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Healthcare Realty Trust Reports Results for the Second Quarter

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NASHVILLE, Tenn., Aug. 02, 2018 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the second quarter ended June 30, 2018.  The Company reported net income of $37.7 million or $0.30 per diluted common share for the quarter.  Normalized FFO for the three months ended June 30, 2018 totaled $49.0 million, or $0.40 per diluted common share.

Salient quarterly highlights include:

  • For the trailing twelve months ended June 30 2018, same store revenue grew 2.8%, operating expenses increased 2.1%, and same store cash NOI grew 3.2%:
      ° Same store revenue per average occupied square foot increased 2.6%.
      ° Average same store occupancy increased 30 basis points to 89.6% from 89.3%.

  • Four predictive growth measures in the same store multi-tenant portfolio:
      ° In-place contractual rent increases averaged 2.84%, up from 2.74% a year ago.
      ° Weighted average cash leasing spreads were 6.4% on 229,000 square feet renewed:
          • 1% (<0% spread)
          • 7% (0-3%)
          • 57% (3-4%)
          • 35% (>4%)
      ° Tenant retention was 84.4%.
      ° The average yield on renewed leases increased 70 basis points.

  • Leasing activity in the second quarter totaled 480,000 square feet related to 122 leases:
      ° 346,000 square feet of renewals
      ° 134,000 square feet of new and expansion leases 

  • Acquisitions totaled $70.4 million in the second quarter and comprised 371,000 square feet, including:
      ° A medical office building adjacent to the Overlake Hospital Medical Center campus in Seattle for $7.8 million.  The 13,000 square foot building is 100% leased and adjacent to a 191,000 square foot medical office development completed by the Company in 2011 and a 26,000 square foot medical office building purchased in 2017.
      ° Two buildings adjacent to Catholic Health Initiatives' St. Anthony Hospital campus in Denver for $25.0 million.  The 78% leased properties total 188,000 square feet on 13.0 acres of fee simple land.  The buildings are adjacent to three on-campus medical office buildings totaling 287,000 square feet developed by the Company in 2011 and 2017, and a 48,000 square foot medical office building the Company purchased in 2015.
      ° A medical office building adjacent to Integris Health's Baptist Medical Center campus in Oklahoma City for $11.4 million.  The 83,000 square foot building is 96% leased.
      ° A medical office building on MultiCare Health System's Allenmore Hospital campus in Seattle for $26.2 million.  The 91% leased, 87,000 square foot building is attached to both the hospital and a 68,000 square foot medical office building acquired by the Company in 2008.  
  • Dispositions totaled $55.7 million in the second quarter, including seven properties in Roanoke, Virginia for $46.2 million pursuant to the exercise of a fixed-price purchase option and five skilled nursing facilities in rural Michigan for $9.5 million.
     
  • A dividend of $0.30 per common share was declared, which is equal to 75.0% of normalized FFO per share. 
     
  • Dividends paid as a percentage of funds available for distribution were 98.4% year-to-date.

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, 2018, the Company owned 201 real estate properties in 27 states totaling 14.9 million square feet and was valued at approximately $5.0 billion. The Company provided leasing and property management services to 11.2 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, 2017 under the heading "Risk Factors," and as updated in its Quarterly Reports on Form 10-Q filed thereafter. 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.


 
Condensed Consolidated Balance Sheets 1
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
ASSETS      
    JUNE 30, 2018       DECEMBER 31, 2017  
Real estate properties      
Land $ 214,755     $ 201,283  
Buildings, improvements and lease intangibles   3,668,938       3,601,460  
Personal property   10,355       10,314  
Construction in progress   23,102       5,458  
Land held for development   24,633       20,123  
Total real estate properties   3,941,783       3,838,638  
Less accumulated depreciation and amortization   (959,732 )     (897,430 )
Total real estate properties, net   2,982,051       2,941,208  
Cash and cash equivalents   7,414       6,215  
Assets held for sale and discontinued operations, net   8,788       33,147  
Other assets, net   216,437       213,015  
Total assets $ 3,214,690     $ 3,193,585  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
    JUNE 30, 2018       DECEMBER 31, 2017  
Liabilities      
Notes and bonds payable $ 1,335,732     $ 1,283,880  
Accounts payable and accrued liabilities   66,490       70,995  
Liabilities of properties held for sale and discontinued operations   340       93  
Other liabilities   44,072       48,734  
Total liabilities   1,446,634       1,403,702  
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; 125,234 and 125,132 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively   1,252       1,251  
Additional paid-in capital   3,178,514       3,173,429  
Accumulated other comprehensive income (loss)   5       (1,299 )
Cumulative net income attributable to common stockholders   1,065,256       1,018,348  
Cumulative dividends   (2,476,971 )     (2,401,846 )
Total stockholders' equity   1,768,056       1,789,883  
Total liabilities and stockholders' equity $ 3,214,690     $ 3,193,585  
               
  1. The Condensed 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.

 
Condensed Consolidated Statements of Income 1
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
           
  THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
    2018     2017       2018     2017  
Revenues          
Rental income $ 109,566   $ 103,384     $ 219,795   $ 206,093  
Other operating   2,068     1,934       3,963     3,869  
    111,634     105,318       223,758     209,962  
Expenses          
Property operating   41,737     38,184       83,556     76,035  
General and administrative   8,373     8,005       17,473     16,699  
Acquisition and pursuit costs   120     785       397     1,371  
Depreciation and amortization   40,130     34,823       79,703     69,274  
Bad debts, net of recoveries   104     105       104     171  
    90,464     81,902       181,233     163,550  
Other income (expense)          
Gain on sales of real estate assets   29,590     16,124       29,590     39,532  
Interest expense   (13,069 )   (14,315 )     (25,737 )   (28,587 )
Impairment of real estate assets       (5 )         (328 )
Interest and other income, net   38     4       530     41  
    16,559     1,808       4,383     10,658  
Net Income $ 37,729   $ 25,224     $ 46,908   $ 57,070  
           
Basic earnings per common share - Net income $ 0.30   $ 0.22     $ 0.37   $ 0.50  
Diluted earnings per common share - Net income $ 0.30   $ 0.22     $ 0.37   $ 0.49  
           
Weighted average common shares outstanding - basic   123,285     114,721       123,271     114,698  
Weighted average common shares outstanding - diluted   123,321     115,674       123,324     115,597  
                           
  1. The Condensed Consolidated Statements of Income do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.


 
Reconciliation of FFO, Normalized FFO and FAD
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED
 
       
  Three Months Ended June 30,
    2018       2017  
Net income $ 37,729     $ 25,224  
Gain on sales of real estate assets   (29,590 )     (16,124 )
Impairment of real estate asset         5  
Real estate depreciation and amortization   40,747       35,421  
Funds from operations $ 48,886     $ 44,526  
Acquisition and pursuit costs 1   120       785  
Normalized funds from operations $ 49,006     $ 45,311  
Non-real estate depreciation and amortization   1,481       1,369  
Provision for bad debt, net   104       105  
Straight-line rent receivable, net   (683 )     (1,623 )
Stock-based compensation   2,593       2,453  
Non-cash items   3,495       2,304  
2nd generation TI   (7,755 )     (3,680 )
Leasing commissions paid   (1,947 )     (984 )
Capital additions   (7,117 )     (5,667 )
Funds available for distribution $ 35,682     $ 37,284  
Funds from operations per common share - diluted $ 0.39     $ 0.38  
Normalized funds from operations per common share - diluted $ 0.40     $ 0.39  
FFO weighted average common shares outstanding - diluted 2   123,983       115,674  
               
  1. Acquisition and pursuit costs include third party and travel costs related to the pursuit of acquisitions and developments.
  2. Diluted weighted average common shares outstanding for the three months ended June 30, 2018 includes the dilutive effect of nonvested share-based awards outstanding of 662,270 shares.


Reconciliation of FFO, Normalized FFO and FAD
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") and FAD per share 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 the most commonly accepted and reported measure of a REIT's operating performance equal to "net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization (including amortization of leasing commissions), and after adjustments for unconsolidated partnerships and joint ventures."  The Company defines Normalized FFO as FFO excluding acquisition-related expenses 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.

Carla Baca
Director of Corporate Communications
P: 615.269.8175

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