HR — Healthcare Realty Trust Incorporated

Summary of Healthcare Realty Trust Incorporated Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Normalized FFO: $1.61 per share for the full year, exceeding guidance by $0.03.
• Q4 Normalized FFO: $0.40 per share.
• Same-store NOI Growth: 4.8% for 2025, with Q4 at 5.5%.
• FAD per Share: $1.26 for the full year, with a quarterly payout ratio of 75%.
• G&A Expenses: Reduced to $45 million, achieving $10 million in run-rate savings.
• Net Debt to EBITDA: Improved to 5.4x from 6.4x at the beginning of the year.
• Dividends: Adjusted to a sustainable level, offering a nearly 6% yield.

2. Strategic Updates and Business Highlights:

• Transformational Year: 2025 marked a significant overhaul with a focus on becoming a leader in the outpatient medical sector.
• Asset Management Revamp: Completed with improved alignment between asset management and leasing, resulting in better economic returns.
• Asset Dispositions: Successfully sold $1.2 billion in assets at a blended cap rate of 6.7%, exiting 14 non-core markets.
• Leasing Activity: Executed approximately 5.8 million square feet of leases, with strong tenant retention at 82%.
• Corporate Governance: Streamlined board to seven members and welcomed Dan Gabbay as CFO.

3. Forward Guidance and Outlook:

• 2026 Guidance: Normalized FFO per share expected to be between $1.58 and $1.64, with a midpoint of $1.61.
• Same-store NOI Growth: Projected at 3.5% to 4.5%.
• Capital Allocation: Focus on redevelopment projects with expected yields of around 10%, stock buybacks, and selective joint ventures.
• Long-term Value Creation: Confidence in achieving earnings growth through improved occupancy and strategic capital deployment.

4. Bad News, Challenges, or Points of Concern:

• Flat FFO Growth: The guidance for 2026 indicates flat year-over-year growth, which may be perceived as underwhelming.
• Market Conditions: Current cost of capital and discount to intrinsic asset value limit external growth opportunities.
• Competitive Pressures: Increased competition from private capital in the outpatient medical space, making acquisitions challenging.
• Retention Rates: While improving, tenant retention is still a concern, with expectations set at 80% to 85%.

5. Notable Q&A Insights:

• Same-store NOI Deceleration: Management explained the expected deceleration in same-store NOI growth for 2026, attributing it to the absence of significant absorption benefits seen in 2025.
• Capital Allocation Decisions: Discussions highlighted a disciplined approach to capital allocation, with a focus on redevelopment and potential joint ventures rather than acquisitions at lower cap rates.
• Build-to-Suit Developments: Limited spec development in outpatient medical space; most developments are pre-leased, indicating strong demand but higher costs.
• Market Dynamics: Insights shared on the competitive landscape, with a noted lack of shadow supply impacting leasing dynamics positively for Healthcare Realty.

Overall, Healthcare Realty Trust Incorporated showcased a strong performance in 2025, with strategic initiatives positioning the company for future growth, despite some challenges in maintaining momentum and navigating competitive pressures.