Core Viewpoint - Healthcare Realty Trust reported its Q2 2025 earnings, showing improved operational performance despite a GAAP net loss per share and a decline in revenue compared to the previous year [1][8]. Financial Performance - Normalized FFO per share was $0.41, exceeding analyst estimates, while GAAP net loss per share was $(0.45) [1][8]. - Revenue for the quarter was $297.502 million, down 5.9% from $316.3 million in Q2 2024 [2]. - Funds Available for Distribution (FAD) was $115.4 million, reflecting a 7.2% increase year-over-year [2][8]. - The quarterly dividend was reduced by 23% to $0.24 per share to enhance sustainability and retained earnings [9][10]. Business Overview and Strategy - The company specializes in owning and managing medical office buildings, focusing on outpatient healthcare facilities leased to leading health systems and physicians [3]. - Strategic priorities include optimizing the property portfolio, improving operational efficiency, and managing the balance sheet [4]. Operational Highlights - Same store cash Net Operating Income (NOI) improved by 5.1%, with occupancy rising to 90% and margins reaching 64.3% [5]. - Tenant retention was at 83%, with health system tenants accounting for 33% of new leasing volume [5][13]. - The company executed 1.5 million square feet of leases, with 452,000 square feet in new agreements [5]. Portfolio Management - The company sold $182.4 million of assets during the quarter, targeting non-core or underperforming assets, with an additional $700 million in sales under contract [6]. - The Net Debt to Adjusted EBITDA ratio improved from 6.4x to 6.0x, with further reductions anticipated by year-end 2025 [6]. Leadership and Governance - Leadership changes included a new President and CEO, along with a streamlined board governance structure [7]. - A comprehensive strategic plan was launched, focusing on margin expansion and disciplined capital allocation [7]. Future Guidance - Full-year Normalized FFO per share guidance was raised to a range of $1.57 to $1.61, with same store cash NOI growth expectations lifted to 3.25% to 4.00% [15]. - The company aims for a Net Debt to Adjusted EBITDA ratio of 5.4x to 5.7x by year-end [15]. - Key themes to monitor include execution of pending asset sales, margin expansion, and operational improvements [16].

PART I - FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company reported a net loss of $205.5 million for H1 2025, with total assets decreasing to $10.24 billion [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $10.24 billion as of June 30, 2025, with total equity declining to $4.88 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total real estate properties, net | $8,674,578 | $9,327,054 | | Assets held for sale, net | $358,207 | $12,897 | | **Total assets** | **$10,235,572** | **$10,650,923** | | Notes and bonds payable | $4,694,391 | $4,662,771 | | **Total liabilities** | **$5,354,146** | **$5,345,049** | | **Total equity** | **$4,877,094** | **$5,301,096** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of $160.1 million for Q2 2025 and a reduced net loss of $205.5 million for H1 2025 Key Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Rental income | $287,070 | $308,135 | $575,927 | $626,211 | | Total Revenues | $297,502 | $316,322 | $596,478 | $643,127 | | Total Expenses | $281,748 | $305,629 | $562,219 | $620,008 | | Impairment of real estate properties | ($142,348) | ($132,118) | ($154,429) | ($148,055) | | Impairment of goodwill | — | — | — | ($250,530) | | **Net loss** | **($160,144)** | **($145,938)** | **($205,532)** | **($461,157)** | | **Diluted EPS** | **($0.45)** | **($0.39)** | **($0.58)** | **($1.22)** | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss was $159.8 million for Q2 2025 and $210.7 million for H1 2025, driven by interest rate swaps Comprehensive Loss Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss | ($160,144) | ($145,938) | ($205,532) | ($461,157) | | Other comprehensive (loss) income | ($2,008) | $2,229 | ($8,127) | $17,973 | | **Comprehensive loss attributable to common stockholders** | **($159,830)** | **($141,585)** | **($210,657)** | **($436,889)** | [Condensed Consolidated Statements of Equity and Redeemable Non-Controlling Interests](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity%20and%20Redeemable%20Non-Controlling%20Interests) Total stockholders' equity decreased to $4.82 billion by June 30, 2025, due to net loss and common stock dividends - Dividends declared for common stockholders totaled **$0.62 per share** for the six months ended June 30, 2025, resulting in a total distribution of **$217.9 million**[15](index=15&type=chunk) - The net loss attributable to common stockholders for the first six months of 2025 was **$202.7 million**, which directly reduced cumulative net income[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was $211.0 million for H1 2025, with significant cash used in investing and financing activities Cash Flow Summary (in thousands) | Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $211,003 | $244,304 | | Net cash (used in) provided by investing activities | ($41,931) | $151,388 | | Net cash used in financing activities | ($212,330) | ($379,626) | | **(Decrease) increase in cash and cash equivalents** | **($43,258)** | **$16,066** | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information on accounting policies, real estate investments, debt, property dispositions, impairment charges, and credit facility refinancing - As of June 30, 2025, the company's portfolio consisted of **559 consolidated real estate properties** totaling approximately **32.2 million square feet**, with gross investments of **$11.2 billion**[18](index=18&type=chunk) - During the first six months of 2025, the company recognized real estate impairment charges totaling **$151.0 million**[36](index=36&type=chunk) - On July 25, 2025, the company entered into a new credit facility, which includes a **$1.5 billion unsecured revolving credit facility** and **$1.115 billion in unsecured term loans**, replacing and extending previous arrangements[71](index=71&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses H1 2025 performance, highlighting revenue decrease, credit facility refinancing, and challenges like rising interest rates [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by rent, property sales, and debt, with a new $1.5 billion credit facility extending maturity to July 2029 - On July 25, 2025, the company entered into a Fifth Amended and Restated Credit Facility, extending the maturity of its **$1.5 billion revolver** to **July 2029**[117](index=117&type=chunk)[131](index=131&type=chunk) - Cash flows from operations in H1 2025 were **not sufficient to fully fund dividends**, primarily due to the timing of interest payments, with the gap covered by the Unsecured Credit Facility[119](index=119&type=chunk) [Investing Activities](index=30&type=section&id=Investing%20Activities) Cash used in investing activities totaled $41.9 million for H1 2025, driven by capital expenditures and property dispositions - Disposed of properties for a total sales price of **$81.2 million** in H1 2025[121](index=121&type=chunk) - Incurred capital costs of **$158.4 million** in H1 2025, with **$75.4 million** for development/redevelopment and **$83.0 million** for tenant improvements and building capital[124](index=124&type=chunk)[127](index=127&type=chunk) [Financing Activities](index=31&type=section&id=Financing%20Activities) Cash used in financing activities was $212.3 million for H1 2025, primarily due to debt repayments and a new credit facility - On May 1, 2025, the company repaid its Senior Notes due 2025 at maturity, including **$250 million** of principal[130](index=130&type=chunk) - In July 2025, the company refinanced its debt with a new facility that includes a **$1.5 billion revolver** (maturing 2029) and five term loan tranches totaling **$1.115 billion**[131](index=131&type=chunk) [Trends and Matters Impacting Operating Results](index=33&type=section&id=Trends%20and%20Matters%20Impacting%20Operating%20Results) Key trends impacting results include rising interest rates, lease expirations, and tenant bankruptcy, with expense increases partially mitigated - Rising interest rates and capital market volatility have **increased the company's cost of capital** and could impact its ability to finance operations and acquisitions[139](index=139&type=chunk) - Prospect Medical, a tenant accounting for **$2.9 million in annual revenue**, filed for **Chapter 11 bankruptcy**[141](index=141&type=chunk) - Approximately **92% of the company's leases** allow for some recovery of operating expenses, mitigating the impact of rising property taxes and utility costs[142](index=142&type=chunk) [Non-GAAP Financial Measures and Key Performance Indicators](index=35&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Key%20Performance%20Indicators) The company uses FFO, Normalized FFO, FAD, and Same Store Cash NOI as key performance indicators, with Normalized FFO at $0.80 per share Non-GAAP Performance Measures (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | FFO attributable to common stockholders | $244,145 | $10,327 | | Normalized FFO attributable to common stockholders | $281,458 | $291,322 | | Normalized FFO per common share - diluted | $0.80 | $0.77 | | FAD | $217,574 | $212,099 | Same Store Cash NOI (in thousands) | Portfolio | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Same store properties (excluding JVs) | $325,785 | $313,126 | +4.0% | | Same store joint venture properties | $8,806 | $9,036 | -2.5% | [Results of Operations](index=39&type=section&id=Results%20of%20Operations) H1 2025 results show decreased rental income and property operating expenses due to dispositions, with G&A expenses rising - **Q2 2025 vs Q2 2024:** - Rental income decreased **6.8%** due to dispositions - Property operating expenses decreased **6.6%**, also from dispositions - G&A expenses increased **67.7%** due to **$10.3 million** in restructuring charges - Interest expense decreased **14.6%** due to lower debt balances[162](index=162&type=chunk)[163](index=163&type=chunk)[165](index=165&type=chunk) - **H1 2025 vs H1 2024:** - Rental income decreased **8.0%** due to dispositions - Property operating expenses decreased **5.8%** - G&A expenses increased **28.6%** due to restructuring charges - Interest expense decreased **12.4%**[171](index=171&type=chunk)[172](index=172&type=chunk)[174](index=174&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risk from interest rate changes on its debt, with no material changes to disclosures since 2024 - There were **no material changes** in market risk disclosures during the six months ended June 30, 2025[179](index=179&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the reporting period[181](index=181&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the second quarter of 2025[182](index=182&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any pending or threatened litigation that would materially affect its financial position - The company is **not aware of any pending or threatened litigation** that would have a **material adverse effect** on its financial condition[183](index=183&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No new risk factors are presented; investors should refer to the 2024 Annual Report on Form 10-K for detailed risks - Investors are advised to review the risk factors detailed in the company's **2024 Form 10-K**[184](index=184&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase shares under its public plan in H1 2025, with $237.0 million remaining under authorization - The company has **$237.0 million** remaining under its stock repurchase authorization as of June 30, 2025[88](index=88&type=chunk)[185](index=185&type=chunk) - Share purchases during H1 2025 were **solely for satisfying employee tax withholding obligations** related to vested awards and not part of the public repurchase program[185](index=185&type=chunk) [Other Information](index=44&type=section&id=Item%205.%20Other%20Information) The company announced the upcoming departures of Executive Vice President Julie F. Wilson and Senior Vice President John M. Bryant, Jr. - Executive Vice President and Chief Administrative Officer, **Julie F. Wilson**, will depart the company effective **December 31, 2025**[187](index=187&type=chunk) - Senior Vice President, Legal Affairs, **John M. Bryant, Jr.**, will depart the company effective **December 31, 2025**[188](index=188&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including credit agreements and CEO/CFO certifications - Key exhibits filed include the **Fifth Amended and Restated Credit and Term Loan Agreement** dated **July 25, 2025**, and **CEO/CFO certifications**[189](index=189&type=chunk)

Financial Data and Key Metrics Changes - Normalized FFO was $0.41 per share, a $0.02 increase from the previous quarter [6] - FAD per share increased to $0.33, representing a 96% payout ratio, a significant improvement from the first quarter [34] - Same store occupancy was 90%, a 40 basis point sequential increase [6] - Same store NOI growth was 5.1%, a 280 basis point sequential increase [6] - Net debt to adjusted EBITDA sits at six times [6] Business Line Data and Key Metrics Changes - The second highest new leasing quarter in the last three years, with year-to-date sales increasing to $211 million at a blended 6.2% cap rate [7] - The company executed nearly 1,500,000 square feet of leases, including over 450,000 square feet of new leases [28] - Current occupancy in the stabilized portfolio is 95%, with NOI margins over 65% [18] Market Data and Key Metrics Changes - Demand for outpatient medical space remains strong, driven by tightening supply and the ongoing migration of services into a lower-cost outpatient setting [28] - The company has a robust and balanced disposition pipeline, expecting asset sales of approximately $1 billion to close in 2025 at a blended cap rate of 7% [21] Company Strategy and Development Direction - The strategic plan, referred to as Healthcare Realty 2.0, focuses on an operations-oriented culture prioritizing earnings growth and strong tenant relationships [12] - Key action items include improved corporate governance, significant organizational restructuring, portfolio optimization, reprioritizing capital allocation, and improving the balance sheet [12][21] - The company aims to invest approximately $300 million over the next three years into the lease-up portfolio to drive NOI growth [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 92% to 93% occupancy rate, citing improved macro conditions and a revamped asset management platform [88][90] - The company anticipates a positive earnings outlook and plans to utilize free cash flow to invest accretively in its portfolio [26][27] Other Important Information - The Board approved a dividend reduction of 23% to $0.24 per share on a quarterly basis to alleviate pressure from $1.4 billion of low coupon bonds maturing over the next three years [24] - The company has successfully completed the first phase of its derisking strategy, extending the maturity of its revolver and term loans [37] Q&A Session Summary Question: Can you talk about the composition of the lease-up portfolio? - Management indicated that the lease-up portfolio consists of properties primarily located in priority markets, with strong demographic trends supporting the potential for growth [42][46] Question: What is the expected upside in the lease-up portfolio? - Management clarified that the total upside is estimated at $50 million, with the majority coming from leasing up vacant space rather than solely from redevelopment [80] Question: How confident is the company in achieving the targeted occupancy rates? - Management expressed confidence based on improved market conditions and a strategic focus on asset management, expecting to see occupancy gains in the coming quarters [90][92] Question: What are the plans for capital allocation in the lease-up portfolio? - Management plans to invest $300 million over three years, focusing on ready-to-occupy suites and redevelopment opportunities to drive higher occupancy and rental rates [22][81] Question: How will the company manage the impact of asset dispositions on earnings? - Management acknowledged that while there may be some dilution from asset sales, they are implementing cost-cutting measures and focusing on revenue growth to offset this impact [99][105]

Financial Data and Key Metrics Changes - Normalized FFO was $0.41 per share, a $0.02 increase from the previous quarter [6] - FAD per share increased to $0.33, representing a 96% payout ratio, a significant improvement from the first quarter [36] - Same store occupancy was 90%, a 40 basis point sequential increase [6] - Same store NOI growth was 5.1%, a 280 basis point sequential increase, marking the highest growth in nine years [36] - Net debt to adjusted EBITDA sits at six times, expected to decrease to the mid-five times area by year end [24][39] Business Line Data and Key Metrics Changes - The second highest new leasing quarter in the last three years, with year-to-date sales increasing to $211 million at a blended 6.2% cap rate [7] - Current occupancy in the stabilized portfolio is 95%, with NOI margins over 65% [17] - The lease-up portfolio, comprising approximately 13% of total assets, has a current occupancy of 70% and NOI margins of 55% [19] - The disposition portfolio, approximately 12% of total assets, has lagged in NOI growth by 700 basis points compared to the stabilized portfolio [20] Market Data and Key Metrics Changes - Demand for outpatient medical space remains strong, driven by tightening supply and the ongoing migration of services into lower-cost outpatient settings [30] - The signed not occupied pipeline (SNO) remains solid at nearly 610,000 square feet, representing almost 170 basis points of occupancy in the coming quarters [31] - The new lease pipeline is over 1,300,000 square feet and growing, with about 60% in the letter of intent or lease documentation phase [32] Company Strategy and Development Direction - The strategic plan, Healthcare Realty 2.0, focuses on an operations-oriented culture prioritizing earnings growth and strong tenant relationships [12] - Key action items include improved corporate governance, significant organizational restructuring, portfolio optimization, reprioritizing capital allocation, and improving the balance sheet [12][22][24] - The company aims to invest approximately $300 million over the next three years into the lease-up portfolio to drive NOI growth [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 92% to 93% occupancy rate, citing improved macro conditions and a revamped asset management platform [91][92] - The company anticipates further leasing momentum and NOI growth throughout the remainder of the year and into 2026 [34] - Management acknowledged the need for a dividend reduction of 23% to $0.24 per share to alleviate pressure from maturing bonds and to reinvest capital into the portfolio [25] Other Important Information - The company completed $211 million of asset sales through July, raising the full-year disposition outlook to $800 million to $1 billion [37] - The company has reduced the size of its board from 12 to 7 directors to bring fresh perspectives and support value creation initiatives [12] - The company has achieved initial goals of at least $10 million in run-rate G&A savings through headcount reduction and office expense savings [15] Q&A Session Summary Question: Can you talk about the composition of the lease-up portfolio? - Management indicated that the lease-up portfolio consists of both multi-tenant and single-tenant properties, with a total upside potential of $50 million, which will be phased in over time [44][46] Question: What is the confidence level in achieving the targeted occupancy rates? - Management cited improved macro conditions and a revamped asset management platform as key factors contributing to confidence in achieving 92% to 93% occupancy [90][92] Question: How will the company fund the capital investments in the lease-up portfolio? - Management clarified that the $300 million required to achieve the $50 million NOI upside will primarily come from the dividend adjustment, with potential use of sale proceeds for earlier investments [48][50] Question: What are the dynamics behind the higher cap rates for the assets being sold? - Management explained that the disposition portfolio is characterized by lower occupancy and older vintage assets, contributing to the higher blended cap rate of 7% [78] Question: How does the company plan to drive incremental growth from the core portfolio? - Management emphasized the importance of maximizing lease economics, with escalators trending upwards and a focus on tenant retention to drive earnings growth [111][113]

Financial Performance & Guidance - The company raised its NFFO guidance range by $0.01, to $1.57 - $1.61 per share for 2025[7] - NFFO per share sequentially improved by $0.02 to $0.41 per share, and FAD per share sequentially improved by $0.04 to $0.33 per share[8, 10] - Same-store cash NOI growth was 5.1%, a sequential increase of 2.8%[8] - The company completed or has under contract/LOI approximately $900 million in asset sales year-to-date[10] Strategic Plan & Portfolio Optimization - The company is implementing a strategic plan to improve operational performance, optimize the portfolio, and re-establish credibility[13] - The company has segmented its portfolio into three categories: Stabilized (approximately 75% of the total portfolio), Lease-Up (approximately 13%), and Disposition (approximately 12%)[15, 36] - The company plans to dispose of approximately $1.2 billion in assets[48] - The stabilized portfolio has approximately 95% occupancy and generates approximately $550 million in NOI[36, 37] - The lease-up portfolio has approximately 70% occupancy and approximately $90 million in NOI, with a potential to unlock up to $50 million in incremental NOI[36, 43, 45] Restructuring & Efficiencies - The company is restructuring its organizational platform to enhance focus and accountability, targeting over $10 million in annual savings[15] - The company identified G&A efficiencies to bring HR in line with peers, improve margins, and create long-term shareholder value, targeting $10 million of G&A reduction[35] Balance Sheet & Capital Allocation - The company is targeting a mid-5x Net Debt / EBITDA and a 5-year weighted average debt maturity[15] - The company reduced the dividend by 23% to $0.24 per share on a quarterly basis to fund high-return capital investments[77]

Group 1 - Healthcare Realty Trust (HR) reported $297.5 million in revenue for the quarter ended June 2025, reflecting a year-over-year decline of 6% [1] - The earnings per share (EPS) for the same period was $0.41, compared to -$0.39 a year ago, indicating a significant improvement [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $298.38 million, resulting in a surprise of -0.3% [1] Group 2 - Rental income was reported at $287.07 million, which was lower than the estimated $289.41 million, representing a year-over-year decline of 6.8% [4] - Interest income came in at $3.45 million, below the average estimate of $3.9 million, marking a year-over-year decrease of 10.8% [4] - Other operating revenues were reported at $6.98 million, exceeding the average estimate of $5.42 million, showing a year-over-year increase of 61.6% [4] Group 3 - The stock of Healthcare Realty Trust has returned -3.1% over the past month, contrasting with the Zacks S&P 500 composite's +2.7% change [3] - The company currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Healthcare Realty Trust shares have lost about 8.2% since the beginning of the year versus the S&P 500's gain of 8.2%. What's Next for Healthcare Realty Trust? Healthcare Realty Trust (HR) came out with quarterly funds from operations (FFO) of $0.41 per share, beating the Zacks Consensus Estimate of $0.4 per share. This compares to FFO of $0.38 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an FFO surprise of +2.50%. A quarter ago, it was expected ...

[Highlights](index=7&type=section&id=Highlights) This section summarizes the company's strong Q2 2025 financial and operational performance, strategic initiatives, and updated financial guidance [Second Quarter 2025 Financial and Operating Results](index=7&type=section&id=SECOND%20QUARTER%202025%20RESULTS) In Q2 2025, Healthcare Realty reported a GAAP Net Loss of $(0.45) per share and a Normalized FFO of $0.41 per share, driven by strong operational performance and raised guidance Q2 2025 Financial Results vs. Q2 2024 (in thousands, except per share amounts) | (in thousands, except per share amounts) | THREE MONTHS ENDED JUNE 30, 2025 | THREE MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | | GAAP Net loss | $(157,851) | $(143,780) | | GAAP Net loss per share | $(0.45) | $(0.39) | | NAREIT FFO, diluted | $120,371 | $123,797 | | NAREIT FFO per share, diluted | $0.34 | $0.33 | | Normalized FFO, diluted | $143,736 | $143,500 | | Normalized FFO per share, diluted | $0.41 | $0.38 | - Improved same store operating metrics including cash NOI growth of **+5.1%**, a **40 bps** sequential increase in occupancy to **90.0%**, and **+3.3%** cash leasing spreads[9](index=9&type=chunk) - Increased full-year 2025 guidance for Normalized FFO per share by **$0.01** at the midpoint to **$1.57 - $1.61** and for Same Store Cash NOI growth by **25 bps** to **3.25% - 4.00%**[9](index=9&type=chunk) [Leasing, Disposition, and Balance Sheet Activity](index=8&type=section&id=LEASING%20ACTIVITY) The company executed 1.5 million square feet of leases and completed $210.5 million in year-to-date asset sales, reducing leverage and extending credit facilities - Executed 341 new and renewal leases totaling **1.5 million square feet** in Q2, with a weighted average lease term of **5.3 years** and an average annual escalator of **3.2%**[11](index=11&type=chunk)[14](index=14&type=chunk) - Completed **$182.4 million** in asset sales during Q2 and through July. Year-to-date sales total **$210.5 million** at a **6.2%** blended cap rate, with an additional **$700 million** under contract or LOI[9](index=9&type=chunk)[12](index=12&type=chunk) - Debt paydown from asset sales reduced run-rate Net Debt to Adjusted EBITDA to **6.0x**. The company extended its **$1.5 billion** revolver to 2030 and obtained extensions on term loans, reducing debt maturing through 2026 from **$1.5 billion** to **$600 million**[12](index=12&type=chunk)[13](index=13&type=chunk) [Strategic Plan and Leadership Updates](index=9&type=section&id=STRATEGIC%20PLAN%20PRESENTATION) The company implemented a new Strategic Plan to optimize its portfolio and operations, initiating a platform restructuring with new hires and senior leadership changes - A new Strategic Plan has been implemented to improve operational performance, optimize the portfolio, and maximize shareholder value[16](index=16&type=chunk) - Commenced a platform restructuring, hiring industry veterans Tony Acevedo and Glenn Preston as SVPs of Asset Management to lead a new operations-centric model[17](index=17&type=chunk)[19](index=19&type=chunk) - Julie Wilson, EVP – Chief Administrative Officer, will depart at year-end after a 24-year career, along with other senior leaders impacted by the restructuring[18](index=18&type=chunk) [Dividend and Financial Reporting](index=9&type=section&id=DIVIDEND) The Board approved a 23% dividend reduction to $0.24 per share to improve the FAD payout ratio and retain capital, while also aligning financial reporting with market norms - The dividend was reduced by **23%** to **$0.24 per share**. This change lowers the FAD payout ratio to about **80%** and is intended to mitigate refinancing risk and retain **$100 million** annually for reinvestment[19](index=19&type=chunk)[20](index=20&type=chunk) - The company began using the Carrying Value of its debt for leverage calculations, which reduced the Q2 Net Debt to Adjusted EBITDA by approximately **0.25x**[23](index=23&type=chunk) - The FAD calculation was updated to exclude Leasing Commissions for first-generation leases, which is expected to decrease Maintenance Capital by **$5-10 million** annually[24](index=24&type=chunk) [Salient Facts](index=11&type=section&id=Salient%20Facts) This section provides a concise overview of the company's property portfolio, market presence, and key capitalization metrics as of June 30, 2025 Company Overview as of June 30, 2025 | Metric | Value | | :--- | :--- | | **Properties** | | | Number of Properties | 619 | | Total Square Feet | 36.1M | | Markets | 60 in 32 states | | **Capitalization** | | | Enterprise Value | $10.5B | | Market Capitalization | $5.6B | | Credit Rating (S&P/Moody's) | BBB/Baa2 | | Run Rate Net Debt to Adj. EBITDA | 6.0x | [Corporate Information](index=13&type=section&id=Corporate%20Information) Healthcare Realty is a REIT specializing in medical outpatient buildings, with a portfolio of 619 properties and a recently streamlined Board of Directors - Healthcare Realty (NYSE: HR) is a REIT specializing in owning and operating medical outpatient buildings, primarily near leading hospital campuses. As of June 30, 2025, its portfolio included **619 properties** across **32 states**, totaling **36.1 million square feet**[34](index=34&type=chunk) - The Board of Directors is chaired by Thomas N. Bohjalian and includes President and CEO Peter A. Scott. The board was recently reduced from **12 to 7 members**[9](index=9&type=chunk)[36](index=36&type=chunk) [Financial Statements](index=15&type=section&id=Financial%20Statements) This section presents the company's balance sheet and income statement, highlighting changes in assets, liabilities, revenues, and net loss for Q2 2025 [Balance Sheet](index=15&type=section&id=Balance%20Sheet) As of June 30, 2025, total assets decreased to $10.24 billion due to dispositions, while total liabilities and equity also saw reductions Selected Balance Sheet Data (in thousands) | Account | 2Q 2025 | 2Q 2024 | | :--- | :--- | :--- | | Total real estate investments, net | $8,674,578 | $10,434,689 | | Assets held for sale, net | $358,207 | $34,530 | | **Total assets** | **$10,235,572** | **$11,803,627** | | Notes and bonds payable | $4,694,391 | $5,148,153 | | **Total liabilities** | **$5,354,146** | **$5,828,935** | | **Total equity** | **$4,877,094** | **$5,970,817** | [Statements of Income](index=16&type=section&id=Statements%20of%20Income) For Q2 2025, total revenues decreased to $297.5 million, resulting in a wider net loss of $(157.9) million, primarily due to asset sales and impairment charges Selected Income Statement Data (in thousands) | Account | 2Q 2025 | 2Q 2024 | | :--- | :--- | :--- | | Rental income | $287,070 | $308,135 | | **Total Revenues** | **$297,502** | **$316,322** | | Property operating expense | $109,924 | $117,719 | | Depreciation and amortization | $147,749 | $173,477 | | Impairment of real estate assets | $(142,348) | $(132,118) | | **Net loss attributable to common stockholders** | **$(157,851)** | **$(143,780)** | | **Diluted earnings per common share** | **$(0.45)** | **$(0.39)** | - General and administrative expenses included **$10.3 million** in normalizing items, primarily related to restructuring, severance costs, and advisory fees[42](index=42&type=chunk)[43](index=43&type=chunk) [REIT Performance Metrics](index=17&type=section&id=FFO%2C%20Normalized%20FFO%2C%20%26%20FAD) This section details key REIT-specific financial metrics, including FFO, Normalized FFO, and FAD, along with capital funding and commitment activities [FFO, Normalized FFO, & FAD](index=17&type=section&id=FFO%2C%20Normalized%20FFO%2C%20%26%20FAD) In Q2 2025, FFO was $0.34 per share and Normalized FFO was $0.41 per share, with FAD totaling $115.4 million after various adjustments Key Performance Metrics (in thousands, except per share data) | Metric | 2Q 2025 | 2Q 2024 | | :--- | :--- | :--- | | FFO | $120,371 | $123,797 | | FFO per common share - diluted | $0.34 | $0.33 | | Normalized FFO | $143,736 | $143,500 | | Normalized FFO per common share - diluted | $0.41 | $0.38 | | FAD | $115,354 | $107,643 | - Key adjustments to arrive at Normalized FFO included adding back **$10.3 million** in restructuring charges, **$10.6 million** for a merger-related fair value adjustment, and **$1.5 million** in credit losses[46](index=46&type=chunk) [Capital Funding & Commitments](index=19&type=section&id=Capital%20Funding%20%26%20Commitments) In Q2 2025, the company funded $42.0 million for re/development and $33.4 million for first-generation tenant improvements, with maintenance capital expenditures totaling $26.3 million Capital Expenditures (in thousands) | Category | 2Q 2025 | 2Q 2024 | | :--- | :--- | :--- | | Re/development | $42,040 | $44,796 | | 1st generation TI/LC & acquisition capex | $33,369 | $13,010 | | **Total Maintenance Capex** | **$26,335** | **$35,134** | - Leasing commitments for leases commencing in Q2 2025 covered **838,063 square feet** with a weighted average lease term (WALT) of **43.8 months**[50](index=50&type=chunk) [Debt & Liquidity](index=20&type=section&id=Debt%20Metrics) This section provides an overview of the company's debt structure, maturity profile, and compliance with financial covenants, alongside its current liquidity position [Debt Metrics](index=20&type=section&id=Debt%20Metrics) As of June 30, 2025, total debt principal was $4.90 billion with a weighted average interest rate of 3.61% and a well-staggered maturity schedule Debt Summary as of June 30, 2025 | Category | Value | | :--- | :--- | | Total Principal Balance | $4,903,872 thousand | | Weighted Average Maturity | 41 months | | Weighted Average Contractual Rate | 3.61% | | % Fixed Rate Debt (net of cash) | 93.7% | - The company has **$628.9 million** in debt maturing in 2026 and **$1.12 billion** maturing in 2027[56](index=56&type=chunk) [Debt Covenants & Liquidity](index=21&type=section&id=Debt%20Covenants%20%26%20Liquidity) The company maintained compliance with all debt covenants as of June 30, 2025, with a total debt to total capital ratio of 39.7% and approximately $1.2 billion in total liquidity Selected Debt Covenant Compliance | Covenant | Requirement | Actual (as of 6/30/25) | | :--- | :--- | :--- | | Leverage Ratio (Total Debt/Total Capital) | Not > 60% | 39.7% | | Fixed Charge Coverage Ratio (EBITDA/Fixed Charges) | Not < 1.50x | 3.0x | | Unencumbered Leverage Ratio | Not > 60% | 43.0% | - Run-rate Net Debt to Adjusted EBITDA was **6.0x**, proforma for July dispositions[58](index=58&type=chunk)[60](index=60&type=chunk) - Total liquidity sources include **$25.5 million** in cash and **$1.205 billion** in availability under the unsecured credit facility[59](index=59&type=chunk) [Portfolio Activity](index=23&type=section&id=JV%20and%20Disposition%20Activity) This section details the company's investment activities, including significant asset dispositions, joint venture interests, and ongoing re/development projects [Investment Activity (Dispositions)](index=23&type=section&id=Investment%20Activity) Through July 30, 2025, the company completed 13 disposition transactions totaling $210.5 million at a 6.2% cap rate, targeting non-core assets 2025 Disposition Activity Summary | Period | of Properties | Total Square Feet | Sale Price | Average Cap Rate | | :--- | :--- | :--- | :--- | :--- | | 1Q 2025 | 4 | 227,952 | $28,100k | N/A | | 2Q 2025 | 4 (+2 land) | 177,906 | $53,086k | N/A | | Post-Q2 | 5 | 504,231 | $129,350k | N/A | | **Total YTD** | **13** | **910,089** | **$210,536k** | **6.2%** | [Joint Ventures](index=25&type=section&id=Joint%20Ventures) The company holds interests in 65 properties through joint ventures, contributing $8.2 million in NOI at its share in Q2 2025, with major partnerships and a net debt share of $32.4 million Joint Venture Portfolio Summary (at HR's Share) | Metric | Total | | :--- | :--- | | of Properties | 65 | | Square Feet | 4,253,845 | | Occupancy | 88% | | Q2 2025 NOI at Share | $8,225 thousand | | Debt at Share | $42,211 thousand | | Net Debt at Share | $32,437 thousand | [Re/development Activity](index=27&type=section&id=Re%2Fdevelopment%20Activity) The company has an active re/development pipeline of nearly 1 million square feet with a total budget of $259.0 million, targeting stabilized yields between 7.0% and 12.0% Active Re/development Pipeline Summary | Category | Square Feet | Budget | Cost to Complete | Projected Stabilized Yield | | :--- | :--- | :--- | :--- | :--- | | Development | 325,356 | $158,800k | $15,642k | 7.0% - 8.5% | | Redevelopment | 647,570 | $100,200k | $25,289k | 9.0% - 12.0% | | **Total** | **972,926** | **$259,000k** | **$40,931k** | **N/A** | [Portfolio Overview](index=29&type=section&id=Portfolio) This section provides a comprehensive look at the company's diversified portfolio by market, property type, and strategic alignment with health systems [Portfolio by Market and Type](index=29&type=section&id=Portfolio) The company's portfolio of 619 properties, totaling 36.1 million square feet, is diversified across 60 markets, with Dallas as the largest contributor to NOI Top 5 Markets by % of NOI | Market | % of NOI | | :--- | :--- | | Dallas, TX | 9.0% | | Seattle, WA | 6.4% | | Charlotte, NC | 5.2% | | Houston, TX | 4.6% | | Denver, CO | 4.5% | Portfolio by Ownership and Tenant Type | Category | % of Square Feet | % of Cash NOI | | :--- | :--- | :--- | | Wholly Owned | 88.2% | 95.4% | | Joint Ventures | 11.8% | 4.6% | | Multi-Tenant | 85.1% | 80.4% | | Single-Tenant | 14.9% | 19.6% | [Health System Relationships and Proximity](index=30&type=section&id=Health%20Systems) The portfolio is strategically aligned with major health systems, with 93% of NOI from credit-rated systems and 73% of MOBs located on or adjacent to hospital campuses - The top five health system relationships (HCA, CommonSpirit, Baylor Scott & White, Ascension Health, Advocate Health) account for **30.6%** of the company's NOI[75](index=75&type=chunk) - Based on square footage, **94%** of the portfolio is associated with a credit-rated healthcare provider, and **42%** is leased by an investment-grade rated provider[77](index=77&type=chunk) MOB Proximity to Hospital | Location | % of Total Square Feet | | :--- | :--- | | On campus | 54.5% | | Adjacent to campus | 18.4% | | **Total On/Adjacent** | **72.9%** | | Off campus - affiliated | 20.0% | | Off campus | 7.1% | [Leasing](index=33&type=section&id=Lease%20Maturity%20%26%20Occupancy) This section details the company's lease maturity schedule, occupancy rates, and key leasing statistics, including spreads and tenant retention [Lease Maturity & Occupancy](index=33&type=section&id=Lease%20Maturity%20%26%20Occupancy) As of Q2 2025, the portfolio was 89.2% occupied with a weighted average lease term remaining of 52.8 months and a staggered maturity schedule Lease Maturity Schedule (% of Total SF) | Expiration Period | % of Total Square Feet | | :--- | :--- | | 3Q-4Q 2025 | 7.1% | | 2026 | 13.4% | | 2027 | 15.7% | | 2028 | 11.8% | | Thereafter | 52.0% | - Total portfolio occupancy was **89.2%** at the end of Q2 2025, with net absorption of **114,464 square feet** during the quarter[86](index=86&type=chunk)[87](index=87&type=chunk) [Leasing Statistics](index=34&type=section&id=Leasing%20Statistics) For Q2 2025, the company achieved 3.3% cash leasing spreads on same-store renewals and an 83.1% tenant retention rate, with an average in-place rent increase of 2.85% Q2 2025 Same Store Renewal Metrics | Metric | Value | | :--- | :--- | | Cash leasing spreads | 3.3% | | Tenant retention rate | 83.1% | - The average in-place contractual rent increase for the total portfolio is **2.85%**[91](index=91&type=chunk) - The portfolio's lease structure is primarily **Net (60.5%)** and **Modified Gross (27.9%)**[92](index=92&type=chunk) [Same Store Performance](index=35&type=section&id=Same%20Store) This section analyzes the operational and financial performance of the company's same-store portfolio, highlighting occupancy trends and cash NOI growth [Same Store Portfolio Metrics](index=35&type=section&id=Same%20Store) The same-store portfolio, representing 91% of total NOI, saw occupancy increase to 90.0% in Q2 2025, with positive net absorption Same Store Occupancy | Metric | 2Q 2025 | 2Q 2024 | Change | | :--- | :--- | :--- | :--- | | Period End Occupancy % | 90.0% | 89.0% | +100 bps | | Sequential Absorption (SF) | 103,000 | N/A | N/A | | Y-o-Y Absorption (SF) | 314,000 | N/A | N/A | - The same-store pool accounts for **$169.2 million**, or **91%**, of the company's total cash NOI of **$186.6 million** in Q2 2025[95](index=95&type=chunk) [Same Store Cash NOI](index=37&type=section&id=Same%20Store) Same-store cash NOI grew by 5.1% year-over-year in Q2 2025, driven by revenue increases and improved operating margins Same Store Year-Over-Year Change (Q2 2025 vs Q2 2024) | Metric | Y-o-Y Change | | :--- | :--- | | Revenues | +4.3% | | Expenses | +2.9% | | **Cash NOI** | **+5.1%** | | Average Occupancy | +80 bps | | Revenue per Occupied SF | +3.5% | - The same-store operating margin improved to **64.3%** in Q2 2025 from **63.8%** in Q2 2024[99](index=99&type=chunk) [Reconciliations](index=39&type=section&id=NOI%20Reconciliations) This section provides detailed reconciliations of GAAP Net Loss to key non-GAAP financial measures, including Cash NOI and Adjusted EBITDA [NOI Reconciliations](index=39&type=section&id=NOI%20Reconciliations) For Q2 2025, the net loss of $(160.1) million was reconciled to a total Cash NOI of $186.6 million, with further breakdown into portfolio segments Reconciliation of Net Loss to Cash NOI (Q2 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net loss | ($160,144) | | Add: Other expense (income) | 175,898 | | Add: G&A expense | 23,482 | | Add: Depreciation and amortization | 147,749 | | Less: Straight-line rent revenue | (7,904) | | Other adjustments | (92,440) | | **Cash NOI** | **$186,641** | - Cash NOI is reconciled to Normalized FFO, showing that after deducting G&A, interest, and other items, the resulting Debt Covenant EBITDA for Q2 2025 was **$177.2 million**[107](index=107&type=chunk) [EBITDA Reconciliations](index=41&type=section&id=EBITDA%20Reconciliations) For Q2 2025, GAAP Net Loss of $(160.1) million was reconciled to an Adjusted EBITDA of $193.9 million, resulting in a Net Debt to Adjusted EBITDA ratio of 6.1x Reconciliation of Net Loss to Adjusted EBITDA (Q2 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net loss | ($160,144) | | Add: Interest expense | 53,346 | | Add: Depreciation and amortization | 147,749 | | Add: Impairments on real estate assets | 140,877 | | Less: Gain on sales of assets | (20,004) | | Other adjustments | 32,096 | | **Adjusted EBITDA** | **$193,920** | - The Net Debt to Adjusted EBITDA ratio was **6.1x** for the quarter. The run-rate ratio, which includes the impact of July dispositions, was **6.0x**[110](index=110&type=chunk)[113](index=113&type=chunk) [Components of Net Asset Value](index=42&type=section&id=Components%20of%20Net%20Asset%20Value) This section outlines the key components contributing to the company's Net Asset Value as of June 30, 2025, including assets, liabilities, and shares outstanding NAV Components as of June 30, 2025 (in thousands) | Component | Value | | :--- | :--- | | **Assets** | | | Total Annualized Cash NOI | $718,340 | | Development & Redevelopment (Est. Total Cost) | $259,000 | | Land, Cash, & Other Assets | $1,101,710 | | **Liabilities & Equity** | | | Total Debt & Other Liabilities | $5,251,325 | | Total Shares Outstanding (incl. OP units) | 355,730,606 | [2025 Guidance](index=43&type=section&id=2025%20Guidance) This section presents the company's updated full-year 2025 guidance, reflecting revised expectations for same-store cash NOI growth, asset sales, FFO per share, and leverage Updated 2025 Full Year Guidance | Metric | Prior Guidance (Low-High) | Current Guidance (Low-High) | | :--- | :--- | :--- | | Same store cash NOI growth | 3.0% - 3.75% | 3.25% - 4.0% | | Asset sales and JV contributions | $400M - $500M | $800M - $1,000M | | Normalized FFO per share | $1.56 - $1.60 | $1.57 - $1.61 | | Net debt to adjusted EBITDA | 6.0x - 6.25x | 5.4x - 5.7x | - The company significantly increased its asset sales guidance for 2025, doubling the low end from **$400 million** to **$800 million** and the high end from **$500 million** to **$1 billion**[120](index=120&type=chunk) - Guidance for Normalized G&A was lowered from **$52-56 million** to **$48-52 million**, reflecting cost-saving initiatives[120](index=120&type=chunk)

Core Insights - Healthcare Realty Trust reported a GAAP net loss of $157.9 million, or $0.45 per share, for Q2 2025, compared to a loss of $143.8 million, or $0.39 per share, in Q2 2024 [3][5] - The company achieved NAREIT FFO of $120.4 million, or $0.34 per share, and Normalized FFO of $143.7 million, or $0.41 per share, showing slight improvements year-over-year [3][5] - The company executed 341 new and renewal leases totaling 1.5 million square feet during the quarter, with a 5.1% growth in cash NOI and a 90% occupancy rate [4][5] Financial Performance - The company’s total revenues for Q2 2025 were $297.5 million, slightly down from $298.9 million in Q1 2025 [29] - Property operating expenses were $109.9 million, while general and administrative expenses increased to $23.5 million [29] - The company reported a total asset value of $10.2 billion as of Q2 2025, down from $10.5 billion in Q1 2025 [26] Leasing Activity - The weighted average lease term for new leases was 5.3 years, with an average annual escalator of 3.2% [6] - Health system leasing constituted approximately 33% of the signed lease volume in the quarter [6] - Significant new leases included a 24,000 square foot lease with CLS Health in Houston and a 23,000 square foot lease with UC Irvine Health in California [6] Disposition and Debt Management - The company completed asset sales totaling $182.4 million through nine transactions in Q2 2025, contributing to a year-to-date total of $210.5 million at a blended cap rate of 6.2% [7][8] - The run-rate Net Debt to Adjusted EBITDA ratio improved to 6.0x, with expectations to decrease to between 5.4x and 5.7x by year-end [7][8] - A $1.5 billion revolving credit facility was extended to mature in July 2030, with additional extension options on outstanding term loans [8] Strategic Initiatives - The company announced a series of leadership changes, including the appointment of Peter Scott as President and CEO, and initiated a platform restructuring to enhance operational performance [10][12] - A Strategic Plan was published to outline actions aimed at maximizing shareholder value and improving operational performance [9] - The Board approved a common stock dividend of $0.24 per share, representing a 23% reduction from the previous level [13][14] Guidance - The company increased its Normalized FFO per share guidance to a range of $1.57 to $1.61 and adjusted Same Store Cash NOI growth guidance to 3.25% - 4.00% [15] - The updated guidance reflects the company's outlook on rental rates, occupancy levels, and operating expenses [15]

Group 1 - Healthcare Realty Trust Incorporated (NYSE: HR) focuses on outpatient medical facilities, positioning itself defensively in the market, which is advantageous during macroeconomic downturns and tightening discretionary demand [1] - The company's strategy is to leverage its essential services nature to better withstand economic challenges, indicating a robust operational framework [1] Group 2 - The analyst emphasizes a long-term perspective on value creation, highlighting the importance of macroeconomic trends and corporate earnings in investment decisions [1]