919 1,805 700 295 3,814 
Operating lease liabilities229,925 230,601 229,223 229,714 273,319 
Financing lease liabilities71,887 75,199 74,769 74,503 74,087 
Other liabilities180,283 177,293 197,763 202,984 211,365 
Total liabilities5,645,238 5,828,935 5,773,906 5,714,349 5,994,945 
Redeemable non-controlling interests3,875 3,875 3,880 3,868 3,195 
Stockholders' equity
Preferred stock, $0.01 par value; 200,000 shares authorized— — — — — 
Common stock, $0.01 par value; 1,000,000 shares authorized3,558 3,643 3,815 3,810 3,809 
Additional paid-in capital9,198,004 9,340,028 9,609,530 9,602,592 9,597,629 
Accumulated other comprehensive (loss) income (16,963)6,986 4,791 (10,741)17,079 
Cumulative net income attributable to common stockholders481,155 574,178 717,958 1,028,794 1,069,327 
Cumulative dividends (4,150,328)(4,037,693)(3,920,199)(3,801,793)(3,684,144)
Total stockholders' equity5,515,426 5,887,142 6,415,895 6,822,662 7,003,700 
Non-controlling interest80,046 83,675 87,243 96,252 101,888 
Total Equity5,595,472 5,970,817 6,503,138 6,918,914 7,105,588 
Total liabilities and stockholders' equity$11,244,585 $11,803,627 $12,280,924 $12,637,131 $13,103,728 









12Q 2024 cash and cash equivalents includes $96.0 million of proceeds held in a cash escrow account from a portfolio disposition that closed on June 28, 2024 and was received by the Company on July 1, 2024.
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Consolidated Statements of Income
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

3Q 20242Q 20241Q 20244Q 20233Q 2023
Revenues
Rental income 1
$306,499$308,135$318,076$322,076$333,335
Interest income3,9043,8654,5384,4224,264
Other operating5,0204,3224,1913,9434,661
315,423316,322326,805330,441342,260
Expenses
Property operating120,232117,719121,078121,362131,639
General and administrative20,12414,00214,78714,60913,396
   Normalizing items 2
(6,861)——(1,445)—
Normalized general and administrative13,26314,00214,78713,16413,396
Transaction costs 719431395301769
Merger-related costs ———1,4147,450
Depreciation and amortization163,226173,477178,119180,049182,989
304,301305,629314,379317,735336,243
Other income (expense)
Interest expense before merger-related fair value(50,465)(52,393)(50,949)(52,387)(55,637)
   Merger-related fair value adjustment(10,184)(10,064)(10,105)(10,800)(10,667)
Interest expense(60,649)(62,457)(61,054)(63,187)(66,304)
Gain on sales of real estate properties and other assets39,31038,3382220,57348,811
Gain on extinguishment of debt————62
Impairment of real estate assets and credit loss reserves(84,394)(132,118)(15,937)(11,403)(56,873)
Impairment of goodwill——(250,530)——
Equity income (loss) from unconsolidated joint ventures208(146)(422)(430)(456)
Interest and other (expense) income, net(132)(248)27565139
(105,657)(156,631)(327,646)(54,382)(74,621)
Net (loss) income$(94,535)$(145,938)$(315,220)$(41,676)$(68,604)
Net loss (income) attributable to non-controlling interests1,5122,1584,3841,143760
Net (loss) income attributable to common stockholders$(93,023)$(143,780)$(310,836)$(40,533)$(67,844)
Basic earnings per common share$(0.26)$(0.39)$(0.82)$(0.11)$(0.18)
Diluted earnings per common share$(0.26)$(0.39)$(0.82)$(0.11)$(0.18)
Weighted average common shares outstanding - basic358,960372,477379,455379,044378,925
Weighted average common shares outstanding - diluted 3
358,960372,477379,455379,044378,925














1In 2Q 2024, rental income was reduced by $3.0 million for Steward Health revenue reserves. This consisted of $2.2 million for April and prepetition rent for May as well as $0.8 million for March. In addition, the Company reversed $2.2 million of straight-line rent receivable against rental income.
23Q 2024 and 4Q 2023 normalizing items primarily include severance-related costs.
3Potential common shares are not included in the computation of diluted earnings per share when a loss exists, as the effect would be an antidilutive per share amount. As a result, the outstanding limited partnership units in the Company's operating partnership ("OP"), totaling 3,649,637 units were not included.
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Reconciliation of FFO, Normalized FFO and FAD 1,2,3
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
3Q 20242Q 20241Q 20244Q 20233Q 2023
Net loss attributable to common stockholders$(93,023)$(143,780)$(310,836)$(40,533)$(67,844)
Net loss attributable to common stockholders/diluted share 3
$(0.26)$(0.39)$(0.82)$(0.11)$(0.18)
Gain on sales of real estate assets(39,148)(33,431)(22)(20,573)(48,811)
Impairments of real estate assets37,632 120,917 15,937 11,403 56,873 
Real estate depreciation and amortization167,821 177,350 181,161 182,272 185,143 
Non-controlling loss from operating partnership units(1,372)(2,077)(4,278)(491)(841)
Unconsolidated JV depreciation and amortization5,3784,8184,5684,4424,421
FFO adjustments$170,311$267,577$197,366$177,053$196,785
FFO adjustments per common share - diluted$0.47$0.71$0.51$0.46$0.51
FFO $77,288$123,797$(113,470)$136,520$128,941
FFO per common share - diluted 4
$0.21$0.33$(0.30)$0.36$0.34
Transaction costs 719431395301769
Merger-related costs
———1,4147,450
Lease intangible amortization(10)129175261213
Non-routine legal costs/forfeited earnest money received 306 465 — (100)—
Debt financing costs————(62)
Restructuring and severance-related charges6,861——1,445—
Credit losses and gains on other assets, net 5
46,6008,525———
Impairment of goodwill——250,530——
Merger-related fair value adjustment 10,18410,06410,10510,80010,667
Unconsolidated JV normalizing items 6
10189878990
Normalized FFO adjustments$64,761$19,703$261,292$14,210$19,127
Normalized FFO adjustments per common share - diluted$0.18$0.05$0.68$0.04$0.05
Normalized FFO
$142,049$143,500$147,822$150,730$148,068
Normalized FFO per common share - diluted$0.39$0.38$0.39$0.39$0.39
Non-real estate depreciation and amortization276313485685475
Non-cash interest amortization, net 7
1,3191,2671,2771,2651,402
Rent reserves, net 8
(27)1,261(151)1,404442
Straight-line rent income, net(5,771)(6,799)(7,633)(7,872)(8,470)
Stock-based compensation4,0643,3833,5623,5662,556
Unconsolidated JV non-cash items 9
(376)(148)(122)(206)(231)
Normalized FFO adjusted for non-cash items
141,534142,777145,240149,572144,242
2nd generation TI(16,951)(12,287)(20,204)(18,715)(21,248)
Leasing commissions paid(10,266)(10,012)(15,215)(14,978)(8,907)
Building capital(7,389)(12,835)(5,363)(17,393)(14,354)
Total maintenance capex(34,606)(35,134)(40,782)(51,086)(44,509)
FAD$106,928$107,643$104,458$98,486$99,733
Quarterly/dividends and OP distributions$113,770$118,627$119,541$118,897$119,456
FFO wtd avg common shares outstanding - diluted 10
363,370376,556383,413383,326383,428

1Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by 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.”
2FFO, Normalized FFO and Funds Available for Distribution ("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 alternatives to net income attributable to common stockholders as indicators of the Company's operating performance or as alternatives to cash flow as measures of liquidity.
3Potential common shares are not included in the computation of diluted earnings per share when a loss exists, as the effect would be an antidilutive per share amount.
4For 1Q 2024, basic weighted average common shares outstanding was the denominator used in the per share calculation.
53Q 2024 includes $46.8 million of credit loss reserves and $0.2 million gain on other assets. 2Q 2024 includes $11.2 million of credit loss reserves and $2.2 million write-off of prior period Steward Health straight-line rent, offset by $4.9 million gain on other assets.
6Includes the Company's proportionate share of normalizing items related to unconsolidated joint ventures such as lease intangibles and acquisition and pursuit costs.
7Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.
82Q 2024 includes $0.8 million related to the Steward Health revenue reserve for March.
9Includes the Company's proportionate share of straight-line rent, net and rent reserves, net related to unconsolidated joint ventures.
10The Company utilizes the treasury stock method, which includes the dilutive effect of nonvested share-based awards outstanding of 760,552 for the three months ended September 30, 2024. Also includes the diluted impact of 3,649,637 OP units outstanding.
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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, and 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 rent reserves, 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.
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.
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