Healthcare Realty Reports First Quarter 2025 Results and Declares Quarterly Dividend
- Same-store cash NOI increased 2.3% year-over-year
- Improved tenant retention at 84.8%, up from 81.6% in Q4 2024
- Strong leasing activity with 1.45 million square feet across 377 leases
- Positive cash leasing spreads of 2.3%
- $66 million in asset sales and loan repayment strengthening balance sheet
- Net loss of $44.9 million in Q1 2025
- $12.1 million impairment of real estate assets and credit loss reserves
- High leverage with net debt to adjusted EBITDA at 6.4x
Insights
Mixed Q1 results show operational stability but continued net losses; normalized FFO tracks with guidance while debt remains elevated.
Healthcare Realty's Q1 2025 results present a mixed financial picture with a net loss of
The company's balance sheet metrics raise some concerns with net debt to adjusted EBITDA at 6.4x, above the 5.0-6.0x level typically preferred by healthcare REIT investors. The
On the operational front, same-store cash NOI growth of
The dividend remains unchanged at
Healthcare Realty shows operational resilience with improved tenant retention and stable occupancy, despite modest leasing spreads.
The Q1 portfolio performance demonstrates operational resilience within Healthcare Realty's medical office building portfolio. Their tenant retention rate improved to
Leasing activity was robust with 1.45 million square feet across 377 leases, including 1 million square feet of renewals and 448,000 square feet of new and expansion leases. This healthy mix suggests the company can both retain existing tenants and attract new ones, though the
Their portfolio recycling strategy continued with
The leadership transition to new CEO Peter Scott adds some uncertainty, but the company's reaffirmed guidance suggests management expects operational continuity. For a medical office REIT, these stable metrics despite healthcare industry pressures demonstrate the defensive nature of their portfolio, primarily located around market-leading hospital campuses where tenant demand remains relatively consistent regardless of economic conditions.
NASHVILLE, Tenn., May 01, 2025 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the first quarter ended March 31, 2025. Net (loss) income attributable to common stockholders for the three months ended March 31, 2025 was
KEY HIGHLIGHTS
- Normalized FFO per share totaled
$0.39 for the quarter. 89.3% same store occupancy as of quarter end, up from89.2% in the fourth quarter of 2024.$66 million of gross proceeds comprised of$28 million of first quarter asset sale transactions and a$38 million loan repayment received in April.
LEASING
- Portfolio leasing activity that commenced in the first quarter totaled 1,450,000 square feet related to 377 leases:
- 1,002,000 square feet of renewals
- 448,000 square feet of new and expansion lease commencements
- In the first quarter, the Company signed new leases totaling 370,000 square feet.
SAME STORE METRICS
- Cash NOI for the first quarter increased
2.3% year over year. - Tenant retention for the first quarter was
84.8% , an increase from81.6% in the fourth quarter of 2024. - MOB cash leasing spreads were
2.3% for the quarter.
BALANCE SHEET
- Run rate net debt to adjusted EBITDA was 6.4 times.
- In January 2025, the Company repaid
$35 million of its term loans maturing in 2026.
LEADERSHIP
- Peter A. Scott appointed as the Company's President & Chief Executive Officer effective April 15, 2025.
- Mr. Scott is expected to be added to the Board of Directors following the Company's 2025 annual meeting of stockholders.
- Connie Moore, who served as Interim President and CEO of the Company from November 2024 until April 14, 2025, will continue to serve on the Board of Directors.
DIVIDEND
- A common stock cash dividend in the amount of
$0.31 per share will be paid on May 23, 2025, to Class A common stockholders of record on May 12, 2025. Additionally, the eligible holders of operating partnership units will receive a distribution of$0.31 per unit, equivalent to the Company's Class A common stock dividend.
GUIDANCE
- The Company reaffirms its per share guidance, as outlined below, as well as the guidance provided on page 28 of the Supplemental Information:
| 2025 GUIDANCE | ACTUAL | ||
| LOW | HIGH | 1Q 2025 | |
| Earnings per share | |||
| NAREIT FFO per share | |||
| Normalized FFO per share | |||
The 2025 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 Friday, May 2, 2025, 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 Dial-In Number: +1 800-715-9871 access code 4950066;
- All Other Locations: +1 646-307-1963 access code 4950066.
- Replay Information:
- Domestic Dial-In Number: +1 800-770-2030 access code 4950066;
- All Other Locations: +1 609-800-9909 access code 4950066.
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 approximately 650 properties totaling more than 38 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 include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could," "budget" and other comparable terms. These forward-looking statements are based on the Company's current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Such risks and uncertainties include, among other things, the following: the Company’s expected results may not be achieved; risks related to future opportunities and plans for the Company, including the uncertainty of expected future financial performance and results of the Company; pandemics or other health crises; increases in interest rates; the availability and cost of capital at expected rates; competition for quality assets; negative developments in the operating results or financial condition of the Company's tenants, including, but not limited to, their ability to pay rent; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to release space at similar rates as vacancies occur; the Company's ability to renew expiring leases; government regulations affecting tenants' Medicare and Medicaid reimbursement rates and operational requirements; unanticipated difficulties and/or expenditures relating to future acquisitions and developments; changes in rules or practices governing the Company's financial reporting; the Company may be required under purchase options to sell properties and may not be able to reinvest the proceeds from such sales at rates of return equal to the return received on the properties sold; uninsured or underinsured losses related to casualty or liability; the incurrence of impairment charges on its real estate properties or other assets; other legal and operational matters; and other risks and uncertainties affecting the Company, including those described from time to time under the caption “Risk Factors” and elsewhere in the Company’s filings and reports with the SEC, including the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Moreover, other risks and uncertainties of which the Company is not currently aware may also affect the Company's forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated. The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing. For a detailed discussion of the Company’s risk factors, please refer to the Company's filings with the SEC, including this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
| Consolidated Balance Sheets | ||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | ||||||||||
| ASSETS | ||||||||||
| 1Q 2025 | 4Q 2024 | 3Q 2024 | 2Q 2024 | 1Q 2024 | ||||||
| Real estate properties | ||||||||||
| Land | ||||||||||
| Buildings and improvements | 9,729,912 | 9,707,066 | 10,074,504 | 10,436,218 | 10,902,835 | |||||
| Lease intangibles | 631,864 | 664,867 | 718,343 | 764,730 | 816,303 | |||||
| Personal property | 9,938 | 9,909 | 9,246 | 12,501 | 12,720 | |||||
| Investment in financing receivables, net | 123,813 | 123,671 | 123,045 | 122,413 | 122,001 | |||||
| Financing lease right-of-use assets | 76,958 | 77,343 | 77,728 | 81,401 | 81,805 | |||||
| Construction in progress | 35,101 | 31,978 | 125,944 | 97,732 | 70,651 | |||||
| Land held for development | 52,408 | 52,408 | 52,408 | 59,871 | 59,871 | |||||
| Total real estate investments | 11,794,629 | 11,810,710 | 12,376,334 | 12,862,398 | 13,409,081 | |||||
| Less accumulated depreciation and amortization | (2,583,819 | ) | (2,483,656 | ) | (2,478,544 | ) | (2,427,709 | ) | (2,374,047 | ) |
| Total real estate investments, net | 9,210,810 | 9,327,054 | 9,897,790 | 10,434,689 | 11,035,034 | |||||
| Cash and cash equivalents 1 | 25,722 | 68,916 | 22,801 | 137,773 | 26,172 | |||||
| Assets held for sale, net | 6,635 | 12,897 | 156,218 | 34,530 | 30,968 | |||||
| Operating lease right-of-use assets | 259,764 | 261,438 | 259,013 | 261,976 | 273,949 | |||||
| Investments in unconsolidated joint ventures | 470,418 | 473,122 | 417,084 | 374,841 | 309,754 | |||||
| Other assets, net and goodwill | 522,920 | 507,496 | 491,679 | 559,818 | 605,047 | |||||
| Total assets | ||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| 1Q 2025 | 4Q 2024 | 3Q 2024 | 2Q 2024 | 1Q 2024 | ||||||
| Liabilities | ||||||||||
| Notes and bonds payable | ||||||||||
| Accounts payable and accrued liabilities | 144,855 | 222,510 | 197,428 | 195,884 | 163,172 | |||||
| Liabilities of properties held for sale | 422 | 1,283 | 7,919 | 1,805 | 700 | |||||
| Operating lease liabilities | 224,117 | 224,499 | 229,925 | 230,601 | 229,223 | |||||
| Financing lease liabilities | 72,585 | 72,346 | 71,887 | 75,199 | 74,769 | |||||
| Other liabilities | 174,830 | 161,640 | 180,283 | 177,293 | 197,763 | |||||
| Total liabilities | 5,349,427 | 5,345,049 | 5,645,238 | 5,828,935 | 5,773,906 | |||||
| Redeemable non-controlling interests | 4,627 | 4,778 | 3,875 | 3,875 | 3,880 | |||||
| Stockholders' equity | ||||||||||
| Preferred stock, | — | — | — | — | — | |||||
| Common stock, | 3,510 | 3,505 | 3,558 | 3,643 | 3,815 | |||||
| Additional paid-in capital | 9,121,269 | 9,118,229 | 9,198,004 | 9,340,028 | 9,609,530 | |||||
| Accumulated other comprehensive (loss) income | (7,206 | ) | (1,168 | ) | (16,963 | ) | 6,986 | 4,791 | ||
| Cumulative net income attributable to common stockholders | 329,436 | 374,309 | 481,155 | 574,178 | 717,958 | |||||
| Cumulative dividends | (4,368,739 | ) | (4,260,014 | ) | (4,150,328 | ) | (4,037,693 | ) | (3,920,199 | ) |
| Total stockholders' equity | 5,078,270 | 5,234,861 | 5,515,426 | 5,887,142 | 6,415,895 | |||||
| Non-controlling interest | 63,945 | 66,235 | 80,046 | 83,675 | 87,243 | |||||
| Total equity | 5,142,215 | 5,301,096 | 5,595,472 | 5,970,817 | 6,503,138 | |||||
| Total liabilities and stockholders' equity | ||||||||||
- 2Q 2024 cash and cash equivalents include
$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.
| Consolidated Statements of Income | ||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | ||||||||||
| 1Q 2025 | 4Q 2024 | 3Q 2024 | 2Q 2024 | 1Q 2024 | ||||||
| Revenues | ||||||||||
| Rental income 1 | ||||||||||
| Interest income | 3,731 | 4,076 | 3,904 | 3,865 | 4,538 | |||||
| Other operating | 6,389 | 5,625 | 5,020 | 4,322 | 4,191 | |||||
| 298,977 | 309,766 | 315,423 | 316,322 | 326,805 | ||||||
| Expenses | ||||||||||
| Property operating | 114,963 | 114,415 | 120,232 | 117,719 | 121,078 | |||||
| General and administrative | 13,530 | 34,208 | 20,124 | 14,002 | 14,787 | |||||
| Normalizing items 2 | (502 | ) | (22,991 | ) | (6,861 | ) | — | — | ||
| Normalized general and administrative | 13,028 | 11,217 | 13,263 | 14,002 | 14,787 | |||||
| Transaction costs | 1,011 | 1,577 | 719 | 431 | 395 | |||||
| Depreciation and amortization | 150,969 | 160,330 | 163,226 | 173,477 | 178,119 | |||||
| 280,473 | 310,530 | 304,301 | 305,629 | 314,379 | ||||||
| Other income (expense) | ||||||||||
| Interest expense before merger-related fair value | (44,366 | ) | (47,951 | ) | (50,465 | ) | (52,393 | ) | (50,949 | ) |
| Merger-related fair value adjustment | (10,446 | ) | (10,314 | ) | (10,184 | ) | (10,064 | ) | (10,105 | ) |
| Interest expense | (54,812 | ) | (58,265 | ) | (60,649 | ) | (62,457 | ) | (61,054 | ) |
| Gain on sales of real estate properties and other assets | 2,904 | 32,082 | 39,310 | 38,338 | 22 | |||||
| Loss on extinguishment of debt | — | (237 | ) | — | — | — | ||||
| Impairment of real estate assets and credit loss reserves | (12,081 | ) | (81,098 | ) | (84,394 | ) | (132,118 | ) | (15,937 | ) |
| Impairment of goodwill | — | — | — | — | (250,530 | ) | ||||
| Equity income (loss) from unconsolidated joint ventures | 1 | 224 | 208 | (146 | ) | (422 | ) | |||
| Interest and other income (expense), net | 95 | (154 | ) | (132 | ) | (248 | ) | 275 | ||
| (63,893 | ) | (107,448 | ) | (105,657 | ) | (156,631 | ) | (327,646 | ) | |
| Net loss | ) | ) | ) | ) | ) | |||||
| Net loss attributable to non-controlling interests | 516 | 1,366 | 1,512 | 2,158 | 4,384 | |||||
| Net loss attributable to common stockholders | ) | ) | ) | ) | ) | |||||
| Basic earnings per common share | ) | ) | ) | ) | ) | |||||
| Diluted earnings per common share | ) | ) | ) | ) | ) | |||||
| Weighted average common shares outstanding - basic | 349,539 | 351,560 | 358,960 | 372,477 | 379,455 | |||||
| Weighted average common shares outstanding - diluted 3 | 349,539 | 351,560 | 358,960 | 372,477 | 379,455 | |||||
- In 4Q 2024, rental income was reduced by
$0.7 million for Prospect Medical revenue reserves. In 2Q 2024, rental income was reduced by$3.0 million for Steward Health revenue reserves. - Normalizing items primarily include restructuring, severance-related costs and non-routine advisory fees associated with shareholder engagement.
- Potential 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 3,665,625 units were not included.
| Reconciliation of FFO, Normalized FFO and FAD 1,2,3 | ||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | ||||||||||
| 1Q 2025 | 4Q 2024 | 3Q 2024 | 2Q 2024 | 1Q 2024 | ||||||
| Net loss attributable to common stockholders | ) | ) | ) | ) | ) | |||||
| Net loss attributable to common stockholders/diluted share 3 | $(0.13 | ) | $(0.31 | ) | $(0.26 | ) | $(0.39 | ) | $(0.82 | ) |
| Gain on sales of real estate assets | (2,904 | ) | (32,082 | ) | (39,148 | ) | (33,431 | ) | (22 | ) |
| Impairments of real estate assets | 10,145 | 75,423 | 37,632 | 120,917 | 15,937 | |||||
| Real estate depreciation and amortization | 155,288 | 164,656 | 167,821 | 177,350 | 181,161 | |||||
| Non-controlling loss from operating partnership units | (599 | ) | (1,422 | ) | (1,372 | ) | (2,077 | ) | (4,278 | ) |
| Unconsolidated JV depreciation and amortization | 6,717 | 5,913 | 5,378 | 4,818 | 4,568 | |||||
| FFO adjustments | ||||||||||
| FFO adjustments per common share - diluted | $0.48 | $0.60 | $0.47 | $0.71 | $0.51 | |||||
| FFO | ) | |||||||||
| FFO per common share - diluted 4 | $0.35 | $0.30 | $0.21 | $0.33 | $(0.30 | ) | ||||
| Transaction costs | 1,011 | 1,577 | 719 | 431 | 395 | |||||
| Lease intangible amortization | (228 | ) | (2,348 | ) | (10 | ) | 129 | 175 | ||
| Non-routine legal costs/forfeited earnest money received | 77 | 306 | 306 | 465 | — | |||||
| Debt financing costs | — | 237 | — | — | — | |||||
| Restructuring and severance-related charges | 502 | 22,991 | 6,861 | — | — | |||||
| Credit losses and gains (losses) on other assets, net 5 | 1,936 | 4,582 | 46,600 | 8,525 | — | |||||
| Impairment of goodwill | — | — | — | — | 250,530 | |||||
| Merger-related fair value adjustment | 10,446 | 10,314 | 10,184 | 10,064 | 10,105 | |||||
| Unconsolidated JV normalizing items 6 | 204 | 113 | 101 | 89 | 87 | |||||
| Normalized FFO adjustments | ||||||||||
| Normalized FFO adjustments per common share - diluted | $0.04 | $0.11 | $0.18 | $0.05 | $0.68 | |||||
| Normalized FFO | ||||||||||
| Normalized FFO per common share - diluted | $0.39 | $0.40 | $0.39 | $0.38 | $0.39 | |||||
| Non-real estate depreciation and amortization | 222 | 404 | 276 | 313 | 485 | |||||
| Non-cash interest amortization, net 7 | 1,217 | 1,239 | 1,319 | 1,267 | 1,277 | |||||
| Rent reserves, net 8 | 94 | (369 | ) | (27 | ) | 1,261 | (151 | ) | ||
| Straight-line rent income, net | (6,844 | ) | (7,051 | ) | (5,771 | ) | (6,799 | ) | (7,633 | ) |
| Stock-based compensation | 3,028 | 3,028 | 4,064 | 3,383 | 3,562 | |||||
| Unconsolidated JV non-cash items 9 | (253 | ) | (277 | ) | (376 | ) | (148 | ) | (122 | ) |
| Normalized FFO adjusted for non-cash items | 135,186 | 140,388 | 141,534 | 142,777 | 145,240 | |||||
| 2nd generation TI | (14,885 | ) | (20,003 | ) | (16,951 | ) | (12,287 | ) | (20,204 | ) |
| Leasing commissions paid | (11,394 | ) | (11,957 | ) | (10,266 | ) | (10,012 | ) | (15,215 | ) |
| Building capital | (6,687 | ) | (8,347 | ) | (7,389 | ) | (12,835 | ) | (5,363 | ) |
| Total maintenance capex | (32,966 | ) | (40,307 | ) | (34,606 | ) | (35,134 | ) | (40,782 | ) |
| FAD | ||||||||||
| Quarterly dividends and OP distributions | ||||||||||
| FFO wtd avg common shares outstanding - diluted 10 | 353,522 | 355,874 | 363,370 | 376,556 | 383,413 | |||||
- Funds 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.”
- FFO, 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.
- Potential 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.
- For 1Q 2024, basic weighted average common shares outstanding was the denominator used in the per share calculation.
- 1Q 2025 represents a
$1.9 million loss on other assets. 4Q 2024 includes$1.6 million of credit loss reserves, net of recoveries and a$4.1 million loss on other assets. These amounts were partially offset by a$1.1 million recovery of prior-period Steward Health straight-line rent for leases assumed. 3Q 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. - Includes the Company's proportionate share of normalizing items related to unconsolidated joint ventures such as lease intangibles and acquisition and pursuit costs.
- Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.
- 2Q 2024 includes
$0.8 million related to the Steward Health revenue reserve for March. - Includes the Company's proportionate share of straight-line rent, net and rent reserves, net related to unconsolidated joint ventures.
- The Company utilizes the treasury stock method, which includes the dilutive effect of nonvested share-based awards outstanding of 317,511 for the three months ended March 31, 2025. Also includes the diluted impact of 3,665,625 OP units outstanding.
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 plus interest from financing receivables 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, financing receivable amortization, 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 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 five full quarters. Newly developed or redeveloped properties will be included in the same store pool five full quarters after substantial completion.
Ron Hubbard
Vice President, Investor Relations
P: 615.269.8290
FAQ
What was Healthcare Realty's (HR) earnings per share in Q1 2025?
What is Healthcare Realty's (HR) dividend payment for Q1 2025?
Who is the new CEO of Healthcare Realty (HR)?
What is Healthcare Realty's (HR) occupancy rate in Q1 2025?
What is Healthcare Realty's (HR) FFO guidance for 2025?
