Financial Data and Key Metrics Changes - The company reported a decrease in occupancy to 94.5% as of June 30, 2025, down from the previous quarter, primarily due to lease expirations and bankruptcies affecting properties [9][10] - The dividend was reduced from $0.21 per share to $0.15 per share, reflecting a rightsizing of the dividend as coverage dropped from 110% to 79% on a Funds Available for Distribution (FAD) basis [14][15] Business Line Data and Key Metrics Changes - The company successfully re-tenanted the Beaumont, Texas facility with Christus Health, which is now fully operational and paying rent [7] - The company completed the acquisition of a five-property portfolio of outpatient medical real estate, bringing total acquisition volume for 2024 and 2025 to approximately $150 million at a blended cash yield of 8.5% [11][12] Market Data and Key Metrics Changes - The company noted a significant increase in portfolio volumes, which averaged $300 million per quarter from 2022 to 2024, spiking to $2.1 billion in 2025 [12] - The market for higher quality assets is trading in the low to mid-six cap rates, with opportunities for higher returns available [26][28] Company Strategy and Development Direction - The company aims to renew portions of its credit facility due in 2026 and diversify its lender relationships to improve access to debt capital [13] - The management is focused on capital recycling, identifying assets for potential sale to enhance cash flows and reduce leverage [15][54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving total occupancy over 95% by the end of the year, with expectations for stabilized occupancy at the East Orange property to exceed 90% within 24 to 36 months [10] - The management team emphasized the importance of maintaining a strong balance sheet and the potential for growth through strategic acquisitions and asset management [16][36] Other Important Information - The company is committed to improving transparency and clarity in its disclosures to better communicate with investors [18] - The management is undergoing a strategic review of the portfolio to identify opportunities for improvement and growth [16] Q&A Session Summary Question: What are the immediate strategic priorities for the company? - The CEO highlighted the need to develop a cohesive strategy with the team and board, focusing on refinancing and capital recycling as immediate priorities [21][22] Question: What types of assets are being considered for capital recycling? - The CFO indicated that ideal candidates for sale would be low-yielding assets with long-term leases and high-grade tenants, while also considering assets that may not fit long-term strategies [23][24] Question: What is the target leverage for the company? - The CEO mentioned a target leverage of sub-40% or sub-six times debt, aiming for a balance sheet that allows for growth [36] Question: How is the occupancy expected to trend going forward? - The COO stated that occupancy should remain above 95%, with some episodic downturns expected but overall consistency anticipated [43] Question: What is the expected impact of the Beaumont facility on future earnings? - The CFO noted that the Beaumont asset would contribute modestly to earnings in the third quarter, following its full occupancy starting in mid-May [44] Question: What is the size of dispositions being considered? - The CEO indicated a goal of $50 million to $100 million in dispositions, depending on market conditions and pricing [54]

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]

Financial Data and Key Metrics Changes - The company reported FFO as adjusted of $0.46 per share and AFFO of $0.44 per share, with total portfolio same store growth of 3.5% [19] - CCRC business reported same store growth of 8.6%, driven by rate growth of 5% and higher entrance fee sales [19] - Outpatient medical segment achieved 85% tenant retention, with a positive rent mark to market of 6% and same store cash NOI growth of 3.9% [20] Business Line Data and Key Metrics Changes - Outpatient medical segment saw same store growth of 3.9%, with over 1,000,000 square feet of leases executed, including approximately 200,000 square feet of new leasing [20] - CCRC portfolio generated approximately $200,000,000 of annual NOI, which is 50% higher than in 2019 before the pandemic [14] - Lab R&D business is beginning to see positive indicators, with new supply quickly going to zero [11] Market Data and Key Metrics Changes - The company has significant concentration in markets like Dallas, Houston, Nashville, Atlanta, Phoenix, and Denver, which are expected to drive growth [10] - Recent broker reports indicated over 4,000,000 square feet of inventory being removed from the supply pipeline in the lab sector [12] - The occupancy in the outpatient medical portfolio remains strong at 91-92% [48] Company Strategy and Development Direction - The company is focusing on internalizing property management to enhance tenant relationships and operational efficiency [8] - A strategic plan is being implemented to enhance operating procedures and elevate service standards [18] - The company is optimistic about the regulatory environment, particularly the proposed rule from CMS that would allow more procedures to be performed in outpatient settings [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution from the team and the diversified portfolio, despite challenges in the lab sector [24] - The political and regulatory environment is improving, with favorable changes in drug pricing and tax treatment for research and manufacturing [7][10] - Management noted that the capital markets have shown signs of improvement, which could benefit tenants seeking to raise capital [40][56] Other Important Information - The company completed an enterprise-wide technology upgrade to improve data integration and productivity [5] - The internalization of property management is expected to generate profit and improve tenant satisfaction [9] - The company has nearly $2,300,000,000 of liquidity and ended the quarter with a net debt to adjusted EBITDA of 5.2 times [22] Q&A Session Summary Question: Can you break down the occupancy decline in the lab segment? - Management indicated that the occupancy decline was due to lease expirations, tenant migration, and some tenants unable to raise capital [28][29] Question: What are the thoughts on capital allocation and balance sheet usage? - Management emphasized maintaining a strong balance sheet and being opportunistic with asset sales and buybacks [32][34] Question: How much impact do you expect from unsuccessful capital raises on occupancy? - Management acknowledged some headwinds for occupancy but noted positive signs in the capital markets that could improve the situation [40][42] Question: Can you provide insights on the development pipeline and capitalized interest? - Management stated that capitalized interest will trend down as projects come online, with ongoing entitlement processes for large projects [76] Question: What are the expectations for the CCRC occupancy? - Management noted that the sequential dip in occupancy is typical seasonality, with strong performance in independent living [78][80] Question: How does the company view the regulatory changes and their impact? - Management expressed optimism about regulatory changes, particularly the shift towards outpatient settings, which aligns with the company's focus [10][106]

Financial Data and Key Metrics Changes - Normalized FFO per share for the quarter was $0.39, aligning with expectations and marking a solid start to the year [20] - Same store cash NOI growth was 2.3%, impacted by higher operating expenses and weather volatility, with expectations for acceleration in growth for the remainder of the year [20][21] - The company ended the quarter with a net debt to adjusted EBITDA ratio of 6.4 times, unchanged from the end of 2024, with expectations to decrease this to a range of 6 to 6.25 times throughout the year [22] Business Line Data and Key Metrics Changes - The same store occupancy rate was reported at 89.3%, with expectations for sequential growth throughout 2025 [11][19] - The company commenced nearly 1,500,000 square feet of new and renewal leases during the quarter, with a solid signed non-occupied pipeline of over 630,000 square feet [16] - Tenant retention improved by over 300 basis points to almost 85%, contributing to a slight uptick in occupancy [18] Market Data and Key Metrics Changes - Demand for outpatient medical space remains robust, with health systems experiencing improving revenue and margin trends, driving further growth and space needs [18] - The company’s on-campus portfolio received the highest average score in a recent industry research piece, indicating a resilient outpatient portfolio compared to peers [18] Company Strategy and Development Direction - The company aims to optimize its portfolio by exiting markets with limited scale and focusing on selling assets rather than contributing them to joint ventures [12][30] - Key strategic focuses include improving leasing, optimizing the portfolio, enhancing the balance sheet, increasing efficiency, and instilling financial discipline [14] - The company plans to maintain its dividend at $0.31 per share while discussing its future based on earnings clarity and efficiency gains [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong fundamentals of outpatient medical real estate, with muted new supply and steadily increasing demand [9] - The company anticipates sequential occupancy growth and a strong leasing pipeline, with expectations for NOI growth throughout the year [19] - Management is focused on creating a more stable platform and improved earnings growth profile, aiming for a better stock price [14] Other Important Information - The company sold four buildings for $28 million in the first quarter, which required significant capital for repositioning [21] - The company has $1.4 billion of capacity on its revolving line of credit and has accessed this liquidity to pay off maturing notes [23] Q&A Session Summary Question: Did the areas of focus listed by the new CEO indicate priority? - The new CEO indicated that while not in perfect order of priority, portfolio optimization and deleveraging are immediate focuses, while leasing will take longer to stabilize [27][28] Question: How does the company view the joint venture model? - The CEO expressed a preference for maintaining existing joint ventures but emphasized selling assets rather than contributing more to those ventures [29][30] Question: Is the current guidance for 2025 confirmed? - The CEO reaffirmed the guidance for 2025 after reviewing the forecast with the team, indicating a good start to the year [35] Question: How will dispositions impact earnings? - The CEO acknowledged that while there may be a negative impact from deleveraging, the company is focused on offsetting that through efficiencies and leasing upside [102][104] Question: What is the strategy for retained cash flow? - The CEO emphasized prioritizing redevelopment opportunities for retained cash flow, as they yield higher returns [116]

Financial Data and Key Metrics Changes - Normalized FFO per share for Q1 2025 was $0.39, aligning with expectations and marking a strong start to the year [22] - Same store cash NOI growth was 2.3%, impacted by higher operating expenses and weather volatility, with expectations for acceleration in growth for the remainder of the year [22][23] - Net debt to adjusted EBITDA remained unchanged at 6.4 times, with expectations to decrease to a range of 6 to 6.25 times as the year progresses [24] Business Line Data and Key Metrics Changes - Same store occupancy at the end of Q1 was 89.3%, with expectations for sequential growth throughout 2025 [11] - The company commenced nearly 1,500,000 square feet of new and renewal leases during the quarter, with a solid signed non-occupied pipeline of over 630,000 square feet [17][20] - Tenant retention improved by over 300 basis points to almost 85%, contributing to the slight uptick in occupancy [20] Market Data and Key Metrics Changes - The demand for outpatient medical space remains robust, with health systems experiencing improving revenue and margin trends, driving further growth and space needs [20] - The company’s on-campus portfolio received an A+ score in a recent industry research piece, indicating a resilient outpatient portfolio compared to peers [20] Company Strategy and Development Direction - The new CEO emphasized a focus on leasing, portfolio optimization, balance sheet improvement, organizational efficiency, and financial discipline as initial strategic priorities [11][14] - The company plans to exit markets with limited scale and focus on selling assets rather than contributing them to joint ventures [13][31] - The dividend will be an output of the strategic plan, with discussions ongoing at the Board level regarding its future [16][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong fundamentals of outpatient medical real estate, with muted new supply and steadily increasing demand [7] - The company anticipates occupancy growth throughout 2025, with a target of 75 to 125 basis points of absorption by year-end [21] - Management is cautious about potential federal healthcare budget cuts but noted that outpatient medical assets may benefit indirectly from such changes [45] Other Important Information - The company maintained its dividend at $0.31 per share for the quarter, with discussions ongoing regarding its future based on earnings clarity [16] - The company sold four buildings for $28 million in Q1, with plans for further dispositions as part of its strategy [23] Q&A Session Summary Question: Did the areas of focus listed by the new CEO represent a priority order? - The CEO indicated that while not in perfect order of priority, portfolio optimization and deleveraging are immediate focuses, while leasing improvements may take two to three years [30] Question: How does the company view the joint venture model? - The CEO expressed a preference for maintaining existing joint ventures but emphasized the need to sell assets rather than contribute more to these ventures [31] Question: Is the current guidance for 2025 confirmed? - The CEO reaffirmed the guidance after reviewing the 2025 forecast, indicating comfort with the numbers presented [35] Question: How will dispositions impact earnings and dividend coverage? - The CEO acknowledged that while there may be a negative impact from asset sales, efforts are being made to offset dilution through efficiencies and leasing upside [104][105] Question: What is the outlook for rent collection from tenants? - The CFO reported full rent collection from a key tenant for February, March, and April, indicating stability despite ongoing bankruptcy processes [62] Question: How does the company plan to utilize retained cash flow? - The CEO highlighted redevelopment opportunities as a priority for retained cash flow, aiming for higher returns on reinvested capital [115]