HR
$27.80
Healthcare Realty Trust
($.55)
(1.94%)
Earnings Details
2nd Quarter June 2020
Wednesday, August 05, 2020 4:50:00 PM
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Summary

Healthcare Realty Trust (HR) Recent Earnings

Healthcare Realty Trust (HR) reported 2nd Quarter June 2020 earnings of $0.42 per share on revenue of $123.7 million. The consensus earnings estimate was $0.41 per share on revenue of $124.1 million. Revenue grew 6.3% on a year-over-year basis.

Healthcare Realty Trust Inc is a real estate investment trust which owns, acquires, manages, finances and develops income-producing real estate properties associated with the delivery of outpatient healthcare services throughout the United States.

Results
Reported Earnings
$0.42
Earnings Whisper
-
Consensus Estimate
$0.41
Reported Revenue
$123.7 Mil
Revenue Estimate
$124.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Healthcare Realty Trust Reports Results for the Second Quarter

NASHVILLE, Tenn., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the second quarter ended June 30, 2020.  The Company reported net income of $75.5 million, or $0.56 per diluted common share, for the quarter ended June 30, 2020.  Normalized FFO for the three months ended June 30, 2020 totaled $56.3 million, or $0.42 per diluted common share.

The Company has provided a separate COVID-19 business update which can be found on the Company's website, https://investors.healthcarerealty.com/corporate-profile/, including the following highlights:

 99% of second quarter rent collected or deferred:
   97% of rent collected
   2% of deferred rent with repayment scheduled by year-end
 $3.1 million of outstanding rent deferred as of July 31, 2020:
   $7.2 million originally granted
   $4.1 million repaid, including $3.7 million repaid early
 Trailing twelve month same store cash NOI growth was 1.9%.  This amount was negatively impacted by approximately 20 basis points due to the following second quarter items:
   A general reserve of approximately $0.7 million against rent deferred
   Sequential parking revenue decrease of approximately $0.8 million
   Operating expense savings, net of reimbursements, of approximately $1 million
 FFO for the second quarter was not materially impacted by the same store items listed above due to an offsetting decrease in incentive compensation and travel expenses totaling $0.6 million.

Salient highlights for the second quarter include:

 Normalized FFO per share of $0.42 increased 5.0% over second quarter of 2019.
 For the trailing twelve months ended June 30, 2020, same store cash NOI grew 1.9%.
 Predictive growth measures in the same store multi-tenant portfolio include:
   Average in-place rent increases of 2.89%
   Future annual contractual increases of 3.10% for leases commencing in the quarter
   Weighted average cash leasing spreads of 4.5% on 330,000 square feet renewed:
     6% (<0% spread)
     11% (0-3%)
     54% (3-4%)
     29% (>4%)
   Tenant retention of 84.6%
 Portfolio leasing activity in the second quarter totaled 572,000 square feet related to 133 leases:
   393,000 square feet of renewals
   179,000 square feet of new and expansion leases
 Subsequent to the end of the second quarter, the Company acquired four medical office buildings for $83.2 million totaling 165,000 square feet. Acquisitions included:
   In San Diego, a 46,000 square foot building adjacent to A rated Palomar Health's Poway Hospital for $16.7 million.
   In Los Angeles, a 50,000 square foot building for $35.0 million.  The property is located adjacent to Huntington Hospital, which is currently under a definitive agreement to join Aa3 rated Cedars-Sinai Health System.  The Company owns two other properties adjacent to this campus.
   In Seattle, a 21,000 square foot building adjacent to AA- rated MultiCare Health System's Allenmore Hospital for $11.0 million.  The Company owns three additional properties on or adjacent to this campus.
   In Atlanta, a 48,000 square foot building adjacent to A rated Wellstar Health System's Kennestone Hospital for $20.5 million.  The Company owns four additional properties on or adjacent to this campus.
 On July 30, 2020, the Company sold to Mercy two single-tenant properties totaling 386,000 square feet for $244.5 million, including:
   a medical office building in Edmond, Oklahoma, and
   an orthopedic specialty hospital in Springfield, Missouri.
 On May 29th, the Company borrowed $150 million from its unsecured term loan due 2026.
 As of June 30, the Company had cash of $43.7 million and $700 million available on its revolver.
 Net debt to adjusted EBITDA decreased to 5.1 times at the end of the quarter.
 During the quarter, the Company issued 1.1 million shares through its at-the-market equity program at a weighted average price of $31.08 per share, generating $32.9 million in net proceeds.
 In addition, the Company currently has approximately 2.3 million shares to be settled through forward equity contracts at a weighted average price per share of $31.72.  The Company expects gross proceeds of approximately $74 million, before cost of borrowing under the forward contracts.
 A dividend of $0.30 per share was declared for the second quarter.  Dividends paid totaled $40.5 million, which equaled 71.9% of normalized FFO and 84.2% of FAD.

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, 2020, the Company owned 210 real estate properties in 24 states totaling 15.5 million square feet and was valued at approximately $5.5 billion. The Company provided leasing and property management services to 12.0 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, 2019 under the heading "Risk Factors," and in the Company's quarterly Reports on Form 10-Q filed with the SEC for the quarters ended March 31, 2020 and June 30, 2020, 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, 2020  DECEMBER 31, 2019 
Real estate properties       
Land $312,139   $289,751 
Buildings, improvements and lease intangibles 3,937,657   3,986,326 
Personal property 10,849   10,538 
Construction in progress    48,731 
Land held for development 24,647   24,647 
Total real estate properties 4,285,292   4,359,993 
Less accumulated depreciation and amortization (1,169,298)  (1,121,102)
Total real estate properties, net 3,115,994   3,238,891 
Cash and cash equivalents 43,680   657 
Assets held for sale, net    37 
Operating lease right-of-use assets 124,398   126,177 
Financing lease right-of-use assets 19,884   12,667 
Net investment in sales-type leases 244,381    
Other assets, net 183,616   185,426 
Total assets $3,731,953   $3,563,855 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
 JUNE 30, 2020  DECEMBER 31, 2019 
Liabilities       
Notes and bonds payable $1,554,936   $1,414,069 
Accounts payable and accrued liabilities 65,485   78,517 
Liabilities of properties held for sale    145 
Operating lease liabilities 91,259   91,574 
Financing lease liabilities 18,595   18,037 
Other liabilities 72,317   61,504 
Total liabilities 1,802,592   1,663,846 
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; 136,048 and 134,706 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 1,360   1,347 
Additional paid-in capital 3,529,559   3,485,003 
Accumulated other comprehensive loss (20,294)  (6,175)
Cumulative net income attributable to common stockholders 1,207,132   1,127,304 
Cumulative dividends (2,788,396)  (2,707,470)
Total stockholders' equity 1,929,361   1,900,009 
Total liabilities and stockholders' equity $3,731,953   $3,563,855 
  1. 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, 
  2020  2019   2020  2019 
Revenues             
Rental income 2 $122,358  $114,351   $245,001  $225,046 
Other operating 1,332  1,966   3,496  3,928 
  123,690  116,317   248,497  228,974 
Expenses     
Property operating 46,580  44,286   96,134  87,012 
General and administrative 7,434  7,845   16,199  16,355 
Acquisition and pursuit costs 431  422   1,181  726 
Depreciation and amortization 47,691  43,926   95,188  86,588 
  102,136  96,479   208,702  190,681 
Other income (expense)     
Gain on sales of real estate assets 68,267  4,849   68,218  4,865 
Interest expense (14,442) (13,850)  (28,402) (27,438)
Impairment of real estate assets   (5,610)    (5,610)
Interest and other income (expense), net 134  (743)  217  (735)
  53,959  (15,354)  40,033  (28,918)
Net Income $75,513  $4,484   $79,828  $9,375 
      
Basic earnings per common share - Net income $0.56  $0.03   $0.59  $0.07 
Diluted earnings per common share - Net income $0.56  $0.03   $0.59  $0.07 
      
Weighted average common shares outstanding - basic 133,634  127,449   133,335  125,799 
Weighted average common shares outstanding - diluted 133,696  127,525   133,420  125,889 
  1. 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.
  2. Beginning in the first quarter of 2019 with the adoption of Accounting Standards Codification Topic 842, bad debts, net of recoveries associated with lease revenue was recorded within rental income. 
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, 
 2020 2019  2020 2019 
Net income $75,513  $4,484   $79,828  $9,375 
Gain on sales of real estate assets (68,267) (4,849)  (68,218) (4,865)
Impairment of real estate asset   5,610     5,610 
Real estate depreciation and amortization 48,657  44,682   97,269  88,066 
Funds from operations (FFO) $55,903  $49,927   $108,879  $98,186 
Acquisition and pursuit costs 1 431  422   1,181  726 
Lease intangible amortization 2 (16) 54   729  138 
Debt financing costs   760     760 
Normalized FFO $56,318  $51,163   $110,789  $99,810 
Non-real estate depreciation and amortization 822  829   1,645  1,592 
Non-cash interest expense amortization 4 1,035  707   1,781  1,409 
Provision for bad debt, net 945  150   862  75 
Straight-line rent income, net (382) (1)  (1,042) (271)
Stock-based compensation 2,405  2,372   5,003  5,011 
Normalized FFO adjusted for non-cash items 61,143  55,220   119,038  107,626 
2nd generation TI (6,005) (6,124)  (12,045) (10,450)
Leasing commissions paid (2,258) (2,315)  (5,082) (3,662)
Capital additions (4,777) (4,993)  (8,247) (8,455)
Funds available for distribution (FAD) $48,103  $41,788   $93,664  $85,059 
FFO per common share - diluted $0.42  $0.39   $0.81  $0.78 
Normalized FFO per common share - diluted $0.42  $0.40   $0.83  $0.79 
FFO weighted average common shares outstanding - diluted 5 134,464  128,279   134,221  126,615 
  1. Acquisition and pursuit costs include third party and travel costs related to the pursuit of acquisitions and developments.
  2. The Company adopted the 2018 NAREIT FFO White Paper Restatement during the first quarter of 2019.  This amended definition specifically includes the impact of acquisition related market lease intangible amortization in the calculation of NAREIT FFO.  The Company historically included this amortization in the real estate depreciation and amortization line item which is added back in the calculation of NAREIT FFO.   Prior periods were not restated for the adoption.
  3. Includes the amortization of deferred financing costs and discounts and premiums.
  4. The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of 767,760 and 800,255, respectively for the three and six months ended June 30, 2020.
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 accounting principles generally accepted in the United States of America and is 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 property lease guaranty income less property operating expenses. Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, lease terminations, 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.   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.

Carla Baca
Associate Vice President, Investor Relations
P: 615.269.8175


HR NAREIT.JPG

Source: Healthcare Realty Trust Incorporated