HR — Healthcare Realty Trust Incorporated

Summary of Healthcare Realty Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Normalized FFO per share: $0.41, up from $0.40 in the previous quarter.
• Same-store cash NOI growth: 6.9%, with same-store occupancy at 92.3%, an increase of 110 basis points year-over-year.
• FAD per share: $0.32, resulting in a quarterly dividend payout ratio of 75%.
• Stock buybacks: $100 million in Q1, with a remaining capacity of $400 million under the current authorization.
• Cash leasing spreads: Averaged 4.2%, with 25% of leases signed having spreads greater than 5%.

2. Strategic Updates and Business Highlights

• The company executed over 290 leases, totaling over 2 million square feet, marking a record for leasing activity.
• Joint venture acquisition: Completed an $18 million acquisition as part of a strategy to grow through partnerships.
• Redevelopment portfolio: Continued stabilization with 23 properties, 64% pre-leased, contributing to a projected $50 million NOI upside over three years.
• Health system relationships: Strengthening ties with major health systems, which is expected to enhance the credit profile and demand for space.

3. Forward Guidance and Outlook

• Increased guidance: Full-year normalized FFO per share guidance raised to $1.59 - $1.65, with a midpoint of $1.62. Same-store cash NOI growth guidance adjusted to 3.75% - 4.75%.
• Core earnings growth: Tracking above 5% for 2026, excluding impacts from portfolio optimization and deleveraging.
• Strong leasing pipeline: Approximately 1.4 million square feet of new leasing opportunities anticipated.

4. Bad News, Challenges, or Points of Concern

• Potential for deceleration: While Q1 showed strong results, management acknowledged that future quarters may not sustain the same growth rates due to tougher year-over-year comparisons.
• Occupancy targets: Current total occupancy at 90.5%, with a target of 92% to 93%, indicating a need for continued focus on leasing and tenant retention.
• Market conditions: The company faces pressure from rising interest rates and a competitive market for outpatient medical facilities, which could affect growth metrics.

5. Notable Q&A Insights

• Occupancy growth: Management believes that achieving the 92% - 93% occupancy target is feasible, supported by a strong leasing pipeline and tenant retention strategies.
• Core asset sales: The company is open to selling core assets to recycle capital into higher-growth opportunities, but will do so with a disciplined approach to avoid compromising long-term growth.
• Leasing economics: Management indicated that while some renewals had negative spreads, they may selectively accept lower rates to retain tenants, focusing on overall financial benefits rather than just lease rates.
• Supply dynamics: There is currently limited new construction in the outpatient medical space, with completions below historical averages, which may support future occupancy and rental rate growth.

Overall, Healthcare Realty reported strong Q1 results, with significant leasing activity and improved financial metrics, while also navigating challenges related to market conditions and occupancy targets. The company remains optimistic about its strategic initiatives and growth potential moving forward.