Healthcare Realty Trust rporated(HR) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a normalized FFO per share growth of 3.6% year-over-year to $0.43, with sequential quarterly FFO growth primarily driven by a $2.4 million contribution from net investment activity [33][34] - Same-store NOI growth was 2.9%, consistent with long-term historical norms, and same-store average occupancy increased 40 basis points to 89.2% [35][36] Business Line Data and Key Metrics Changes - Year-to-date acquisitions totaled $341 million at a blended cap rate of 5.1%, with a significant portion aligned with leading health systems [19][20] - Dispositions contributed $110 million at a blended cap rate of 4.2%, resulting in a positive rotation of 90 basis points between average sale cap rate and average acquisition cap rate [20] Market Data and Key Metrics Changes - The company is experiencing strong leasing interest from independent physician groups, with a record number of property tours in the first quarter [36] - The development pipeline is expanding, with $1.6 billion in projects slated to start later this year, driven by strong demand for space [9][22] Company Strategy and Development Direction - The strategic combination with HTA is expected to enhance growth, shifting from an average annual FAD per share growth of 4.5% to a range of 5% to 7% [12][13] - The focus is on forming more hospital-centric clusters, which will drive value for shareholders and increase market share [25][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic combination with HTA, highlighting the potential for accelerated growth and increased stability [17][41] - The company anticipates steady absorption gains in the coming quarters based on constructive provider sentiment [8] Other Important Information - The company has secured commitments for a new $1.5 billion revolving credit facility and $1.5 billion of term loans to enhance liquidity [39][40] - A $500 million stock repurchase program has been authorized to reinvest proceeds accretively [15] Q&A Session Summary Question: Details on asset sales and joint ventures - Management confirmed that asset sales will primarily involve HTA assets, focusing on off-campus properties with longer lease terms [48][50] Question: Path to achieving Party F's offer - Management indicated confidence in exceeding Party F's unsolicited proposal through accelerated growth from the combination with HTA [51][54] Question: Impact of joint ventures on FAD accretion - Management stated that additional joint ventures and asset sales could add approximately 30 basis points to FAD accretion [58] Question: Tenant relationships regarding the strategic combination - Management noted excitement among tenants about the increased size and concentration of the portfolio, with no significant concerns raised [81] Question: Future Board composition post-merger - Management acknowledged the expanded Board size but emphasized the value of HTA board members and the intention to reduce the size over time [102][104]