Healthcare Realty Trust rporated(US:HR)2022-08-10 02:43Financial Data and Key Metrics Changes - Healthcare Realty's normalized FFO per share increased by 4.7% from $0.21 to $0.45 in the second quarter [22] - FAD per share increased by 11% year-over-year, reducing the FAD payout ratio to 83% for the quarter [23] - Year-over-year quarterly same-store NOI growth for HR increased by 3.3%, driven by a 3.4% increase in revenue [23][24] Business Line Data and Key Metrics Changes - HTA's normalized FFO for the second quarter was $101 million or $0.43 per share, with a FAD payout ratio of 92% [23] - HR's cash leasing spreads for the second quarter were 3.4%, consistent with historical ranges [25] - There were 215,000 square feet of signed leases in the same-store portfolio in the process of build-out, representing 1.6% of total same-store square footage [25] Market Data and Key Metrics Changes - The combined portfolio now includes over 700 properties and 40 million square feet, with significant concentration in high-growth markets [8][10] - The company operates in dense, high-growth markets, with over 75% of properties located in attractive coastal and Sunbelt markets [10] Company Strategy and Development Direction - The company aims to increase scale through the combination with HTA, focusing on asset sales and joint ventures to fund a $1.1 billion special cash dividend [11][14] - Key performance indicators include asset sales, integration, leasing momentum, and relationships to drive growth [11] - The company plans to invest $500 million to $750 million in the low to mid-pods, funded largely through asset recycling [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for outpatient healthcare, driven by an aging population, which is expected to accelerate over the next decade [10] - The company anticipates solid occupancy and NOI improvement due to robust leasing activity and a focus on high-growth markets [11][12] - Management acknowledged the challenges in the current market but remains optimistic about achieving their strategic goals [33] Other Important Information - The company has a $500 million share repurchase program authorized by the board, aimed at opportunistic buybacks when valuations are attractive [28][78] - The company expects to maintain its legacy dividend policy and cadence moving forward [30] Q&A Session Summary Question: What is causing the delay in the $1.1 billion dispositions? - Management indicated that there hasn't been a material delay and that progress is on pace, with nearly half closed and the balance expected to close in August [33] Question: What is the long-term target for on-campus versus off-campus investments? - The company aims for a long-term target of about 75% on or adjacent to campus, with current levels at approximately 68% [35] Question: Can the company achieve a higher growth profile in the medical office sector? - Management believes they can sustain a 3%+ growth profile but does not expect to transform the medical office sector into a cyclical business [41] Question: How does the company plan to balance share buybacks with increased leverage? - The company plans to use disposition proceeds for share buybacks rather than increasing leverage, maintaining a target debt to EBITDA ratio of 6% to 6.5% [78] Question: What is the outlook for occupancy gains in the multi-tenant HTA portfolio? - Management is optimistic about occupancy gains due to a broker-oriented approach and increased scale in markets, with significant leases in the build-out process [81][84]