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 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]