HEALTHCARE REALTY TRUST INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 15, 2017

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EX-99.2 - EXHIBIT 99.2 - HEALTHCARE REALTY TRUST INCexhibit992supplementalinfo.htm
8-K - 8-K - HEALTHCARE REALTY TRUST INChr-20161231xearnings8xk.htm



Carla Baca
Director of Corporate Communications
P: 615.269.8175
News Release
HEALTHCARE REALTY TRUST REPORTS RESULTS FOR THE FOURTH QUARTER

NASHVILLE, Tennessee, February 15, 2017 - Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the fourth quarter ended December 31, 2016. The Company reported net income of $52.4 million or $0.45 per diluted common share for the quarter. Normalized FFO for the three months ended December 31, 2016 totaled $0.41 per diluted common share.

Salient quarterly highlights include:
•
Normalized FFO for the fourth quarter grew 14.6% year-over-year to $47.1 million.
•
For the trailing twelve months ended December 31, 2016, same store revenue grew 3.4%, operating expenses increased 0.7%, and same store NOI grew 5.0%:
◦
Same store revenue per average occupied square foot increased 2.8%.
◦
Average same store occupancy increased to 89.2% from 88.7%.
•
Leasing activity in the fourth quarter totaled 340,000 square feet related to 132 leases:
◦
235,000 square feet of renewals
◦
105,000 square feet of new and expansion leases
•
Four predictive growth measures in the same store multi-tenant portfolio:
◦
Contractual rent increases occurring in the quarter averaged 2.9%, and contractual rent increases for leases commencing in the quarter will average 3.2%.
◦
Cash leasing spreads were 3.9% on 216,000 square feet renewed:
•
1% (<0% spread)
•
4% (0-3%)
•
72% (3-4%)
•
23% (>4%)
◦
Tenant retention was 88.5%.
◦
The average yield on renewed leases increased 50 basis points.
•
Acquisitions totaled $63.8 million for the fourth quarter, comprising 212,000 square feet at an aggregate leased percentage of 91%:
◦
The Company purchased two medical office buildings on the University of Maryland Medical System's Upper Chesapeake Health Medical Center campus in Baltimore, Maryland for $36.3 million. The buildings total 114,000 square feet and are 92% leased.
◦
The Company purchased two medical office buildings on Providence Health's Swedish Edmonds campus in Seattle, Washington for $14.9 million. Collectively, the buildings total 50,000 square feet and are 83% leased. The Company now owns four properties on the Swedish Edmonds campus.


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◦
The Company purchased a medical office building on HealthEast Care System’s St. John’s Hospital campus in St. Paul, Minnesota for $12.6 million. The building is 48,000 square feet and 94% leased.
•
Dispositions totaled $94.7 million for the quarter:
◦
The Company sold three inpatient rehabilitation facilities for $68.0 million.
◦
The Company sold three medical office buildings totaling 125,000 square feet for $26.7 million.
•
A dividend of $0.30 per common share was declared, which is equal to 73.2% of normalized FFO per share.

Salient highlights for the year ended December 31, 2016 include:
•
Normalized FFO totaled $1.63 per diluted common share.
•
Annual leasing activity totaled 1,875,000 square feet related to 589 leases:
◦
1,301,000 square feet of renewals
◦
574,000 square feet of new and expansion leases
◦
102,000 square feet of net absorption
•
Tenant improvement commitments for leases in second generation space at the multi-tenant properties were:
◦
$1.55 per square foot per lease year for renewal leases
◦
$4.74 per square foot per lease year for new leases
•
Net investments totaled $192.5 million:
◦
$241.9 million of acquisitions, comprised of 10 on or adjacent-to-campus medical office buildings
◦
$45.3 million of development and redevelopment funding
◦
$94.7 million of dispositions
•
The Company issued $449.2 million of equity in 2016 to fund investment activity and reduce leverage. Leverage decreased from 41.8% at the end of 2015 to 33.9% at year-end 2016, and net debt to adjusted EBITDA decreased from 6.2x to 5.0x.
•
Dividends totaled $1.20 per common share, which is equal to 73.6% of normalized FFO per share and 95.2% of FAD per share.

Healthcare Realty Trust is a real estate investment trust that integrates owning, managing, financing and developing income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. As of December 31, 2016, the Company had gross investments of approximately $3.6 billion in 202 real estate properties in 27 states totaling approximately 14.6 million square feet. The Company provided leasing and property management services to approximately 10.3 million square feet nationwide.
__________________________________________________________________________________________________________

Additional information regarding the Company, including this quarter's operations, can be found at www.healthcarerealty.com. Please contact the Company at 615.269.8175 to request a printed copy of this information.

In addition to the historical information contained within, the matters discussed in this press release may contain forward-looking statements that involve risks and uncertainties. These risks are discussed in filings with the Securities and Exchange Commission by Healthcare Realty Trust, including its Annual Report on Form 10-K for the year ended December 31, 2016 under the heading "Risk Factors," and as updated in its Quarterly Reports on Form 10-Q filed thereafter. Forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims any obligation to update forward-looking statements. A reconciliation of all non-GAAP financial measures in this release appears beginning on page 5.

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HEALTHCARE REALTY TRUST INCORPORATED
Consolidated Balance Sheets (1) 
(amounts in thousands, except per share data)

 
ASSETS
 
 
 
 
Real estate properties:
 
12/31/2016

 
12/31/2015

Land
 

$199,672

 

$198,585

Buildings, improvements and lease intangibles
 
3,386,480

 
3,135,893

Personal property
 
10,291

 
9,954

Construction in progress
 
11,655

 
19,024

Land held for development
 
20,123

 
17,452

Total real estate properties
 
3,628,221

 
3,380,908

Less accumulated depreciation and amortization
 
(840,839
)
 
(761,926
)
Total real estate properties, net
 
2,787,382

 
2,618,982

Cash and cash equivalents
 
5,409

 
4,102

Restricted cash
 
49,098

 
—

Assets held for sale and discontinued operations, net
 
3,092

 
724

Other assets, net
 
195,666

 
186,416

Total assets
 

$3,040,647

 

$2,810,224

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Notes and bonds payable
 

$1,264,370

 

$1,424,992

Accounts payable and accrued liabilities
 
78,266

 
75,489

Liabilities of properties held for sale and discontinued operations
 
614

 
33

Other liabilities
 
43,983

 
66,963

Total liabilities
 
1,387,233

 
1,567,477

Commitments and contingencies
 
 
 
 
Stockholders' equity:
 
 
 
 
Preferred stock, $.01 par value; 50,000 shares authorized; none issued and outstanding
 
—

 
—

Common stock, $.01 par value; 150,000 shares authorized; 116,417 and 101,517 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively
 
1,164

 
1,015

Additional paid-in capital
 
2,917,914

 
2,461,376

Accumulated other comprehensive income
 
(1,401
)
 
(1,569
)
Cumulative net income attributable to common stockholders
 
995,256

 
909,685

Cumulative dividends
 
(2,259,519
)
 
(2,127,760
)
Total stockholders' equity
 
1,653,414

 
1,242,747

Total liabilities and stockholders' equity
 

$3,040,647

 

$2,810,224

 
(1)
The Consolidated Balance Sheets do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.


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HEALTHCARE REALTY TRUST INCORPORATED
Consolidated Statements of Income (1) 
(amounts in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
 
Twelve Months Ended December 31,
 
 
 
2016

 
2015

 
2016

 
2015

Revenues
 
 
 
 
 
 
 
 
Rental income
 

$104,736

 

$97,466

 

$407,481

 

$383,333

Mortgage interest
 
—

 
—

 
—

 
91

Other operating
 
573

 
1,116

 
4,149

 
5,047

 
 
105,309

 
98,582

 
411,630

 
388,471

Expenses
 
 
 
 
 
 
 
 
Property operating
 
37,285

 
36,758

 
146,458

 
140,195

General and administrative
 
8,707

 
7,216

 
35,805

 
26,925

Depreciation
 
30,989

 
27,019

 
116,483

 
106,530

Amortization
 
3,033

 
2,556

 
11,207

 
10,084

Bad debts, net of recoveries
 
(13
)
 
9

 
(21
)
 
(193
)
 
 
80,001

 
73,558

 
309,932

 
283,541

Other Income (Expense)
 
 
 
 
 
 
 
 
Gain on sales of real estate assets
 
41,037

 
9,138

 
41,038

 
56,602

Interest expense
 
(13,839
)
 
(14,885
)
 
(57,351
)
 
(65,534
)
Loss on extinguishment of debt
 
—

 
—

 
—

 
(27,998
)
Pension termination
 
—

 
—

 
(4
)
 
(5,260
)
Impairment of real estate assets
 
—

 
(1
)
 
—

 
(3,639
)
Impairment of internally-developed software
 
—

 
—

 
—

 
(654
)
Interest and other income, net
 
74

 
78

 
375

 
389

 
 
27,272

 
(5,670
)
 
(15,942
)
 
(46,094
)
 
 
 
 
 
 
 
 
 
Income From Continuing Operations
 
52,580

 
19,354

 
85,756

 
58,836

 
 
 
 
 
 
 
 
 
Discontinued Operations
 
 
 
 
 
 
 
 
Income (loss) from discontinued operations
 
(22
)
 
(10
)
 
(71
)
 
715

Impairments of real estate assets
 
(121
)
 
(686
)
 
(121
)
 
(686
)
Gain on sales of real estate properties
 
—

 
—

 
7

 
10,571

Income (Loss) From Discontinued Operations
 
(143
)
 
(696
)
 
(185
)
 
10,600

 
 
 
 
 
 
 
 
 
Net Income
 

$52,437

 

$18,658

 

$85,571

 

$69,436

Basic Earnings Per Common Share:
 
 
 
 
 
 
 
 
Income from continuing operations
 

$0.46

 

$0.19

 

$0.79

 

$0.59

Discontinued operations
 
0.00

 
0.00

 
0.00

 
0.11

Net income
 

$0.46

 

$0.19

 

$0.79

 

$0.70

Diluted Earnings Per Common Share:
 
 
 
 
 
 
 
 
Income from continuing operations
 

$0.46

 

$0.19

 

$0.78

 

$0.59

Discontinued operations
 
(0.01
)
 
0.00

 
0.00

 
0.11

Net income
 

$0.45

 

$0.19

 

$0.78

 

$0.70

Weighted Average Common Shares Outstanding—Basic
 
114,589

 
99,699

 
108,572

 
99,171

Weighted Average Common Shares Outstanding—Diluted
 
115,408

 
100,474

 
109,387

 
99,880

(1)
The Consolidated Statements of Income do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

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HEALTHCARE REALTY TRUST INCORPORATED
Reconciliation of FFO, Normalized FFO and FAD
(amounts in thousands, except per share data)
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
 
Twelve Months Ended December 31,
 
 
 
2016

 
2015

 
2016

 
2015

Net Income Attributable to Common Stockholders
 

$52,437

 

$18,658

 

$85,571

 

$69,436

Gain on sales of real estate properties
 
(41,037
)
 
(9,138
)
 
(41,044
)
 
(67,172
)
Impairments of real estate assets
 
121

 
687

 
121

 
4,325

Real estate depreciation and amortization
 
34,699

 
29,907

 
129,772

 
117,982

Total adjustments
 
(6,217
)
 
21,456

 
88,849

 
55,135

Funds From Operations Attributable to Common Stockholders
 

$46,220

 

$40,114

 

$174,420

 

$124,571

Acquisition costs
 
915

 
1,068

 
3,414

 
1,394

Write-off of deferred financing costs upon amendment of line of credit facility
 
—

 
—

 
81

 
—

Severance expense
 
—

 
—

 
—

 
141

Loss on extinguishment of debt
 
—

 
—

 
—

 
27,998

Pension termination
 
—

 
—

 
4

 
5,260

Impairment of internally-developed software
 
—

 
—

 
—

 
654

Reversal of restricted stock amortization upon officer resignation
 
—

 
(40
)
 
—

 
(40
)
Revaluation of awards upon retirement
 
—

 
—

 
89

 
—

Normalized Funds From Operations
 

$47,135

 

$41,142

 

$178,008

 

$159,978

Non-real estate depreciation and amortization
 
1,339

 
1,341

 
5,475

 
5,830

Provision for bad debt, net
 
(13
)
 
9

 
(21
)
 
(194
)
Straight-line rent receivable, net
 
(1,595
)
 
(1,741
)
 
(7,134
)
 
(8,829
)
Stock-based compensation
 
1,949

 
1,511

 
7,509

 
6,069

Provision for deferred post-retirement benefits
 
—

 
—

 
—

 
385

Non-cash items included in cash flows from operating activities
 
1,680

 
1,120

 
5,829

 
3,261

2nd generation TI
 
(7,918
)
 
(3,081
)
 
(23,692
)
 
(12,068
)
Leasing commissions paid
 
(1,030
)
 
(1,856
)
 
(5,210
)
 
(7,504
)
Capital additions
 
(4,283
)
 
(3,918
)
 
(17,122
)
 
(16,242
)
Funds Available for Distribution
 

$35,584

 

$33,407

 

$137,813

 

$127,425

Funds from Operations per Common Share—Diluted
 

$0.40

 

$0.40

 

$1.59

 

$1.25

Normalized Funds From Operations Per Common Share—Diluted
 

$0.41

 

$0.41

 

$1.63

 

$1.60

Funds Available for Distribution Per Common Share—Diluted
 

$0.31

 

$0.33

 

$1.26

 

$1.28

Weighted Average Common Shares Outstanding - Diluted
 
115,408

 
100,474

 
109,387

 
99,880



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HEALTHCARE REALTY TRUST INCORPORATED
Use of Non-GAAP Measures


Management considers funds from operations ("FFO"), FFO per share, normalized FFO, normalized FFO per share, funds available for distribution ("FAD") and FAD per share to be useful non-GAAP measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors.

The non-GAAP financial measures presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income (determined in accordance with GAAP), as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs.

FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization (including amortization of leasing commissions), and after adjustments for unconsolidated partnerships and joint ventures.” The Company defines Normalized FFO as FFO excluding acquisition-related expenses and other normalizing items that are unusual and infrequent in nature. FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense and provision for bad debts, net; and subtracting maintenance capital expenditures, including second generation tenant improvements and leasing commissions paid and straight-line rent income, net of expense. The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts. FFO, Normalized FFO and FAD do not represent cash generated from operating activities determined in accordance with accounting principles generally accepted in the United States of America and is not necessarily indicative of cash available to fund cash needs. FFO, Normalized FFO and FAD should not be considered an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flow as a measure of liquidity. FFO, Normalized FFO and FAD should be reviewed in connection with GAAP financial measures.

Management believes FFO, FFO per share, Normalized FFO, Normalized FFO per share, and FAD provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, including depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, gains or losses from sales of real estate, and other normalizing items that are unusual and infrequent, FFO, FFO per share, Normalized FFO, Normalized FFO per share and FAD can facilitate comparisons of operating performance between periods. The Company reports these measures because they have been observed by management to be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because these measures are consistently reported, discussed, and compared by research analysts in their notes and publications about REITs.



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