Healthcare Realty Trust Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rich Anderson - Wedbush Securities, Inc. - Analyst : Hey, thanks. Good morning and welcome, Pete. So when you laid out your areas of focus, some are going to take longer than others. I wonder, did you list them in order of priority? Or do you think this overall sort of layout that you've put out there is a one-, two-, three-year type of timeframe to sort of right the ship?

Question: Rich Anderson - Wedbush Securities, Inc. - Analyst : Okay, thanks. Second question is, you said sell, not JV when you're exiting or selling out of markets. How do you feel about the JV model generally? Is that something that you see as something to unwind over time to simplify the platform, or are you comfortable with the current setup as is? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 3:00PM, HR.N - Q1 2025 Healthcare Realty Trust Inc Earnings Call

Question: Rich Anderson - Wedbush Securities, Inc. - Analyst : Fair enough. I'll let someone else ask the dividend questions. Thanks very much.

Question: Juan Sanabria - BMO Capital Markets Corp. - Analyst : Hi, Pete. Welcome and congratulations. First question, just a simple one, I guess, guidance. Is this a kind of Pete stamp approved? At this point, I know you've only been there, I think, about two weeks. Or is that something that may be refined as you incorporate some of your strategic plans as you outlined in your prepared remarks?

Question: Juan Sanabria - BMO Capital Markets Corp. - Analyst : And as we think about the dividend in '26, noting that it sounds like dispositions may be a bit heavier than what's in the '25 guidance, I guess, how should we think about those relative dispositions? Are they going to be diluted? I'm not sure where you think you can sell assets where cap rates are. But is the earnings base going to shrink before it grows, or how are you guys kind of at least penciling that currently?

Question: Juan Sanabria - BMO Capital Markets Corp. - Analyst : Thank you.

Question: Seth Berge - Citigroup Inc. - Analyst : Hi. How are you thinking about potential future acquisitions? Are you still going to be mostly on-campus focus, or could we see additional appetite for off-campus?

Question: Seth Berge - Citigroup Inc. - Analyst : Okay, thanks. And then I guess my second question is are you seeing any impact of potential federal healthcare budget cuts or policy changes and any impacts to your tenants or tenant decision-making there?

Question: Seth Berge - Citigroup Inc. - Analyst : Great. Thanks.

Question: John Kilichowski - Wells Fargo Securities LLC - Analyst : Good morning. Thank you. And Pete, congrats again. So I'd like to start one for you, Pete. Our last conversation on OM were done really in a different seat, but same idea was that you saw room to kind of push the frontier on mark-to-markets from maybe that historical 2% to 3% to maybe 5% to 10%. I know in your opening remarks, we talked about kind of growing occupancy here at a steady rate. Do you still think that there's room to do that here at HR, or is the focus to be a little bit more programmatic, drive occupancy, and then maybe address that opportunity later?

Question: John Kilichowski - Wells Fargo Securities LLC - Analyst : Got it. Maybe on your remark around the potential for dispositions to be increased sort of back halfway to the end of '26 the guide right now has about $450 million with $300 million to CapEx, so I guess the other $150 million is the underlying. If you were to increase that number, is that use of funds strictly to pay down the line? Is there any consideration where the stock is trading? Because that helps with dividend coverage versus I know the focus seems right now to be deleveraging, but you're balancing those. So I'm curious, if you were to increase those proceeds, is there any consideration of the stock or is this purely deleveraging at this point?

Question: John Kilichowski - Wells Fargo Securities LLC - Analyst : Got it. Well, thank you. Congrats again. And I'll have that list of ours over to you shortly.

Question: Nick Yulico - Scotia Capital (USA), Inc. - Analyst : Hi. Thanks, everyone. So in terms of prospects, I didn't see an update versus what you said back in March. Any update you could provide there on rent collection and expectations?

Question: Nick Yulico - Scotia Capital (USA), Inc. - Analyst : Okay, great. Thanks, Austen. And then, yes, Pete, congrats on the new role. So it sounds like there's sort of a strategy plan being put in place. And at some point, I guess later this year, there's going to be an update on that to the market and then sort of at the same time to the Board to think about where the dividend could be set in the future. Is there any specific timeframe you're able to share on that? Thanks.

Question: Nick Yulico - Scotia Capital (USA), Inc. - Analyst : Okay, thanks.

Question: Austin Wurschmidt - KeyBanc Capital Markets, Inc. - Analyst : Thanks. Good morning. Hey, Pete, welcome. Appreciate all the comments in your prepared remarks. Just wanted to hone in on one about the upside and the margin profile of the company and really how much upside do you see as kind of that initial low-hanging fruit? And what are the best opportunities you see to drive margin just given kind of your background and what you've recently gone through in your prior role and whether internalizing certain leasing is an opportunity across the platform, maybe where -- just curious what you see on that front. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 3:00PM, HR.N - Q1 2025 Healthcare Realty Trust Inc Earnings Call

Question: Austin Wurschmidt - KeyBanc Capital Markets, Inc. - Analyst : That's all very helpful. And maybe, Rob, just switching over to you, you had some positive commentary around just what you're seeing in the leasing pipeline, despite maybe optically what looked like a little bit of a softer quarter to start the year. Can you just give us the aggregate size of what that leasing pipeline looks like today versus where that stood in prior quarters, and then just given the probability that you think you can deliver on that, maybe given what's a little bit of an uncertain environment overall. Thanks.

Question: Austin Wurschmidt - KeyBanc Capital Markets, Inc. - Analyst : Great. Thanks for the time.

Question: Omotayo Okusanya - Deutsche Bank Securities, Inc. - Analyst : Congratulations.

Question: Omotayo Okusanya - Deutsche Bank Securities, Inc. - Analyst : You're forgiven. That's perfectly fine. So I am curious, sir, if you had an opportunity just to speak with a lot of the healthcare systems that are a tenant of yours -- again, there's clearly an overlap versus your prior job. But just kind of curious, what are healthcare systems at this point just thinking, just kind of given the way the macro backdrop is evolving? And how do you see that impacting your business one way or another?

Question: Omotayo Okusanya - Deutsche Bank Securities, Inc. - Analyst : That's helpful. And then on the balance sheet front, again, everything you said makes sense, but I'm just curious. Just tactically, as you start thinking about, again, the $1.2 billion of debt coming during '26, over $0.5 billion of swaps coming during '26, are there things one can be doing now, just kind of based on the forward curve? Or do you really have to just wait for things to play out a little bit better before you can actually start to make some real moves?

Question: Omotayo Okusanya - Deutsche Bank Securities, Inc. - Analyst : Helpful. Thank you, and good luck.

Question: Michael Mueller - JPMorgan Securities LLC - Analyst : Yes, hi. Just first, how do you think about balancing the disposition-driven portfolio optimization and deleveraging with earnings impact over the next few years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 3:00PM, HR.N - Q1 2025 Healthcare Realty Trust Inc Earnings Call

Question: Michael Mueller - JPMorgan Securities LLC - Analyst : Got it, okay. And then I know you said you'll review the dividend, but as you sit there today, are there any benefits that you can point to from not cutting the dividend as it relates to operations and growth prospects?

Question: Michael Mueller - JPMorgan Securities LLC - Analyst : Okay, thanks.

Question: Michael Gorman - BTIG LLC - Analyst : Yes, thanks. Good morning. Going back to the discussion on the NOI margins, I'm wondering if you could kind of break out the potential for the dispositions to help drive margin higher as well. Do you see kind of a material differentiation between some of your larger markets and some of your core markets in terms of the NOI margin you can drive there versus maybe some of the smaller markets that you would be looking to exit?

Question: Michael Gorman - BTIG LLC - Analyst : Okay, great. That's helpful. And then, Pete, maybe just approaching the dividend from a different angle here, given your prior role, can you just spend a minute talking about, as you think about the strategic plan and the opportunities for HR, how you think about the role of retained cash flow in the capital stack and in the future of leasing CapEx and potential either redevelopment or development opportunities and just kind of how you view retained cash flow in an MOB portfolio? Thanks.

Question: Michael Gorman - BTIG LLC - Analyst : Great. Thank you for the time.