OREANDA-NEWS. August 04, 2016. Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the second quarter ended June 30, 2016. Normalized FFO for the three months ended June 30, 2016 totaled \\$0.42 per diluted common share. Revenue for the second quarter grew by \\$5.9 million to \\$102.6 million compared to the same quarter in 2015. The Company reported net income of \\$12.1 million or \\$0.12 per share for the quarter.

Salient highlights include:

  • Normalized FFO for the second quarter grew 10.7% year-over-year to \\$44.1 million.  Over the same time period, normalized FFO per share increased 5.0%.
  • For the trailing twelve months ended June 30, 2016, same store revenue grew 4.0%, operating expenses increased 3.4%, and same store NOI grew 4.3%.
  • Same store revenue per average occupied square foot increased 3.3% over the prior year.
  • Average same store occupancy increased to 89.9% from 89.3% a year ago.
  • Leasing activity totaled 418,000 square feet related to 137 leases:
    • 260,000 square feet of renewals
    • 158,000 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%
    • Cash leasing spreads were 6.3% on 228,000 square feet renewed: 0% of square feet (<0% spread), 12% (0-3%), 41% (3-4%) and 47% (>4%)
    • Tenant retention was 81.2%
    • The average yield on renewed leases increased 90 basis points
  • In April 2016, the Company acquired a 100% leased, 46,600 square foot medical office building in Seattle, Washington for a purchase price of \\$21.6 million. The property is located on UW Medicine's Valley Medical Center campus.
  • In May 2016, the Company acquired an 80% leased, 63,000 square foot medical office building in Los Angeles, California for a purchase price of \\$20.0 million. The property is located on HCA's West Hills Hospital and Medical Center campus.
  • The Company is working on the acquisition of two MOBs for a combined purchase price of \\$98 million and expects to close in October 2016.  These properties total 191,000 square feet, are 100% leased, and are on hospital campuses in Seattle and Washington, D.C.
  • On July 5, 2016, the Company completed the sale of 9.2 million shares of common stock for net proceeds of approximately \\$304.6 million to fund investment activity.
  • During the second quarter, the Company sold 2.4 million shares through the at-the-market (ATM) program, generating net proceeds of \\$74.9 million.
  • In July 2016, the Company renewed its \\$700 million unsecured credit facility. The new credit facility includes 14 banks and matures in July 2020 with an option to extend the facility for an additional year.
  • In July 2016, S&P Global Ratings upgraded the Company's senior unsecured debt rating to BBB.
  • A dividend of \\$0.30 per common share was declared, which is equal to 71.4% of normalized FFO 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 June 30, 2016, the Company had investments of approximately \\$3.4 billion in 202 real estate properties located in 30 states totaling approximately 14.5 million square feet.  The Company provided leasing and property management services to approximately 10.0 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, 2015 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.

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

ASSETS    
Real estate properties: 6/30/2016 12/31/2015
Land \\$208,386   \\$198,585  
Buildings, improvements and lease intangibles  3,235,744    3,135,893  
Personal property  10,032    9,954  
Construction in progress  35,174    19,024  
Land held for development  17,438    17,452  
Total real estate properties  3,506,774    3,380,908  
Less accumulated depreciation and amortization  (819,744)   (761,926) 
Total real estate properties, net  2,687,030    2,618,982  
Cash and cash equivalents  9,026    4,102  
Assets held for sale and discontinued operations, net  710    724  
Other assets, net  185,298    186,416  
Total assets \\$2,882,064   \\$2,810,224  
     
LIABILITIES AND STOCKHOLDERS' EQUITY
    
Liabilities:    
Notes and bonds payable \\$1,414,739   \\$1,424,992  
Accounts payable and accrued liabilities  70,408    75,489  
Liabilities of discontinued operations  17    33  
Other liabilities  46,452    66,963  
Total liabilities  1,531,616    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; 106,662 and 101,517 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively  1,067    1,015  
Additional paid-in capital  2,609,880    2,461,376  
Accumulated other comprehensive income  (1,485)   (1,569) 
Cumulative net income attributable to common stockholders  930,985    909,685  
Cumulative dividends  (2,189,999)   (2,127,760) 
Total stockholders' equity  1,350,448    1,242,747  
Total liabilities and stockholders' equity \\$2,882,064   \\$2,810,224  
           

(1) The Condensed 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.

HEALTHCARE REALTY TRUST INCORPORATED
Condensed Consolidated Statements of Income (1)
(amounts in thousands, except per share data)
(Unaudited)

         
  Three Months Ended June 30, Six Months Ended June 30,
  2016 2015 2016 2015
Revenues        
Rental income \\$101,472   \\$95,450   \\$200,212   \\$190,484  
Mortgage interest  —    31    —    62  
Other operating  1,170    1,227    2,451    2,618  
   102,642    96,708    202,663    193,164  
Expenses        
Property operating  36,263    33,927    71,668    68,189  
General and administrative  8,129    6,713    18,375    13,451  
Depreciation  28,528    26,552    56,221    52,940  
Amortization  2,762    2,474    5,463    5,142  
Bad debts, net of recoveries  78    27    39    (181) 
   75,760    69,693    151,766    139,541  
Other Income (Expense)        
Gain on sales of real estate properties  1    41,549    1    41,549  
Interest expense  (14,815)   (17,213)   (29,753)   (35,536) 
Loss on extinguishment of debt  —    (27,998)   —    (27,998) 
Pension termination  (4)   (5,260)   (4)   (5,260) 
Impairment of real estate assets  —    —    —    (3,328) 
Impairment of internally-developed software  —    (654)   —    (654) 
Interest and other income, net  93    147    179    239  
   (14,725)   (9,429)   (29,577)   (30,988) 
         
Income From Continuing Operations  12,157    17,586    21,320    22,635  
         
Discontinued Operations        
Income (loss) from discontinued operations  (19)   330    (27)   663  
Gain on sales of real estate properties  7    —    7    —  
Income (Loss) From Discontinued Operations  (12)   330    (20)   663  
         
Net Income \\$12,145   \\$17,916   \\$21,300   \\$23,298  
Basic Earnings Per Common Share:        
Income from continuing operations \\$0.12   \\$0.18   \\$0.21   \\$0.23  
Discontinued operations  0.00    0.00    0.00    0.01  
Net income \\$0.12   \\$0.18   \\$0.21   \\$0.24  
Diluted Earnings Per Common Share:        
Income from continuing operations \\$0.12   \\$0.18   \\$0.21   \\$0.23  
Discontinued operations  0.00    0.00    0.00    0.00  
Net income \\$0.12   \\$0.18   \\$0.21   \\$0.23  
Weighted Average Common Shares Outstanding—Basic  103,988    99,273    102,710    98,819  
Weighted Average Common Shares Outstanding—Diluted  104,770    99,945    103,471    99,554  
                     

(1) The Condensed 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.

HEALTHCARE REALTY TRUST INCORPORATED
Reconciliation of FFO and Normalized FFO (1)
(amounts in thousands, except per share data)
(Unaudited)

Non-GAAP Measures
Management considers funds from operations ("FFO"), FFO per share, normalized FFO, and normalized FFO 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.

  2016
  2015
 
Net Income \\$12,145   \\$17,916  
Gain on sales of real estate properties  (8)   (41,549) 
Real estate depreciation and amortization  31,716    29,388  
Total adjustments  31,708    (12,161) 
Funds From Operations \\$43,853   \\$5,755  
Acquisition costs  232    167  
Pension termination  4    5,260  
Loss on extinguishment of debt  —    27,998  
Impairment of internally-developed software  —    654  
Normalized Funds From Operations \\$44,089   \\$39,834  
Funds from Operations per Common Share—Diluted \\$0.42   \\$0.06  
Normalized Funds From Operations Per Common Share—Diluted \\$0.42   \\$0.40  
FFO Weighted Average Common Shares Outstanding  104,770    99,945  
           

(1) 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.  FFO does 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 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.

Management believes FFO, FFO per share, Normalized FFO, and Normalized FFO per share 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, and Normalized FFO per share 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. However, these measures do not represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. FFO, FFO per share, Normalized FFO, and Normalized FFO per share should not be considered as an alternative to net income attributable to common stockholders as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.

(2) During the third quarter of 2015, the Company began including an add-back for leasing commission amortization in order to provide a better basis for comparing its results of operations with those of others in the industry, consistent with the NAREIT definition of FFO.  For the three ended June 30, 2015, FFO per diluted common share was previously reported as \\$0.05.