Healthcare Realty Trust Incorporated (NYSE:HR) today announced
results for the first quarter ended March 31, 2024. Net (loss)
income attributable to common stockholders for the three months
ended March 31, 2024 was $(310.8) million, or $(0.82) per
diluted common share. Normalized FFO per share totaled $0.39 for
the three months ended March 31, 2024.
CAPITAL ALLOCATION
- The Company announced a strategic JV
with KKR & Co., Inc. with the following key terms:
- The Company will contribute 12 existing
properties at a value of $382.5 million, representing a cap rate of
approximately 6.6%.
- KKR will make an initial capital
contribution into the JV equal to 80% of the value of the
properties.
- The Company will retain a 20% interest
and will manage the JV, as well as continue to oversee day-to-day
operations and leasing of the properties.
- The JV is expected to generate
approximately $300 million of proceeds to the Company, and the
contribution of the properties is expected to occur throughout May
and June, subject to customary closing conditions.
- Asset-level financing is not expected
to be used for the initial JV seed portfolio or future
investments.
- KKR has also committed up to $600
million of additional equity capital to invest in high-quality
stabilized MOBs, which may include additional contributions of the
Company's properties.
- The Company has additional transactions
under contract and letters of intent that are expected to generate
further proceeds of more than $300 million within 90 days.
- The impact of additional transactions
as well as the KKR JV will be incorporated into the Company's
guidance expectations when they are completed.
- Proceeds are expected to be used to
repurchase shares on a leverage neutral basis, maintaining debt to
adjusted EBITDA between 6.0 and 6.5 times.
- In April, the Company repurchased 3.0
million shares totaling $41.7 million at an average price of $14.07
per share.
- The Company's Board of Directors has authorized the repurchase
of up to $500.0 million of outstanding shares of the Company’s
common stock.
MULTI-TENANT OCCUPANCY AND ABSORPTION
- Multi-tenant
sequential occupancy gains were in-line with expectations provided
in the February 2024 Investor Presentation as shown below:
|
|
1Q 2024 ACTUAL |
|
Absorption (SF) |
56,972 |
|
Change in occupancy (bps) |
+ 17 |
|
|
|
- Strong multi-tenant absorption was
noteworthy given the 1,603,000 square feet of expirations in first
quarter, nearly double the expirations in the fourth quarter 2023
and the highest quarterly level scheduled in 2024.
- The multi-tenant portfolio leased
percentage was 87.1% at March 31, which was 170 basis points
greater than occupancy of 85.4%.
- Multi-tenant occupancy has increased by
70 basis points since third quarter of 2023. For the Legacy HTA
properties, multi-tenant occupancy has increased by 130 basis
points for the same period.
- The multi-tenant occupancy and NOI
bridge can be found on page 5 of the Key Highlights Investor
Presentation.
LEASING
- Portfolio leasing activity that
commenced in the first quarter totaled 2,077,000 square feet
related to 411 leases:
- 1,595,000 square feet of renewals
- 482,000 square feet of new and
expansion lease commencements
- The Company signed new leases totaling
approximately 440,000 square feet in the quarter.
SAME STORE
- Same Store cash NOI
for the first quarter increased 3.0% over the same quarter in the
prior year, up from 2.7% year over year growth in fourth quarter
2023.
- Tenant retention for the first
quarter was 84.8%, an increase from 78.2% in fourth quarter
2023.
- Operating expense growth was 1.7%
over the same quarter in the prior year, down from 4.1% year over
year growth in fourth quarter 2023.
- First quarter predictive growth
measures in the Same Store portfolio include:
- Average in-place rent increases of
2.8%
- Future annual contractual increases
of 2.9% for leases commencing in the quarter.
- Weighted average MOB cash leasing
spreads of 3.7% on 1,313,000 square feet renewed:
- 4% (<0% spread)
- 10% (0-3%)
- 54% (3-4%)
- 31% (>4%)
BALANCE SHEET
- Net debt to adjusted EBITDA was 6.5
times at March 31, 2024.
- In March 2024, the Company reduced its
credit spread on its term loans and credit facility by 1 basis
point as a result of meeting certain sustainability targets.
- As of March 31, 2024, variable rate
debt was 10% of outstanding, an improvement from 16% as of March
31, 2023.
DIVIDEND
- The Company is focused on its top
priorities of capital allocation and operational momentum to
accelerate earnings growth and improve dividend coverage.
- A dividend of $0.31 per share was paid
in March 2024. A dividend of $0.31 per share will be paid on May
23, 2024 to stockholders and OP unitholders of record on May 13,
2024.
GUIDANCE
- The Company
affirms its 2024 Normalized FFO per share guidance as shown
below:
|
|
ACTUAL |
|
EXPECTED 2Q 2024 |
|
EXPECTED 2024 |
|
|
1Q 2024 |
|
|
LOW |
|
HIGH |
|
|
LOW |
|
HIGH |
|
|
Earnings per share |
$(0.82) |
|
|
$(0.12) |
|
$(0.11) |
|
|
$(1.30) |
|
$(0.80) |
|
|
NAREIT FFO per share |
$(0.30) |
|
|
$0.35 |
|
$0.36 |
|
|
$0.77 |
|
$0.82 |
|
|
Normalized FFO per share |
$0.39 |
|
|
$0.38 |
|
$0.39 |
|
|
$1.52 |
|
$1.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- The Company's 2024 guidance range
includes activities outlined in the Components of Expected FFO on
page 27 of the Supplemental Information.
- The Company's 2024 guidance range does
not include any assumptions for recently announced or prospective
JV seed portfolios, dispositions or share repurchases. These
transactions will be incorporated into the Company's guidance
expectations after completion.
- The Company's earnings per share and
NAREIT FFO per share guidance ranges have been updated to reflect
the impact of non-cash goodwill and real estate impairments
recognized in 1Q 2024, as applicable.
The 2024 annual guidance range reflects the Company's view of
current and future market conditions, including assumptions with
respect to rental rates, occupancy levels, interest rates, and
operating and general and administrative expenses. The Company's
guidance does not contemplate impacts from gains or losses
from dispositions, potential impairments, or debt
extinguishment costs, if any. There can be no assurance that the
Company's actual results will not be materially higher or lower
than these expectations. If actual results vary from these
assumptions, the Company's expectations may change.
EARNINGS CALL
- On Tuesday, May 7,
2024, at 12:00 p.m. Eastern Time, Healthcare Realty Trust has
scheduled a conference call to discuss earnings results, quarterly
activities, general operations of the Company and industry
trends.
- Simultaneously, a webcast of the
conference call will be available to interested parties at
https://investors.healthcarerealty.com/corporate-profile/webcasts
under the Investor Relations section. A webcast replay will be
available following the call at the same address.
- Live Conference Call Access Details:
- Domestic Toll-Free Number: +1
833-470-1428 access code 240790;
- All Other Locations: +1 404-975-4839
access code 240790.
- Replay Information:
- Domestic Toll-Free Number: +1
866-813-9403 access code 656103;
- All Other Locations: +1 929-458-6194
access code 656103.
Healthcare Realty (NYSE: HR) is a real estate investment trust
(REIT) that owns and operates medical outpatient buildings
primarily located around market-leading hospital campuses. The
Company selectively grows its portfolio through property
acquisition and development. As the first and largest REIT to
specialize in medical outpatient buildings, Healthcare Realty's
portfolio includes nearly 700 properties totaling over 40 million
square feet concentrated in 15 growth markets.
Additional information regarding the Company, including this
quarter's operations, can be found at www.healthcarerealty.com. In
addition to the historical information contained within, this press
release contains certain forward-looking statements with respect to
the Company. Forward-looking statements are statements that are not
descriptions of historical facts and include statements regarding
management’s intentions, beliefs, expectations, plans or
predictions of the future, within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Because such
statements include risks, uncertainties and contingencies, actual
results may differ materially and in adverse ways from those
expressed or implied by such forward-looking statements. These
risks, uncertainties and contingencies include, without limitation,
the following: the Company's expected results may not be achieved;
failure to realize the expected benefits of the Merger; significant
transaction costs and/or unknown or inestimable liabilities; risks
related to future opportunities and plans for the Company,
including the uncertainty of expected future financial performance
and results of the Company; the possibility that, if the Company
does not achieve the perceived benefits of the Merger as rapidly or
to the extent anticipated by financial analysts or investors, the
market price of the Company’s common stock could decline; general
adverse economic and local real estate conditions; changes in
economic conditions generally and the real estate market
specifically; legislative and regulatory changes, including changes
to laws governing the taxation of REITs and changes to laws
governing the healthcare industry; the availability of capital;
changes in interest rates; competition in the real estate industry;
the supply and demand for operating properties in the Company’s
proposed market areas; changes in accounting principles generally
accepted in the US; policies and guidelines applicable to REITs;
the availability of properties to acquire; the availability of
financing; pandemics and other health concerns, and the measures
intended to prevent their spread, including the currently ongoing
COVID-19 pandemic; and the potential material adverse effect these
matters may have on the Company’s business, results of operations,
cash flows and financial condition. Additional information
concerning the Company and its business, including additional
factors that could materially and adversely affect the Company’s
financial results, include, without limitation, the risks described
under Part I, Item 1A - Risk Factors, in the Company’s 2023 Annual
Report on Form 10-K and in its other filings with the SEC.
Consolidated Balance Sheets |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
ASSETS |
|
|
|
|
|
|
|
1Q 2024 |
|
|
4Q 2023 |
|
|
3Q 2023 |
|
|
2Q 2023 |
|
|
1Q 2023 |
|
Real estate properties |
|
|
|
|
|
Land |
$ |
1,342,895 |
|
$ |
1,343,265 |
|
$ |
1,387,821 |
|
$ |
1,424,453 |
|
$ |
1,412,805 |
|
Buildings and
improvements |
|
10,902,835 |
|
|
10,881,373 |
|
|
11,004,195 |
|
|
11,188,821 |
|
|
11,196,297 |
|
Lease intangibles |
|
816,303 |
|
|
836,302 |
|
|
890,273 |
|
|
922,029 |
|
|
929,008 |
|
Personal property |
|
12,720 |
|
|
12,718 |
|
|
12,686 |
|
|
12,615 |
|
|
11,945 |
|
Investment in financing
receivables, net |
|
122,001 |
|
|
122,602 |
|
|
120,975 |
|
|
121,315 |
|
|
120,692 |
|
Financing lease right-of-use
assets |
|
81,805 |
|
|
82,209 |
|
|
82,613 |
|
|
83,016 |
|
|
83,420 |
|
Construction in progress |
|
70,651 |
|
|
60,727 |
|
|
85,644 |
|
|
53,311 |
|
|
42,615 |
|
Land
held for development |
|
59,871 |
|
|
59,871 |
|
|
59,871 |
|
|
78,411 |
|
|
69,575 |
|
Total real estate investments |
|
13,409,081 |
|
|
13,399,067 |
|
|
13,644,078 |
|
|
13,883,971 |
|
|
13,866,357 |
|
Less
accumulated depreciation and amortization |
|
(2,374,047 |
) |
|
(2,226,853 |
) |
|
(2,093,952 |
) |
|
(1,983,944 |
) |
|
(1,810,093 |
) |
Total real estate investments, net |
|
11,035,034 |
|
|
11,172,214 |
|
|
11,550,126 |
|
|
11,900,027 |
|
|
12,056,264 |
|
Cash and cash equivalents |
|
26,172 |
|
|
25,699 |
|
|
24,668 |
|
|
35,904 |
|
|
49,941 |
|
Assets held for sale, net |
|
30,968 |
|
|
8,834 |
|
|
57,638 |
|
|
151 |
|
|
3,579 |
|
Operating lease right-of-use
assets |
|
273,949 |
|
|
275,975 |
|
|
323,759 |
|
|
333,224 |
|
|
336,112 |
|
Investments in unconsolidated
joint ventures |
|
309,754 |
|
|
311,511 |
|
|
325,453 |
|
|
327,245 |
|
|
327,746 |
|
Other
assets, net and goodwill |
|
605,047 |
|
|
842,898 |
|
|
822,084 |
|
|
797,796 |
|
|
795,242 |
|
Total assets |
$ |
12,280,924 |
|
$ |
12,637,131 |
|
$ |
13,103,728 |
|
$ |
13,394,347 |
|
$ |
13,568,884 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
1Q 2024 |
|
|
4Q 2023 |
|
|
3Q 2023 |
|
|
2Q 2023 |
|
|
1Q 2023 |
|
Liabilities |
|
|
|
|
|
Notes and bonds payable |
$ |
5,108,279 |
|
$ |
4,994,859 |
|
$ |
5,227,413 |
|
$ |
5,340,272 |
|
$ |
5,361,699 |
|
Accounts payable and accrued
liabilities |
|
163,172 |
|
|
211,994 |
|
|
204,947 |
|
|
196,147 |
|
|
155,210 |
|
Liabilities of properties held
for sale |
|
700 |
|
|
295 |
|
|
3,814 |
|
|
222 |
|
|
277 |
|
Operating lease
liabilities |
|
229,223 |
|
|
229,714 |
|
|
273,319 |
|
|
278,479 |
|
|
279,637 |
|
Financing lease
liabilities |
|
74,769 |
|
|
74,503 |
|
|
74,087 |
|
|
73,629 |
|
|
73,193 |
|
Other
liabilities |
|
197,763 |
|
|
202,984 |
|
|
211,365 |
|
|
219,694 |
|
|
232,029 |
|
Total liabilities |
|
5,773,906 |
|
|
5,714,349 |
|
|
5,994,945 |
|
|
6,108,443 |
|
|
6,102,045 |
|
|
|
|
|
|
|
Redeemable non-controlling
interests |
|
3,880 |
|
|
3,868 |
|
|
3,195 |
|
|
2,487 |
|
|
2,000 |
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
Preferred stock, $0.01 par
value; 200,000 shares authorized |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Common stock, $0.01 par value;
1,000,000 shares authorized |
|
3,815 |
|
|
3,810 |
|
|
3,809 |
|
|
3,808 |
|
|
3,808 |
|
Additional paid-in
capital |
|
9,609,530 |
|
|
9,602,592 |
|
|
9,597,629 |
|
|
9,595,033 |
|
|
9,591,194 |
|
Accumulated other
comprehensive (loss) income |
|
4,791 |
|
|
(10,741 |
) |
|
17,079 |
|
|
9,328 |
|
|
(8,554 |
) |
Cumulative net income
attributable to common stockholders |
|
717,958 |
|
|
1,028,794 |
|
|
1,069,327 |
|
|
1,137,171 |
|
|
1,219,930 |
|
Cumulative dividends |
|
(3,920,199 |
) |
|
(3,801,793 |
) |
|
(3,684,144 |
) |
|
(3,565,941 |
) |
|
(3,447,750 |
) |
Total stockholders' equity |
|
6,415,895 |
|
|
6,822,662 |
|
|
7,003,700 |
|
|
7,179,399 |
|
|
7,358,628 |
|
Non-controlling interest |
|
87,243 |
|
|
96,252 |
|
|
101,888 |
|
|
104,018 |
|
|
106,211 |
|
Total Equity |
|
6,503,138 |
|
|
6,918,914 |
|
|
7,105,588 |
|
|
7,283,417 |
|
|
7,464,839 |
|
Total liabilities and stockholders' equity |
$ |
12,280,924 |
|
$ |
12,637,131 |
|
$ |
13,103,728 |
|
$ |
13,394,347 |
|
$ |
13,568,884 |
|
Consolidated Statements of Income |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
|
|
1Q 2024 |
|
|
4Q 2023 |
|
|
3Q 2023 |
|
|
2Q 2023 |
|
|
1Q 2023 |
|
Revenues |
|
|
|
|
|
Rental income |
$ |
318,076 |
|
$ |
322,076 |
|
$ |
333,335 |
|
$ |
329,680 |
|
$ |
324,093 |
|
Interest income |
|
4,538 |
|
|
4,422 |
|
|
4,264 |
|
|
4,233 |
|
|
4,214 |
|
Other
operating |
|
4,191 |
|
|
3,943 |
|
|
4,661 |
|
|
4,230 |
|
|
4,618 |
|
|
|
326,805 |
|
|
330,441 |
|
|
342,260 |
|
|
338,143 |
|
|
332,925 |
|
Expenses |
|
|
|
|
|
Property operating |
|
121,078 |
|
|
121,362 |
|
|
131,639 |
|
|
125,395 |
|
|
122,040 |
|
General and
administrative |
|
14,787 |
|
|
14,609 |
|
|
13,396 |
|
|
15,464 |
|
|
14,935 |
|
Normalizing items 1 |
|
— |
|
|
(1,445 |
) |
|
— |
|
|
(275 |
) |
|
— |
|
Normalized general and administrative |
|
14,787 |
|
|
13,164 |
|
|
13,396 |
|
|
15,189 |
|
|
14,935 |
|
Transaction costs |
|
395 |
|
|
301 |
|
|
769 |
|
|
669 |
|
|
287 |
|
Merger-related costs |
|
— |
|
|
1,414 |
|
|
7,450 |
|
|
(15,670 |
) |
|
4,855 |
|
Depreciation and amortization |
|
178,119 |
|
|
180,049 |
|
|
182,989 |
|
|
183,193 |
|
|
184,479 |
|
|
|
314,379 |
|
|
317,735 |
|
|
336,243 |
|
|
309,051 |
|
|
326,596 |
|
Other income (expense) |
|
|
|
|
|
Interest expense before
merger-related fair value |
|
(50,949 |
) |
|
(52,387 |
) |
|
(55,637 |
) |
|
(54,780 |
) |
|
(52,895 |
) |
Merger-related fair value adjustment |
|
(10,105 |
) |
|
(10,800 |
) |
|
(10,667 |
) |
|
(10,554 |
) |
|
(10,864 |
) |
Interest expense |
|
(61,054 |
) |
|
(63,187 |
) |
|
(66,304 |
) |
|
(65,334 |
) |
|
(63,759 |
) |
Gain on sales of real estate
properties |
|
22 |
|
|
20,573 |
|
|
48,811 |
|
|
7,156 |
|
|
1,007 |
|
Gain (loss) on extinguishment
of debt |
|
— |
|
|
— |
|
|
62 |
|
|
— |
|
|
— |
|
Impairment of real estate
assets and credit loss reserves |
|
(15,937 |
) |
|
(11,403 |
) |
|
(56,873 |
) |
|
(55,215 |
) |
|
(31,422 |
) |
Impairment of goodwill |
|
(250,530 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Equity (loss) gain from
unconsolidated joint ventures |
|
(422 |
) |
|
(430 |
) |
|
(456 |
) |
|
(17 |
) |
|
(780 |
) |
Interest and other income (expense), net |
|
275 |
|
|
65 |
|
|
139 |
|
|
592 |
|
|
547 |
|
|
|
(327,646 |
) |
|
(54,382 |
) |
|
(74,621 |
) |
|
(112,818 |
) |
|
(94,407 |
) |
Net (loss) income |
$ |
(315,220 |
) |
$ |
(41,676 |
) |
$ |
(68,604 |
) |
$ |
(83,726 |
) |
$ |
(88,078 |
) |
Net
loss (income) attributable to non-controlling interests |
|
4,384 |
|
|
1,143 |
|
|
760 |
|
|
967 |
|
|
953 |
|
Net (loss) income attributable to common stockholders |
$ |
(310,836 |
) |
$ |
(40,533 |
) |
$ |
(67,844 |
) |
$ |
(82,759 |
) |
$ |
(87,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common
share |
$ |
(0.82 |
) |
$ |
(0.11 |
) |
$ |
(0.18 |
) |
$ |
(0.22 |
) |
$ |
(0.23 |
) |
Diluted earnings per common
share |
$ |
(0.82 |
) |
$ |
(0.11 |
) |
$ |
(0.18 |
) |
$ |
(0.22 |
) |
$ |
(0.23 |
) |
|
|
|
|
|
|
Weighted average common shares
outstanding - basic |
|
379,455 |
|
|
379,044 |
|
|
378,925 |
|
|
378,897 |
|
|
378,840 |
|
Weighted average common shares
outstanding - diluted 2 |
|
379,455 |
|
|
379,044 |
|
|
378,925 |
|
|
378,897 |
|
|
378,840 |
|
- 4Q 2023 normalizing items include severance costs and and 2Q
2023 includes non-routine legal costs..
- Potential common shares are not included in the computation of
diluted earnings per share when a loss exists, as the effect would
be an antidilutive per share amount. As a result, the Company's OP
totaling 3,681,225 units was not included.
Reconciliation of FFO, Normalized FFO and FAD
1,2,3 |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
|
|
1Q 2024 |
|
|
4Q 2023 |
|
|
3Q 2023 |
|
|
2Q 2023 |
|
|
1Q 2023 |
|
Net (loss) income attributable
to common stockholders |
$ |
(310,836 |
) |
$ |
(40,533 |
) |
$ |
(67,844 |
) |
$ |
(82,759 |
) |
$ |
(87,125 |
) |
Net loss attributable to
common stockholders/diluted share 3 |
$ |
(0.82 |
) |
$ |
(0.11 |
) |
$ |
(0.18 |
) |
$ |
(0.22 |
) |
$ |
(0.23 |
) |
|
|
|
|
|
|
Gain on sales of real estate
assets |
|
(22 |
) |
|
(20,573 |
) |
|
(48,811 |
) |
|
(7,156 |
) |
|
(1,007 |
) |
Impairments of real estate
assets |
|
15,937 |
|
|
11,403 |
|
|
56,873 |
|
|
55,215 |
|
|
26,227 |
|
Real estate depreciation and
amortization |
|
181,161 |
|
|
182,272 |
|
|
185,143 |
|
|
185,003 |
|
|
186,109 |
|
Non-controlling loss from
partnership units |
|
(4,278 |
) |
|
(491 |
) |
|
(841 |
) |
|
(1,027 |
) |
|
(1,067 |
) |
Unconsolidated JV depreciation and amortization |
|
4,568 |
|
|
4,442 |
|
|
4,421 |
|
|
4,412 |
|
|
4,841 |
|
FFO adjustments |
$ |
197,366 |
|
$ |
177,053 |
|
$ |
196,785 |
|
$ |
236,447 |
|
$ |
215,103 |
|
FFO
adjustments per common share - diluted |
$ |
0.51 |
|
$ |
0.46 |
|
$ |
0.51 |
|
$ |
0.62 |
|
$ |
0.56 |
|
FFO |
$ |
(113,470 |
) |
$ |
136,520 |
|
$ |
128,941 |
|
$ |
153,688 |
|
$ |
127,978 |
|
FFO per common share - diluted
4 |
$ |
(0.30 |
) |
$ |
0.36 |
|
$ |
0.34 |
|
$ |
0.40 |
|
$ |
0.33 |
|
|
|
|
|
|
|
Transaction costs |
|
395 |
|
|
301 |
|
|
769 |
|
|
669 |
|
|
287 |
|
Merger-related costs |
|
— |
|
|
1,414 |
|
|
7,450 |
|
|
(15,670 |
) |
|
4,855 |
|
Lease intangible
amortization |
|
175 |
|
|
261 |
|
|
213 |
|
|
240 |
|
|
146 |
|
Non-routine legal
costs/forfeited earnest money received |
|
— |
|
|
(100 |
) |
|
— |
|
|
275 |
|
|
— |
|
Debt financing costs |
|
— |
|
|
— |
|
|
(62 |
) |
|
— |
|
|
— |
|
Severance costs |
|
— |
|
|
1,445 |
|
|
— |
|
|
— |
|
|
— |
|
Impairment of goodwill |
|
250,530 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Allowance for credit losses
5 |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,599 |
|
Merger-related fair value
adjustment |
|
10,105 |
|
|
10,800 |
|
|
10,667 |
|
|
10,554 |
|
|
10,864 |
|
Unconsolidated JV normalizing items 6 |
|
87 |
|
|
89 |
|
|
90 |
|
|
93 |
|
|
117 |
|
Normalized FFO adjustments |
$ |
261,292 |
|
$ |
14,210 |
|
$ |
19,127 |
|
$ |
(3,839 |
) |
$ |
24,868 |
|
Normalized FFO adjustments per common share - diluted |
$ |
0.68 |
|
$ |
0.04 |
|
$ |
0.05 |
|
$ |
(0.01 |
) |
$ |
0.06 |
|
Normalized FFO |
$ |
147,822 |
|
$ |
150,730 |
|
$ |
148,068 |
|
$ |
149,849 |
|
$ |
152,846 |
|
Normalized FFO per common
share - diluted |
$ |
0.39 |
|
$ |
0.39 |
|
$ |
0.39 |
|
$ |
0.39 |
|
$ |
0.40 |
|
|
|
|
|
|
|
Non-real estate depreciation
and amortization |
|
485 |
|
|
685 |
|
|
475 |
|
|
802 |
|
|
604 |
|
Non-cash interest
amortization, net 7 |
|
1,277 |
|
|
1,265 |
|
|
1,402 |
|
|
1,618 |
|
|
682 |
|
Rent reserves, net |
|
(151 |
) |
|
1,404 |
|
|
442 |
|
|
(54 |
) |
|
1,371 |
|
Straight-line rent income,
net |
|
(7,633 |
) |
|
(7,872 |
) |
|
(8,470 |
) |
|
(8,005 |
) |
|
(8,246 |
) |
Stock-based compensation |
|
3,562 |
|
|
3,566 |
|
|
2,556 |
|
|
3,924 |
|
|
3,745 |
|
Unconsolidated JV non-cash items 8 |
|
(122 |
) |
|
(206 |
) |
|
(231 |
) |
|
(316 |
) |
|
(227 |
) |
Normalized FFO adjusted for non-cash items |
|
145,240 |
|
|
149,572 |
|
|
144,242 |
|
|
147,818 |
|
|
150,775 |
|
2nd generation TI |
|
(20,204 |
) |
|
(18,715 |
) |
|
(21,248 |
) |
|
(17,236 |
) |
|
(8,882 |
) |
Leasing commissions paid |
|
(15,215 |
) |
|
(14,978 |
) |
|
(8,907 |
) |
|
(5,493 |
) |
|
(7,013 |
) |
Capital expenditures |
|
(5,363 |
) |
|
(17,393 |
) |
|
(14,354 |
) |
|
(8,649 |
) |
|
(8,946 |
) |
Total maintenance capex |
|
(40,782 |
) |
|
(51,086 |
) |
|
(44,509 |
) |
|
(31,378 |
) |
|
(24,841 |
) |
FAD |
$ |
104,458 |
|
$ |
98,486 |
|
$ |
99,733 |
|
$ |
116,440 |
|
$ |
125,934 |
|
Quarterly/annual
dividends |
$ |
119,541 |
|
$ |
118,897 |
|
$ |
119,456 |
|
$ |
119,444 |
|
$ |
119,442 |
|
FFO wtd avg common
shares outstanding - diluted 9 |
|
383,413 |
|
|
383,326 |
|
|
383,428 |
|
|
383,409 |
|
|
383,335 |
|
- Funds from operations (“FFO”) and FFO per share are operating
performance measures adopted by NAREIT. NAREIT defines FFO as “net
income (computed in accordance with GAAP) excluding depreciation
and amortization related to real estate, gains and losses from the
sale of certain real estate assets, gains and losses from change in
control, and impairment write-downs of certain real assets and
investments in entities when the impairment is directly
attributable to decreases in the value of depreciable real estate
held by the entity.”
- FFO, Normalized FFO and Funds Available for Distribution
("FAD") do not represent cash generated from operating activities
determined in accordance with GAAP and is not necessarily
indicative of cash available to fund cash needs. FFO, Normalized
FFO and FAD should not be considered alternatives to net income
attributable to common stockholders as indicators of the Company's
operating performance or as alternatives to cash flow as measures
of liquidity.
- Potential common shares are not included in the computation of
diluted earnings per share when a loss exists, as the effect would
be an antidilutive per share amount.
- For 1Q 2024, basic weighted average common shares outstanding
was the denominator used in the per share calculation.
- In 1Q 2023, allowance for credit losses included a $5.2 million
credit allowance for a mezzanine loan and a $3.4 million reserve
for three skilled nursing facilities.
- Includes the Company's proportionate share of normalizing items
related to unconsolidated joint ventures such as lease intangibles
and acquisition and pursuit costs.
- Includes the amortization of deferred financing costs,
discounts and premiums, and non-cash financing receivable
amortization.
- Includes the Company's proportionate share of straight-line
rent, net and rent reserves, net related to unconsolidated joint
ventures.
- The Company utilizes the treasury stock method, which includes
the dilutive effect of nonvested share-based awards outstanding of
254,261 for the three months ended March 31, 2024. Also includes
the diluted impact of 3,681,225 OP units outstanding.
Reconciliation of Non-GAAP Measures |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED |
|
Management considers funds from operations ("FFO"), FFO per
share, normalized FFO, normalized FFO per share, funds available
for distribution ("FAD") 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
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 “net income (computed in
accordance with GAAP) excluding depreciation and amortization
related to real estate, gains and losses from the sale of certain
real estate assets, gains and losses from change in control, and
impairment write-downs of certain real assets and investments in
entities when the impairment is directly attributable to decreases
in the value of depreciable real estate held by the entity.” The
Company defines Normalized FFO as FFO excluding acquisition-related
expenses, lease intangible amortization 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 rent reserves, 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
GAAP and are 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.
Merger Combined Cash NOI and Merger Combined Same Store Cash NOI
are key performance indicators. Management considers these to be
supplemental measures that allow investors, analysts and Company
management to measure unlevered property-level operating results.
The Company defines Merger Combined Cash NOI as rental income and
less property operating expenses. Merger Combined Cash NOI excludes
non-cash items such as above and below market lease intangibles,
straight-line rent, lease inducements, lease termination fees,
tenant improvement amortization and leasing commission
amortization. Merger Combined Cash NOI is historical and not
necessarily indicative of future results.
Merger Combined Same Store Cash NOI compares Merger Combined
Cash NOI for stabilized properties. Stabilized properties are
properties that have been included in operations for the duration
of the year-over-year comparison period presented. Accordingly,
stabilized properties exclude properties that were recently
acquired or disposed of, properties classified as held for sale,
properties undergoing redevelopment, and newly redeveloped or
developed properties.
The Company utilizes the redevelopment classification for
properties where management has approved a change in strategic
direction for such properties through the application of additional
resources including an amount of capital expenditures significantly
above routine maintenance and capital improvement expenditures.
Any recently acquired property will be included in the same
store pool once the Company has owned the property for eight full
quarters. Newly developed or redeveloped properties will be
included in the same store pool eight full quarters after
substantial completion.
Ron HubbardVice President, Investor RelationsP: 615.269.8290
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