Healthcare Realty Trust Inc Q4 2024 Earnings Call Summary

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

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc. - Analyst : I was hoping that you could break out new leasing this quarter related to some of the backfilling of the Steward space that you achieved. And then along the same lines, I'm curious if the same store net absorption guidance of 75 basis points to 125 basis points includes any releasing of that Steward space. And then what kind of that incremental leasing what's not in the SNO pipeline is assumed to achieve that net absorption?

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc. - Analyst : Yeah. Trying to understand how much if there's any of the Steward spaces included in the 75 basis points to 125 basis points of net absorption expected this year as well as kind of what's the incremental new leasing you need to achieve to reach that absorption guidance recognizing you've got some lease up from the expansion of the SNO pipeline.

Question: Juan Sanabria - BMO Capital Markets - Analyst : Just hoping you could talk a little bit about expectations for FAD as it relates to normalized FFO guidance. And then is it -- and part of that, just the latest thoughts on the dividend. I know you kind of said you'd expect to be covered by the fourth quarter '25 or into '26. So is a dividend cut that was maybe talked about later last year, is that 100% off the table or just the latest thoughts around that?

Question: Juan Sanabria - BMO Capital Markets - Analyst : [FAD] payout or for FAD numbers, the guidance range was to think about that relative to normalized FFO. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 4:00PM, HR.N - Q4 2024 Healthcare Realty Trust Inc Earnings Call

Question: Juan Sanabria - BMO Capital Markets - Analyst : Sort of. Yes.

Question: Nick Joseph - Citi - Analyst : Connie, you mentioned obviously the CEO process that's ongoing and not wanting to rush it, which makes sense, but just curious where we are in the process and expectations of timing of an announcement.

Question: Nick Joseph - Citi - Analyst : And then just obviously, things are changing in Washington. There's probably some more direct impacts to some other property sectors. But is there anything from a MOB perspective that maybe changes in Washington could have a downstream impact to your tenants?

Question: Richard Anderson - Wedbush Securities Inc. - Analyst : Let me ask a question on the CEO also. Perhaps you won't answer it, but we'll see. You've laid out a very specific game plan around the dividend, around people, around strategy. And I'm wondering if that sort of stake in the ground on those important topics has made it harder to find a candidate that may naturally want his or her own thoughts to come through on the path forward for the company. I'm just wondering if that is at all a headwind with a lot of the decisions -- big decisions already made.

Question: Richard Anderson - Wedbush Securities Inc. - Analyst : I'm not surprised by that. And then just a quick one for me, the rub against medical office is, it doesn't sort of sit very well in an inflationary environment. I'm wondering maybe to Rob, if there's any sense that you can sort of deploy inflation into your conversations and get a spread over CPI to a greater degree in terms of rent growth in much of the way, we've seen in other asset classes. Is that something that you're finding some success with?

Question: John Kilichowski - Wells Fargo Securities, LLC - Analyst : Maybe Austen, if I could kind of go back to your comments on sort of the capital recycling activity and the $400 million to $500 million of dispositions and guide. Could you help bifurcate one of those are asset sales versus JVs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 4:00PM, HR.N - Q4 2024 Healthcare Realty Trust Inc Earnings Call And then kind of where the capital would go? Initially, it's kind of CapEx and redev seems to be the focus. But then what's left over, it looks like it's implied about $100 million to $200 million. Maybe what's on the balance sheet that's your first target? And then what are those '26 term loans may have any early termination fees associated with them?

Question: John Kilichowski - Wells Fargo Securities, LLC - Analyst : And I guess so the disposition guide, I think my second part of this was that disposition cap rate kind of moved up from a 6.6 to that 6.8 to 7.3 range. You would say that's mostly indicative of the mix of dispositions between asset sales and JV contributions between '24 and '25 and not necessarily the nature of the portfolio moving in this environment?

Question: Michael Gorman - BTIG - Analyst : Maybe just sticking with that, Austen, can you just kind of walk through the bucket for the asset sales this year? Were those also potentially part of the non-core asset sales last year, or has the -- have the parameters of how you think about what's non-core in the portfolio changed? And then maybe as you think about the capital allocation here, I'm just curious how you think about your cost of equity as that cap rate on non-core sales starts to creep up. And you were still active on kind of share repurchases in the fourth quarter. I'm just kind of curious how that all kind of pieces together.

Question: Omotayo Okusanya - Deutsche Bank - Analyst : So my question is really around, when you guys think about sustainable earnings growth for the overall HR platform, what do you guys kind of estimate that is? And how soon does HR get there? And I think again, you talked a little bit about delevering near term, being a little bit of a headwind. When we take a look at interest, debt maturities over the next two years or so, the large amount of debt maturity, the swaps also in place, and some of the interest rate risk there that probably is a headline or a headwind for the next two to three years. Just again, how do you guys really kind of think through that that when you're kind of past all that, you have the right capital structure in place? This company is capable of generating 3%, 4% AFFO per share growth with a dividend growth commensurate with that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 4:00PM, HR.N - Q4 2024 Healthcare Realty Trust Inc Earnings Call Just how do you kind of think through all that? And basically, what's the ask to investors of be patient for the next two years as we fix this to before you kind of get sustainable earnings growth?

Question: John Pawlowski - Green Street - Analyst : Maybe just a follow on question to that that conversation topic. Austen, the 2026 maturity is $1.2 billion rolling in 2026. I think a lot of it's clustered around the middle of the year. How quickly will you look to refinance that? Is that a second half of '25 exercise in your mind? More color on how you tend to address the significant 2026 maturities would be appreciated. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 4:00PM, HR.N - Q4 2024 Healthcare Realty Trust Inc Earnings Call

Question: John Pawlowski - Green Street - Analyst : I wanted to go back to the conversation around the trajectory of FAD relative to the dividend. I know that maybe the messaging has changed late last year. But middle of last year, there was commentary from the company that you thought the dividend would be fully covered entering 2025. And we're not really close to that right now. So I guess what fundamentally has changed in the portfolio that's led to an underwhelming trajectory of FAD and throughout the second half of 2024?

Question: Nikita Bely - JPMorgan - Analyst : You guys talked about the occupancy absorption for '25, but specifically, can you talk about the multi-tenant? And maybe if you're comfortable providing an exact occupancy percent for '25 that you expect multi-tenant occupancy to be for over '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 4:00PM, HR.N - Q4 2024 Healthcare Realty Trust Inc Earnings Call

Question: Juan Sanabria - BMO Capital Markets - Analyst : Just hoping you could go through a little bit more detail on the sources and uses. I'm not sure how much should we budget towards redevelopment. And just trying to think about excess capital that you may have coming from dispositions that would allow you to do further buybacks in the '25 and just your general views on buybacks at this point.

Question: Juan Sanabria - BMO Capital Markets - Analyst : And then just curious, do you guys have any commentary on how margins may trend? You've done a good job on controllable expenses. It sounds like some of the dispositions may further enhance them as you have more depth in the markets you're staying. And so just curious on margins and your controllable expenses as we think about modeling in '25. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 4:00PM, HR.N - Q4 2024 Healthcare Realty Trust Inc Earnings Call

Question: Juan Sanabria - BMO Capital Markets - Analyst : And one last one if you wouldn't mind indulging me, anything that's baked into guidance for Steward or Prospect in terms of further backfilling the space for those leases coming online that we should be factoring in?