Form 8-K HEALTHCARE REALTY TRUST For: Nov 02

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November 2, 2016 5:10 PM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8‑K

CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 2, 2016 (November 2, 2016)


HEALTHCARE REALTY TRUST INCORPORATED
(Exact Name of Registrant as Specified in Charter)

MARYLAND
 
001-11852
 
62-1507028
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)


3310 West End Avenue, Suite 700, Nashville, Tennessee 37203
(Address of principal executive offices) (Zip Code)

(615) 269-8175
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

c    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

c    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

c    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

c    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02    Results of Operations and Financial Condition
On November 2, 2016, Healthcare Realty Trust Incorporated (the “Company”) issued a press release announcing its earnings for the third quarter ended September 30, 2016. A copy of this press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.

Item 7.01        Regulation FD Disclosure
The Company is furnishing its Supplemental Information for the three months ended September 30, 2016, which is also contained on its website (www.healthcarerealty.com). See Exhibit 99.2 to this Current Report on Form 8-K.

Item 9.01        Financial Statements and Exhibits
99.1    Third quarter earnings press release, dated November 2, 2016.
99.2    Supplemental Information for the three months ended September 30, 2016.









































SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
HEALTHCARE REALTY TRUST INCORPORATED
 
By:
/s/ B. Douglas Whitman, II
 
 
B. Douglas Whitman, II
 
 
Executive Vice President - Corporate Finance
November 2, 2016
 
 











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

NASHVILLE, Tennessee, November 2, 2016 - Healthcare Realty Trust Incorporated (NYSE: HR) today announced results for the third quarter ended September 30, 2016. The Company reported net income of $11.8 million or $0.10 per diluted common share for the quarter. Normalized FFO for the three months ended September 30, 2016 totaled $0.39 per diluted common share.

Salient highlights include:
•
Normalized FFO for the third quarter grew 10.7% year-over-year to $45.1 million.
•
For the trailing twelve months ended September 30, 2016, same store revenue grew 4.1%, operating expenses increased 3.8%, and same store NOI grew 4.3%:
◦
Same store revenue per average occupied square foot increased 3.6%.
◦
Average same store occupancy increased to 89.9% from 89.4%.
•
Leasing activity totaled 561,000 square feet related to 173 leases:
◦
399,000 square feet of renewals
◦
162,000 square feet of new and expansion leases
◦
52,000 square feet of net absorption
•
Tenant improvement commitments for leases in second generation space at the multi-tenant properties were:
◦
$1.04 per square foot per lease-year for renewal leases in the third quarter, and $1.45 for the trailing twelve months
◦
$5.54 per square foot per lease-year for new tenant leases in the third quarter, and $4.16 for the trailing twelve months
•
Four predictive growth measures in the same store multi-tenant portfolio:
◦
Contractual rent increases occurring in the quarter averaged 2.8%, and contractual rent increases for leases commencing in the quarter will average 3.2%.
◦
Cash leasing spreads were 4.3% on 314,000 square feet renewed: 1% of square feet (<0% spread), 15% (0-3%), 57% (3-4%) and 27% (>4%).
◦
Tenant retention was 90.1%.
◦
The average yield on renewed leases increased 60 basis points.
•
In September 2016, the Company acquired a 100% leased, 87,000 square foot medical office building in Seattle, Washington for a purchase price of $53.1 million. The property is located on UW Medicine's Valley Medical Center campus and is adjacent to a 47,000 square foot medical office building the Company purchased in April.


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HEALTHCAREREALTY.COM  | PAGE 1 OF 5


•
Also in September 2016, the Company acquired a 100% leased, 104,000 square foot medical office building in suburban Washington, D.C. for a purchase price of $45.2 million. The property is located on Inova Health System's Loudoun campus.
•
In October 2016, the Company purchased three on-campus medical office buildings totaling 143,000 square feet for a total purchase price of $46.0 million. Two properties on the University of Maryland Medical System's Upper Chesapeake Health Medical Center campus in Baltimore, Maryland are 92% leased, and the third, on Providence Health's Swedish Edmonds campus in Seattle, Washington, is 96% leased.
•
In October 2016, the Company sold two medical office buildings totaling 116,000 square feet for $23.9 million.
•
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 and repay indebtedness.
•
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 options 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 76.9% 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 September 30, 2016, the Company had investments of approximately $3.5 billion in 202 real estate properties in 29 states totaling approximately 14.5 million square feet. The Company provided leasing and property management services to approximately 10.1 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.


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HEALTHCAREREALTY.COM  | PAGE 2 OF 5


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

 
ASSETS
 
 
 
 
Real estate properties:
 
9/30/2016

 
12/31/2015

Land
 

$206,647

 

$198,585

Buildings, improvements and lease intangibles
 
3,322,293

 
3,135,893

Personal property
 
10,124

 
9,954

Construction in progress
 
45,734

 
19,024

Land held for development
 
17,438

 
17,452

Total real estate properties
 
3,602,236

 
3,380,908

Less accumulated depreciation and amortization
 
(835,276
)
 
(761,926
)
Total real estate properties, net
 
2,766,960

 
2,618,982

Cash and cash equivalents
 
12,649

 
4,102

Assets held for sale and discontinued operations, net
 
14,732

 
724

Other assets, net
 
197,380

 
186,416

Total assets
 

$2,991,721

 

$2,810,224

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Notes and bonds payable
 

$1,239,062

 

$1,424,992

Accounts payable and accrued liabilities
 
71,052

 
75,489

Liabilities of properties held for sale and discontinued operations
 
572

 
33

Other liabilities
 
46,441

 
66,963

Total liabilities
 
1,357,127

 
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; 115,878 and 101,517 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
 
1,160

 
1,015

Additional paid-in capital
 
2,916,816

 
2,461,376

Accumulated other comprehensive income
 
(1,443
)
 
(1,569
)
Cumulative net income attributable to common stockholders
 
942,819

 
909,685

Cumulative dividends
 
(2,224,758
)
 
(2,127,760
)
Total stockholders' equity
 
1,634,594

 
1,242,747

Total liabilities and stockholders' equity
 

$2,991,721

 

$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.


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HEALTHCAREREALTY.COM  | PAGE 3 OF 5


HEALTHCARE REALTY TRUST INCORPORATED
Condensed Consolidated Statements of Income (1) 
(amounts in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2016

 
2015

 
2016

 
2015

Revenues
 
 
 
 
 
 
 
 
Rental income
 

$102,534

 

$95,383

 

$302,746

 

$285,867

Mortgage interest
 
—

 
29

 
—

 
91

Other operating
 
1,125

 
1,313

 
3,576

 
3,931

 
 
103,659

 
96,725

 
306,322

 
289,889

Expenses
 
 
 
 
 
 
 
 
Property operating
 
37,504

 
35,247

 
109,173

 
103,437

General and administrative
 
8,724

 
6,258

 
27,098

 
19,709

Depreciation
 
29,273

 
26,571

 
85,494

 
79,511

Amortization
 
2,712

 
2,386

 
8,174

 
7,528

Bad debts, net of recoveries
 
(47
)
 
(21
)
 
(8
)
 
(202
)
 
 
78,166

 
70,441

 
229,931

 
209,983

Other Income (Expense)
 
 
 
 
 
 
 
 
Gain on sales of real estate assets
 
—

 
5,915

 
1

 
47,464

Interest expense
 
(13,759
)
 
(15,113
)
 
(43,512
)
 
(50,649
)
Loss on extinguishment of debt
 
—

 
—

 
—

 
(27,998
)
Pension termination
 
—

 
—

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

 
(310
)
 
—

 
(3,638
)
Impairment of internally-developed software
 
—

 
—

 
—

 
(654
)
Interest and other income, net
 
123

 
72

 
301

 
311

 
 
(13,636
)
 
(9,436
)
 
(43,214
)
 
(40,424
)
 
 
 
 
 
 
 
 
 
Income From Continuing Operations
 
11,857

 
16,848

 
33,177

 
39,482

 
 
 
 
 
 
 
 
 
Discontinued Operations
 
 
 
 
 
 
 
 
Income (loss) from discontinued operations
 
(23
)
 
61

 
(50
)
 
725

Gain on sales of real estate properties
 
—

 
10,571

 
7

 
10,571

Income (Loss) From Discontinued Operations
 
(23
)
 
10,632

 
(43
)
 
11,296

 
 
 
 
 
 
 
 
 
Net Income
 

$11,834

 

$27,480

 

$33,134

 

$50,778

Basic Earnings Per Common Share:
 
 
 
 
 
 
 
 
Income from continuing operations
 

$0.10

 

$0.17

 

$0.31

 

$0.40

Discontinued operations
 
0.00

 
0.11

 
0.00

 
0.11

Net income
 

$0.10

 

$0.28

 

$0.31

 

$0.51

Diluted Earnings Per Common Share:
 
 
 
 
 
 
 
 
Income from continuing operations
 

$0.10

 

$0.17

 

$0.31

 

$0.40

Discontinued operations
 
0.00

 
0.10

 
0.00

 
0.11

Net income
 

$0.10

 

$0.27

 

$0.31

 

$0.51

Weighted Average Common Shares Outstanding—Basic
 
114,152

 
99,337

 
106,552

 
98,994

Weighted Average Common Shares Outstanding—Diluted
 
115,052

 
99,997

 
107,366

 
99,694

(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.

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HEALTHCAREREALTY.COM  | PAGE 4 OF 5


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.

Three Months Ended September 30,
 
 
 
2016

 
2015

Net Income
 

$11,834

 

$27,480

Gain on sales of real estate properties
 
—

 
(16,486
)
Impairments of real estate assets
 
—

 
310

Real estate depreciation and amortization
 
32,557

 
29,317

Total adjustments
 
32,557

 
13,141

Funds From Operations
 

$44,391

 

$40,621

Acquisition costs
 
649

 
121

Write-off of deferred financing costs upon amendment of line of credit facility
 
81

 
—

Normalized Funds From Operations
 

$45,121

 

$40,742

Funds from Operations per Common Share—Diluted
 

$0.39

 

$0.41

Normalized Funds From Operations Per Common Share—Diluted
 

$0.39

 

$0.41

FFO Weighted Average Common Shares Outstanding
 
115,052

 
99,997



(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.




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HEALTHCAREREALTY.COM  | PAGE 5 OF 5















3Q | 2016

Supplemental Information

FURNISHED AS OF NOVEMBER 2, 2016 (UNAUDITED)

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Table of Contents

 
 
 
 
3

  
Corporate Information
 
 
 
5

  
Balance Sheet Information
 
 
 
6

 
Statements of Income Information
 
 
 
7

 
Historical Reconciliation of FFO
 
 
 
8

  
Debt Metrics
 
 
 
9

  
Investment Activity
 
 
 
10

  
Portfolio by Market
 
 
 
11

 
Square Feet by Provider
 
 
 
12

 
Square Feet by Proximity
 
 
 
13

  
Lease Maturity, Size and Building Square Feet
 
 
 
14

 
Occupancy Information
 
 
 
15

 
Same Store Properties
 
 
 
16

  
Reconciliation of Non-GAAP Measures
 
 
 
17

 
Same Store Leasing Statistics
 
 
 
18

  
Components of Net Asset Value
 
 
 
19

 
Components of Expected 2016 FFO

Copies of this report may be obtained at www.healthcarerealty.com or by contacting Investor Relations at 615.269.8175 or [email protected].
Forward looking statements and risk factors:
This Supplemental Information report contains disclosures that are “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words and phrases such as “can,” “may,” “payable,” “indicative,” “annualized,” “expect,” “expected,” “future cash or NOI,” “deferred revenue,” “rent increases,” “range of expectations,” "budget," “components of expected 2016 FFO,” and other comparable terms in this report. These forward-looking statements are made as of the date of this report and are not guarantees of future performance. These statements are based on the current plans and expectations of Company management and are subject to a number of unknown risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from those described in this release or implied by such forward-looking statements. Such risks and uncertainties include, among other things, the following: changes in the economy; increases in interest rates; the availability and cost of capital at expected rates; changes to facility-related healthcare regulations; competition for quality assets; negative developments in the operating results or financial condition of the Company's tenants, including, but not limited to, their ability to pay rent and repay loans; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to re-lease space at similar rates as vacancies occur; the Company's ability to renew expiring long-term single-tenant net leases; the Company's ability to timely reinvest proceeds from the sale of assets at similar yields; government regulations affecting tenants' Medicare and Medicaid reimbursement rates and operational requirements; unanticipated difficulties and/or expenditures relating to future acquisitions and developments; changes in rules or practices governing the Company's financial reporting; the Company may be required under purchase options to sell properties and may not be able to reinvest the proceeds from such sales at rates of return equal to the return received on the properties sold; uninsured or underinsured losses related to casualty or liability; the incurrence of impairment charges on its real estate properties or other assets; and other legal and operational matters. Other risks, uncertainties and factors that could cause actual results to differ materially from those projected are detailed under the heading “Risk Factors,” in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2015 and other risks described from time to time thereafter in the Company's SEC filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 
 
 
 
 
 
HEALTHCARE REALTY 2
 
3Q 2016 SUPPLEMENTAL INFORMATION



Corporate Information
 
 
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 September 30, 2016, the Company had investments of approximately $3.5 billion in 202 real estate properties in 29 states totaling approximately 14.5 million square feet. The Company provided leasing and property management services to approximately 10.1 million square feet nationwide.

Corporate Headquarters
Healthcare Realty Trust Incorporated
  
3310 West End Avenue, Suite 700
  
Nashville, Tennessee 37203
  
Phone: 615.269.8175
  
Fax: 615.269.8461
  
 
Website: www.healthcarerealty.com
 

Executive Officers
David R. Emery
  
Chairman of the Board and Chief Executive Officer
John M. Bryant, Jr.
  
Executive Vice President and General Counsel
J. Christopher Douglas
 
Executive Vice President and Chief Financial Officer
Todd J. Meredith
  
Executive Vice President - Investments
B. Douglas Whitman, II
  
Executive Vice President - Corporate Finance

Board of Directors
David R. Emery
  
Chairman of the Board and Chief Executive Officer, Healthcare Realty Trust Incorporated
Nancy H. Agee
 
President and Chief Executive Officer, Carilion Clinic
C. Raymond Fernandez, M.D.
  
Retired Chief Executive Officer, Piedmont Clinic
Peter F. Lyle
 
Vice President of Health Systems, Pharma and Medical Practice Services, Medical Management Associates, Inc.
Edwin B. Morris III
  
Managing Director, Morris & Morse Company, Inc.
J. Knox Singleton
  
President and Chief Executive Officer, Inova Health System
Bruce D. Sullivan
  
Retired Audit Partner, Ernst & Young LLP
Christann M. Vasquez
 
President, Dell Seton Medical Center at University of Texas
Dan S. Wilford
  
Retired Chief Executive Officer, Memorial Hermann Healthcare System



            
 
 
 
 
 
 
HEALTHCARE REALTY 3
 
3Q 2016 SUPPLEMENTAL INFORMATION


Corporate Information
 
Professional Services
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
BDO USA, LLP
  
414 Union Street, Suite 1800, Nashville, Tennessee 37219
  
TRANSFER AGENT
  
Wells Fargo N.A., Shareowner Services
  
1110 Centre Pointe Curve, Suite 101, Mendota Heights, Minnesota 55120-4100
 
Stock Exchange, Symbol and CUSIP Number
 
SECURITY DESCRIPTION
STOCK EXCHANGE
SYMBOL
CUSIP NUMBER
Common Stock
NYSE
HR
421946104
Senior Notes due 2021
OTC
HR
421946AG9
Senior Notes due 2023
OTC
HR
421946AH7
Senior Notes due 2025
OTC
HR
421946AJ3
Dividend Reinvestment Plan
Through the Company’s transfer agent, Wells Fargo, named stockholders of record can re-invest dividends in shares at a 5% discount and may also purchase up to $60,000 of HR common stock per calendar year without a service or sales charge. For information, write Wells Fargo Shareowner Services, P.O. Box 64856, St. Paul, Minnesota 55164-0856, or call 1.800.468.9716. Information may also be obtained at the transfer agent’s website, www.shareowneronline.com.

  
Direct Deposit of Dividends
Direct deposit of dividends is offered as a convenience to stockholders of record. For information, write Wells Fargo Shareowner Services, P.O. Box 64856, St. Paul, Minnesota 55164-0856, or call 1.800.468.9716. Information may also be obtained at the transfer agent’s website, www.shareowneronline.com.


  
Dividends Declared
On November 1, 2016, the Company declared a dividend of $0.30 per share, payable on November 30, 2016, to stockholders of record on November 16, 2016.


  
Analyst Coverage
BTIG, LLC
 
Morgan Stanley
 
 
Cantor Fitzgerald, L.P.
 
KeyBanc Capital Markets Inc.
 
 
Goldman, Sachs & Co.
 
Mizuho Securities USA Inc.
 
 
Green Street Advisors, Inc.
 
Stifel, Nicolaus & Company, Inc.
 
 
J.J.B. Hilliard W.L. Lyons, LLC
 
SunTrust Robinson Humphrey, Inc.
 
 
J.P. Morgan Securities LLC
 
Wells Fargo Securities, LLC
 
 
JMP Securities LLC
 
 
 

 
 
 
 
 
 
HEALTHCARE REALTY 4
 
3Q 2016 SUPPLEMENTAL INFORMATION


Balance Sheet Information (1) 
(dollars in thousands, except per share data)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
2015
 
Real estate properties:
 
Q3

 
Q2

 
Q1

 
Q4

 
Q3

Land
 

$206,647

 

$208,386

 

$201,157

 

$198,585

 

$186,108

Buildings, improvements and lease intangibles
 
3,322,293

 
3,235,744

 
3,181,748

 
3,135,893

 
3,042,367

Personal property
 
10,124

 
10,032

 
9,881

 
9,954

 
9,833

Construction in progress
 
45,734

 
35,174

 
31,669

 
19,024

 
15,455

Land held for development
 
17,438

 
17,438

 
17,434

 
17,452

 
17,475

Total real estate properties
 
3,602,236

 
3,506,774

 
3,441,889

 
3,380,908

 
3,271,238

Less accumulated depreciation and amortization
 
(835,276
)
 
(819,744
)
 
(790,819
)
 
(761,926
)
 
(737,398
)
Total real estate properties, net
 
2,766,960

 
2,687,030

 
2,651,070

 
2,618,982

 
2,533,840

Cash and cash equivalents
 
12,649

 
9,026

 
2,174

 
4,102

 
8,497

Assets held for sale and discontinued operations, net
 
14,732

 
710

 
706

 
724

 
6,380

Other assets, net (2)
 
197,380

 
185,298

 
187,665

 
186,416

 
186,221

Total assets
 

$2,991,721

 

$2,882,064

 

$2,841,615

 

$2,810,224

 

$2,734,938

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Notes and bonds payable (2)
 

$1,239,062

 

$1,414,739

 

$1,418,347

 

$1,424,992

 

$1,374,537

Accounts payable and accrued liabilities
 
71,052

 
70,408

 
66,013

 
75,489

 
65,839

Liabilities of properties held for sales and discontinued operations
 
572

 
17

 
20

 
33

 
216

Other liabilities
 
46,441

 
46,452

 
64,236

 
66,963

 
65,648

Total liabilities
 
1,357,127

 
1,531,616

 
1,548,616

 
1,567,477

 
1,506,240

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
 
1,160

 
1,067

 
1,042

 
1,015

 
1,005

Additional paid-in capital
 
2,916,816

 
2,609,880

 
2,533,130

 
2,461,376

 
2,435,849

Accumulated other comprehensive loss
 
(1,443
)
 
(1,485
)
 
(1,527
)
 
(1,569
)
 
(1,611
)
Cumulative net income attributable to common stockholders
 
942,819

 
930,985

 
918,841

 
909,685

 
891,027

Cumulative dividends
 
(2,224,758
)
 
(2,189,999
)
 
(2,158,487
)
 
(2,127,760
)
 
(2,097,572
)
Total stockholders' equity
 
1,634,594

 
1,350,448

 
1,292,999

 
1,242,747

 
1,228,698

Total liabilities and stockholders' equity
 

$2,991,721

 

$2,882,064

 

$2,841,615

 

$2,810,224

 

$2,734,938

CAPITAL FUNDING
 
 
 
 
 
 
 
 
 
 
Re/development
 
$10,939
 
$8,542
 
$16,758
 
$9,322
 
$7,103
1st generation TI & planned capital expenditures for acquisitions (3)
 
4,471
 
5,486
 
1,298
 
4,686
 
4,073
2nd generation TI
 
6,013
 
5,559
 
4,202
 
3,081
 
3,627
Leasing commissions paid
 
1,514
 
1,587
 
1,079
 
1,856
 
1,050
Capital expenditures
 
5,088
 
5,653
 
2,098
 
3,918
 
3,402
(1)
The balance sheet information is presented as of the last day of the quarter indicated.
(2)
The Company adopted a new accounting standard (ASU 2015-03 - "Simplifying the Presentation of Debt Issuance Costs") on January 1, 2016 which resulted in a reclassification of deferred financing costs from Other assets to the Notes and bonds payable line item.
(3)
Planned capital expenditures for acquisitions include expected fundings that were contemplated as part of the acquisition.

 
 
 
 
 
 
HEALTHCARE REALTY 5

 
3Q 2016 SUPPLEMENTAL INFORMATION


Statements of Income Information
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
2015
 
 
2014

 
Q3

 
Q2

 
Q1

 
Q4

 
Q3

 
Q2

 
Q1

 
Q4

Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income

$102,534

 

$101,472

 

$98,740

 

$97,466

 

$95,383

 

$95,450

 

$95,034

 

$93,648

Mortgage interest
—

 
—

 
—

 
—

 
29

 
31

 
31

 
32

Other operating
1,125

 
1,170

 
1,281

 
1,116

 
1,313

 
1,227

 
1,391

 
1,320

 
103,659

 
102,642

 
100,021

 
98,582

 
96,725

 
96,708

 
96,456

 
95,000

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating
37,504

 
36,263

 
35,406

 
36,758

 
35,247

 
33,927

 
34,263

 
33,386

General and administrative
8,724

 
8,129

 
10,246

 
7,216

 
6,258

 
6,713

 
6,738

 
5,990

Depreciation
29,273

 
28,528

 
27,693

 
27,019

 
26,571

 
26,552

 
26,387

 
25,881

Amortization
2,712

 
2,762

 
2,700

 
2,556

 
2,386

 
2,474

 
2,667

 
2,630

Bad debts, net of recoveries
(47
)
 
78

 
(39
)
 
9

 
(21
)
 
27

 
(207
)
 
(92
)
 
78,166

 
75,760

 
76,006

 
73,558

 
70,441

 
69,693

 
69,848

 
67,795

Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sales of real estate properties
—

 
1

 
—

 
9,138

 
5,915

 
41,549

 
—

 
—

Interest expense
(13,759
)
 
(14,815
)
 
(14,938
)
 
(14,885
)
 
(15,113
)
 
(17,213
)
 
(18,322
)
 
(18,237
)
Loss on extinguishment of debt
—

 
—

 
—

 
—

 
—

 
(27,998
)
 
—

 
—

Pension termination
—

 
(4
)
 
—

 
—

 
—

 
(5,260
)
 
—

 
—

Impairment of real estate assets
—

 
—

 
—

 
(1
)
 
(310
)
 
—

 
(3,328
)
 
—

Impairment of internally-developed software
—

 
—

 
—

 
—

 
—

 
(654
)
 
—

 
—

Interest and other income, net
123

 
93

 
86

 
78

 
72

 
147

 
91

 
91

 
(13,636
)
 
(14,725
)
 
(14,852
)
 
(5,670
)
 
(9,436
)
 
(9,429
)
 
(21,559
)
 
(18,146
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income From Continuing Operations
11,857

 
12,157

 
9,163

 
19,354

 
16,848

 
17,586

 
5,049

 
9,059

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from discontinued operations
(23
)
 
(19
)
 
(7
)
 
(10
)
 
61

 
330

 
333

 
729

Impairments of real estate assets
—

 
—

 
—

 
(686
)
 
—

 
—

 
—

 
(995
)
Gain on sales of real estate properties
—

 
7

 
—

 
—

 
10,571

 
—

 
—

 
9,280

Income (Loss) From Discontinued Operations
(23
)
 
(12
)
 
(7
)
 
(696
)
 
10,632

 
330

 
333

 
9,014

Net Income

$11,834

 

$12,145

 

$9,156

 

$18,658

 

$27,480

 

$17,916

 

$5,382

 

$18,073


 
 
 
 
 
 
HEALTHCARE REALTY 6

 
3Q 2016 SUPPLEMENTAL INFORMATION


Historical Reconciliation of FFO (1) (2) 
(amounts in thousands, except for share data)


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
2015
 
 
2014

 
 
Q3

 
Q2

 
Q1

 
Q4

 
Q3

 
Q2

 
Q1

 
Q4

Net Income Attributable to Common Stockholders
 

$11,834

 

$12,145

 

$9,156

 

$18,658

 

$27,480

 

$17,916

 

$5,382

 

$18,073

Gain on sales of real estate properties
 
—

 
(8
)
 
—

 
(9,138
)
 
(16,486
)
 
(41,549
)
 
—

 
(9,280
)
Impairments of real estate assets
 
—

 
—

 
—

 
687

 
310

 
—

 
3,328

 
995

Real estate depreciation and amortization
 
32,557

 
31,716

 
30,800

 
29,907

 
29,317

 
29,388

 
29,370

 
28,707

Total adjustments
 
32,557

 
31,708


30,800


21,456

 
13,141

 
(12,161
)
 
32,698

 
20,422

Funds from Operations Attributable to Common Stockholders
 

$44,391

 

$43,853



$39,956

 

$40,114

 

$40,621



$5,755

 

$38,080

 

$38,495

Acquisition costs
 
649

 
232

 
1,618

 
1,068

 
121

 
167

 
38

 
471

Write-off of deferred financing costs upon amendment of line of credit facility
 
81

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Pension termination
 
—

 
4

 
—

 
—

 
—

 
5,260

 
—

 
—

Loss on extinguishment of debt
 
—

 
—

 
—

 
—

 
—

 
27,998

 
—

 
—

Impairment of internally-developed software
 
—

 
—

 
—

 
—

 
—

 
654

 
—

 
—

Severance expense
 
—

 
—

 
—

 
—

 
—

 
—

 
141

 
—

Security deposit recognized upon sale
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(407
)
Reversal of restricted stock amortization upon director / officer resignation
 
—

 
—

 
—

 
(40
)
 
—

 
—

 
—

 
(115
)
Revaluation of awards upon retirement
 
—

 
—

 
89

 
—

 
—

 
—

 
—

 
—

Normalized Funds from Operations Attributable to Common Stockholders
 

$45,121

 

$44,089

 

$41,663

 

$41,142

 

$40,742

 

$39,834

 

$38,259

 

$38,444

Funds from Operations per Common Share—Diluted
 

$0.39

 

$0.42

 

$0.39

 

$0.40

 

$0.41

 

$0.06

 

$0.38

 

$0.39

Normalized Funds from Operations Per Common Share—Diluted
 

$0.39

 

$0.42

 

$0.41

 

$0.41

 

$0.41

 

$0.40

 

$0.39

 

$0.39

FFO Weighted Average Common Shares Outstanding
 
115,052

 
104,770

 
102,165

 
100,474

 
99,997

 
99,945

 
99,137

 
98,086


(1)
Funds from operations (“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.”
(2)
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 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.







 
 
 
 
 
 
HEALTHCARE REALTY 7
 
3Q 2016 SUPPLEMENTAL INFORMATION


Debt Metrics
(dollars in thousands)

SUMMARY OF INDEBTEDNESS
 
 
Q3 2016 Interest Expense (1)
 
Balance as of
9/30/2016 (2)
 
Weighted Months to
Maturity

 
Effective
Interest Rate

Senior Notes due 2021, net of discount
 
$5,831
 
$396,980
 
52

 
5.97
%
Senior Notes due 2023, net of discount
 
2,391
 
247,196
 
79

 
3.95
%
Senior Notes due 2025, net of discount (3)
 
2,469
 
247,764
 
103

 
4.08
%
Total Senior Notes Outstanding
 
$10,691
 
$891,940
 
73

 
4.89
%
Unsecured credit facility due 2020 (4)
 
71
 
81,000
 
46

 
1.53
%
Unsecured term loan facility due 2019
 
659
 
149,432
 
29

 
1.72
%
Mortgage notes payable, net
 
1,609
 
116,804
 
84

 
5.14
%
Total Outstanding Notes and Bonds Payable
 
$13,030
 
$1,239,176
 
67

 
4.31
%
Interest cost capitalization
 
(377)
 
 
 
 
 
 
Unsecured credit facility fee and deferred financing costs
 
1,106
 
 
 
 
 
 
Total Quarterly Consolidated Interest Expense
 
$13,759
 
 
 
 
 
 
SELECTED FINANCIAL DEBT COVENANTS (5)
 
 
Calculation
 
Requirement
 
Trailing Twelve Months Ended 9/30/2016

Revolving Credit Facility and Term Loan
 
 
 
 
Leverage Ratio
 
Total Debt / Total Capital
 
Not greater than 60%
 
33.5
%
Secured Leverage Ratio
 
Total Secured Debt / Total Capital
 
Not greater than 30%
 
3.1
%
Unencumbered Leverage Ratio
 
Unsecured Debt / Unsecured Real Estate
 
Not greater than 60%
 
34.0
%
Fixed Charge Coverage Ratio
 
EBITDA / Fixed Charges
 
Not less than 1.50x
 
3.6x

Unsecured Coverage Ratio
 
Unsecured EBITDA / Unsecured Interest
 
Not less than 1.75x
 
4.0x

Construction and Development
 
CIP / Total Assets
 
Not greater than 15%
 
1.5
%
Asset Investments
 
Mortgages & Unimproved Land / Total Assets
 
Not greater than 20%
 
0.6
%
 
 
 
 
 
 
 
Senior Notes
 
 
 

 


Incurrence of Total Debt
 
Total Debt / Total Assets
 
Not greater than 60%
 
32.6
%
Incurrence of Debt Secured by Any Lien
 
Secured Debt / Total Assets
 
Not greater than 40%
 
3.0
%
Maintenance of Total Unsecured Assets
 
Unencumbered Assets / Unsecured Debt
 
Not less than 150%
 
312.1
%
Debt Service Coverage
 
EBITDA / Interest Expense
 
Not less than 1.5x
 
4.0x

 
 
 
 
 
 
 
Other
 
 
 

 


Net Debt to adjusted EBITDA (6)
 
Net debt (debt less cash) / adjusted EBITDA
 
Not required
 
5.0x

Debt to Enterprise Value (7)
 
Total Debt / Enterprise Value
 
Not required
 
25.6
%

(1)
The Company adopted a new accounting standard (ASU 2015-03 - "Simplifying the Presentation of Debt Issuance Costs") on January 1, 2016 which resulted in a reclassification of deferred financing costs from Other assets to the Notes and bonds payable line item. The Company adjusted the effective interest rates to reflect this change.
(2)
Balance includes $0.1 million of a mortgage note payable included in Liabilities of properties held for sale and discontinued operations.
(3)
The effective interest rate includes the impact of the $1.7 million settlement of a forward-starting interest rate swap that is included in accumulated other comprehensive income on the Company's Condensed Consolidated Balance Sheets.
(4)
As of July 5, 2016, the balance of the unsecured credit facility due 2017, which on July 29, 2016 was amended and extended through July 2020, was repaid with proceeds from the issuance of 9.2 million shares resulting in proceeds of $304.6 million. The average daily balance outstanding on the unsecured credit facility due 2017 for the third quarter of 2016 was $17.7 million.
(5)
Does not include all financial and non-financial covenants and restrictions that are required by the Company's various debt agreements.
(6)
Adjusted EBITDA is based on the current quarter results, annualized. See page 16 for a reconciliation of adjusted EBITDA.
(7)
Based on the closing price of $31.33 on October 28, 2016 and 115,878,537 shares outstanding.


 
 
 
 
 
 
HEALTHCARE REALTY 8
 
3Q 2016 SUPPLEMENTAL INFORMATION


Investment Activity
(dollars in thousands)
2016 ACQUISITION ACTIVITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Location
 
Campus Location
 
Distance to Campus
 
Health System Affiliation
 
Closing
 
Purchase Price
 
Acquisition Costs
 

Square Feet

 
Aggregate
Leased %

 
Cap Rate (2)

Seattle, WA (1)
 
ADJ
 
0.24 miles
 
UW Medicine
 
3/31/2016
 
$38,259
 
$1,618
 
69,712

 
100
%
 
5.5
%
Seattle, WA
 
ON
 
0.00 miles
 
UW Medicine
 
4/29/2016
 
21,615
 
362
 
46,637

 
100
%
 
5.9
%
Los Angeles, CA
 
ON
 
0.00 miles
 
HCA
 
5/13/2016
 
20,000
 
232
 
63,012

 
80
%
 
5.1
%
Seattle, WA
 
ON
 
0.00 miles
 
UW Medicine
 
9/12/2016
 
53,065
 
618
 
87,462

 
100
%
 
5.5
%
Washington, DC
 
ON
 
0.00 miles
 
Inova Health System
 
9/26/2016
 
45,225
 
31
 
103,783

 
100
%
 
5.6
%
Baltimore, MD
 
ON
 
0.00 miles
 
University of Maryland
 
10/11/2016
 
36,275
 
452
 
113,631

 
92
%
 
5.7
%
Seattle, WA
 
ON
 
0.00 miles
 
Providence Health
 
10/17/2016
 
9,750
 
206
 
29,753

 
96
%
 
5.6
%
Total
 
 
 
 
 
 
 
 
 
$224,189

$3,519
 
513,990

 
96
%
 
5.6
%

HISTORICAL INVESTMENT ACTIVITY
 
 
 
 
Acquisitions (3)

 
Mortgage
Funding

 
Construction
Mortgage Funding

 
Re/Development
Funding

 
Total Investments

 
Dispositions
2012
 
$94,951
 
—

 
$78,297
 
$5,608
 
$178,856
 
$91,384
2013
 
216,956
 
—

 
58,731
 
—

 
275,687
 
101,910
2014
 
85,077
 
1,900
 
1,244
 
4,384
 
92,605
 
34,840
2015
 
187,216
 
—

 
—

 
27,859
 
215,075
 
157,975
2016 (4)
 
224,189
 
—

 
—

 
36,239
 
260,428
 
24,575
Total
 
$808,389
 
$1,900
 
$138,272
 
$74,090
 
$1,022,651
 
$410,684
% of Total
 
79.1
%
 
0.2
%
 
13.5
%
 
7.2
%
 
100
%
 
 

RE/DEVELOPMENT ACTIVITY
 
 
 
 
Location
 
Type (5)
 
Campus Location
 
Square Feet

 
Budget
 
Amount Funded Q3 2016
 
Total Amount Funded Through 9/30/2016
 
Estimated Remaining Fundings
 
Aggregate
Leased %

 
Estimated Completion Date
Construction activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nashville, TN (6)
 
Redev
 
On
 
294,000

 
$51,800
 
$6,545
 
$45,775
 
$6,025
 
83
%
 
Q1 2017
Denver, CO
 
Dev
 
On
 
98,000

 
26,500
 
4,394
 
7,388
 
19,112
 
35
%
 
Q2 2017
Total construction activity
 
392,000

 
$78,300
 
$10,939
 
$53,163
 
$25,137
 
71
%
 
 

(1)
Acquisition costs in Q1 2016 include seller credits related to a loan prepayment, brokerage commission and excise taxes.
(2)
Represents the forecasted first year NOI / purchase price plus acquisition costs and expected capital additions.
(3)
Net of mortgage notes receivable payoffs upon acquisition.
(4)
Acquisitions and dispositions include activity through November 2, 2016.
(5)
Redev - Redevelopment; Dev - Development
(6)
Includes $15.2 million for the addition of 70,000 rentable square feet, $18.9 million for a 907-space parking garage and associated land and $17.7 million for existing building upgrades and tenant improvement allowances associated with newly executed leases.


 
 
 
 
 
 
HEALTHCARE REALTY 9
 
3Q 2016 SUPPLEMENTAL INFORMATION


Portfolio by Market
(dollars in thousands) 
BY MARKET
 
 
 
 
SQUARE FEET
 
 
MOB/OUTPATIENT (89.4%)
 
INPATIENT (7.0%)
 
OTHER (3.6%)
 
 
 
 
 
Investment(1)
Multi-tenant

 
Single-tenant Net Lease

 
Rehab

 
Surgical

 
Other

 
Total

 
% of Total

Dallas - Fort Worth, TX
$483,509
2,149,939
 
 
 
42,627
 
156,245
 
 
 
2,348,811
 
16.2
%
Seattle - Bellevue, WA
388,555
839,729
 
67,510
 
 
 
 
 
 
 
907,239
 
6.2
%
Charlotte, NC
167,617
820,457
 
 
 
 
 
 
 
 
 
820,457
 
5.6
%
Nashville, TN
93,849
717,434
 
 
 
 
 
 
 
 
 
717,434
 
4.9
%
Los Angeles, CA
160,491
551,383
 
 
 
63,000
 
 
 
 
 
614,383
 
4.2
%
Houston, TX
129,635
591,027
 
 
 
 
 
 
 
 
 
591,027
 
4.1
%
Richmond, VA
144,852
548,801
 
 
 
 
 
 
 
 
 
548,801
 
3.8
%
Des Moines, IA
133,829
233,413
 
146,542
 
 
 
 
 
152,655
 
532,610
 
3.7
%
San Antonio, TX
103,814
483,811
 
 
 
39,786
 
 
 
 
 
523,597
 
3.6
%
Memphis, TN
91,744
515,876
 
 
 
 
 
 
 
 
 
515,876
 
3.5
%
Roanoke, VA
48,965
 
 
334,454
 
 
 
 
 
126,427
 
460,881
 
3.2
%
Austin, TX
131,350
354,481
 
 
 
66,095
 
 
 
12,880
 
433,456
 
3.0
%
Indianapolis, IN
77,329
382,695
 
 
 
 
 
 
 
 
 
382,695
 
2.6
%
Denver, CO
109,825
346,335
 
 
 
34,068
 
 
 
 
 
380,403
 
2.6
%
Honolulu, HI
137,416
298,427
 
 
 
 
 
 
 
 
 
298,427
 
2.1
%
Washington, DC
75,212
286,619
 
 
 
 
 
 
 
 
 
286,619
 
2.0
%
Oklahoma City, OK
109,089
68,860
 
200,000
 
 
 
 
 
 
 
268,860
 
1.8
%
Chicago, IL
57,809
243,491
 
 
 
 
 
 
 
 
 
243,491
 
1.7
%
Miami, FL
53,553
241,980
 
 
 
 
 
 
 
 
 
241,980
 
1.7
%
Colorado Springs, CO
51,765
241,224
 
 
 
 
 
 
 
 
 
241,224
 
1.7
%
Phoenix, AZ
64,436
179,963
 
 
 
51,903
 
 
 
 
 
231,866
 
1.6
%
Detroit, MI
25,432
199,749
 
 
 
 
 
 
 
11,308
 
211,057
 
1.5
%
San Francisco, CA
86,485
210,621
 
 
 
 
 
 
 
 
 
210,621
 
1.4
%
South Bend, IN
43,985
205,573
 
 
 
 
 
 
 
 
 
205,573
 
1.4
%
Springfield, MO
111,293
 
 
 
 
 
 
186,000
 
 
 
186,000
 
1.3
%
Other (30 markets)
451,665
1,253,224
 
296,623
 
373,722
 
 
 
214,864
 
2,138,433
 
14.6
%
Total
$3,533,504
11,965,112
 
1,045,129
 
671,201
 
342,245
 
518,134
 
14,541,821
 
100.0
%
Number of Properties
 
165
 
14
 
11
 
2
 
10
 
202
 
 
Percent of Square Feet
 
82.2
%
 
7.2
%
 
4.6
%
 
2.4
%
 
3.6
%
 
100.0
%
 
 
Investment (1)
 
$2,800,544
 
$251,862
 
$191,815
 
$208,725
 
$80,558
 
$3,533,504
 
 
% of Investment
 
79.3
%
 
7.1
%
 
5.4
%
 
5.9
%
 
2.3
%
 
100.0
%
 
 

MSA BY RANK (% of total SF)
 
 
 
 
Rank
 
MOB / Outpatient

 
Total

Top 25
 
59
%
 
56
%
Top 50
 
83
%
 
78
%
Top 75
 
87
%
 
81
%
Top 100
 
92
%
 
87
%


(1)
Excludes gross assets held for sale, land held for development, construction in progress and corporate property.


 
 
 
 
 
 
HEALTHCARE REALTY 10
 
3Q 2016 SUPPLEMENTAL INFORMATION


Square Feet by Provider (1) 
MOB SQUARE FEET
 
 
System Rank (3)
 
Credit Rating
 
ASSOCIATED (93.3%) (2)
 
 
 
Total MOB SF
 
% of Total MOB SF

Top Health Systems
 
 
 
On

 
Adjacent (4)

 
Anchored (5) 

 
Off

 
 
Baylor Scott & White Health
 
19
 
AA-/Aa3
 
1,834,256
 
129,879
 
163,188
 
—

 
2,127,323
 
16.4
%
Ascension Health
 
3
 
AA+/Aa2
 
967,996
 
148,356
 
30,096
 
—

 
1,146,448
 
8.8
%
Catholic Health Initiatives
 
7
 
A-/--
 
769,471
 
132,617
 
95,486
 
—

 
997,574
 
7.7
%
Carolinas HealthCare System
 
27
 
--/Aa3
 
353,537
 
98,066
 
313,513
 
—

 
765,116
 
5.9
%
HCA
 
2
 
BB/B1
 
389,931
 
185,904
 
157,388
 
—

 
733,223
 
5.6
%
Tenet Healthcare Corporation
 
6
 
B/B1
 
570,264
 
67,790
 
—

 
—

 
638,054
 
4.9
%
Bon Secours Health System
 
49
 
A-/A3
 
548,801
 
—

 
—

 
—

 
548,801
 
4.2
%
Baptist Memorial Health Care
 
105
 
 A-/--
 
424,306
 
—

 
39,345
 
—

 
463,651
 
3.6
%
Indiana University Health
 
22
 
AA-/Aa3
 
280,129
 
102,566
 
—

 
—

 
382,695
 
2.9
%
University of Colorado Health
 
73
 
AA-/Aa3
 
150,291
 
161,099
 
33,850
 
—

 
345,240
 
2.7
%
Trinity Health
 
8
 
AA-/Aa3
 
205,573
 
73,331
 
—

 
—

 
278,904
 
2.1
%
University of Washington
 
90
 
AA+/Aa1
 
194,536
 
69,712
 
—

 
—

 
264,248
 
2.0
%
Providence Health & Services
 
9
 
AA-/Aa3
 
126,361
 
129,181
 
—

 
—

 
255,542
 
2.0
%
Medstar Health
 
31
 
A-/A2
 
241,739
 
—

 
—

 
—

 
241,739
 
1.9
%
Advocate Health Care
 
26
 
AA/Aa2
 
142,955
 
95,436
 
—

 
—

 
238,391
 
1.8
%
Memorial Hermann
 
43
 
A+/A1
 
—

 
206,090
 
—

 
—

 
206,090
 
1.6
%
Community Health
 
4
 
B/B2
 
201,574
 
—

 
—

 
—

 
201,574
 
1.5
%
Mercy (St. Louis)
 
30
 
AA-/Aa3
 
—

 
—

 
200,000
 
—

 
200,000
 
1.5
%
Overlake Health System
 
343
 
A/A2
 
191,051
 
—

 
—

 
—

 
191,051
 
1.5
%
Other credit rated
 
 
 
 
 
799,056
 
560,499
 
90,607
 
—

 
1,450,162
 
11.1
%
Subtotal - credit rated (6)
 
 
 
 
 
8,391,827
 
2,160,526
 
1,123,473
 
—

 
11,675,826
 
89.7
%
Non-credit rated
 
 
 
 
 
269,506
 
192,418
 
—

 
872,491
 
1,334,415
 
10.3
%
Total
 
 
 
 
 
8,661,333
 
2,352,944
 
1,123,473
 
872,491
 
13,010,241
 
100.0
%
% of Total
 
 
 
 
 
66.6
%
 
18.1
%
 
8.6
%
 
6.7
%
 
 
 
 
HEALTH SYSTEM (2)(3) BY RANK (% of total SF)
Rank
 
MOB / Outpatient

 
Total

Top 25
 
54
%
 
51
%
Top 50
 
72
%
 
68
%
Top 75
 
76
%
 
72
%
Top 100
 
79
%
 
77
%
LEASED SQUARE FEET
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LEASED SQUARE FEET
 
 
Top Health Systems
 
System Rank (3)
 
Credit Rating
 
# of Buildings
 
# of Leases
 
MOB

 
Inpatient / Other

 
Total
 
% of Total Leased SF

 
% of Total Revenue

Baylor Scott & White Health
 
19
 
AA-/Aa3
 
23
 
161
 
998,331

 
156,245

 
1,154,576
 
9.0
%
 
10.1
%
Mercy (St. Louis)
 
30
 
AA-/Aa3
 
2
 
2
 
200,000

 
186,000

 
386,000
 
3.0
%
 
4.5
%
Catholic Health Initiatives
 
7
 
A-/--
 
14
 
81
 
544,132

 
—

 
544,132
 
4.2
%
 
4.4
%
Carolinas HealthCare System
 
27
 
--/Aa3
 
16
 
78
 
587,193

 
—

 
587,193
 
4.6
%
 
4.4
%
Baptist Memorial Health Care
 
105
 
A-/--
 
6
 
17
 
105,419

 
—

 
105,419
 
0.8
%
 
2.6
%
HealthSouth
 
89
 
BB-/Ba3
 
5
 
5
 
—

 
351,989

 
351,989
 
2.7
%
 
2.5
%
Bon Secours Health System
 
49
 
A-/A3
 
7
 
63
 
269,315

 
—

 
269,315
 
2.1
%
 
2.2
%
HCA
 
2
 
BB/B1
 
14
 
15
 
413,346

 
—

 
413,346
 
3.2
%
 
2.2
%
Ascension Health
 
3
 
AA+/Aa2
 
16
 
50
 
302,306

 
—

 
302,306
 
2.4
%
 
2.0
%
Tenet Healthcare Corporation
 
6
 
B/B1
 
10
 
35
 
121,887

 
63,000

 
184,887
 
1.4
%
 
1.7
%
Total
 
 
 
 
 

 

 

 

 

 
33.4
%
 
36.6
%
(1)
Excludes mortgage notes receivable, construction in progress and assets classified as held for sale.
(2)
Includes total square feet of buildings located on-campus, adjacent and off-campus/anchored by healthcare systems.
(3)
Ranked by revenue based on Modern Healthcare's Healthcare Systems Financials Database.
(4)
The Company defines an adjacent property as being no more than 0.25 miles from a hospital campus.
(5)
Includes buildings where health systems lease 40% or more of the property.
(6)
Based on square footage, 89.7% of HR's MOB portfolio is associated with a credit-rated healthcare provider and 77.4% is associated with an investment-grade rated healthcare provider.

HEALTHCARE REALTY 11
 
3Q 2016 SUPPLEMENTAL INFORMATION


Square Feet by Proximity (1)(2) 


MEDICAL OFFICE BUILDINGS BY LOCATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016 (3)
 
 
2015
 
 
 
Q3

 
Q2

 
Q1

 
Q4

 
Q3

 
Q2

On campus
 
67
%
 
66
%
 
66
%
 
67
%
 
67
%
 
68
%
Adjacent to campus (3)
 
18
%
 
18
%
 
18
%
 
13
%
 
13
%
 
12
%
Total on/adjacent
 
85
%
 
84
%

84
%
 
80
%
 
80
%
 
80
%
Off campus - anchored by hospital system (4)
 
8
%
 
9
%
 
9
%
 
9
%
 
9
%
 
9
%
Off campus
 
7
%
 
7
%
 
7
%
 
11
%
 
11
%
 
11
%
 
 
100
%
 
100
%

100
%
 
100
%
 
100
%
 
100
%

MEDICAL OFFICE BUILDINGS BY DISTANCE TO HOSPITAL CAMPUS
 
 
Greater than
Less than or equal to
 
Number of Buildings

 
Square Feet
 
% of Total

 
Cumulative %

 
Campus Proximity
 
0.00
 
108

 
8,661,333
 
67
%
 
67
%
 
On campus
0.00
250 yards
 
19

 
1,231,736
 
9
%
 
76
%
 
Adjacent (3)
250 yards
0.25 miles
 
19

 
1,121,208
 
9
%
 
85
%
 
0.25 miles
0.50
 
3

 
143,690
 
1
%
 
86
%
 
Off campus
0.50
1.00
 
2

 
291,328
 
2
%
 
88
%
 
1.00
2.00
 
8

 
608,486
 
5
%
 
93
%
 
2.00
5.00
 
10

 
476,633
 
4
%
 
97
%
 
5.00
10.00
 
6

 
332,359
 
2
%
 
99
%
 
10.00
 
 
4

 
143,468
 
1
%
 
100
%
 
Total
 
 
179

 
13,010,241
 
100
%
 

 
 


(1)
Excludes mortgage notes receivable, construction in progress and assets classified as held for sale.
(2)
Hospitals include acute care hospitals with inpatient beds. The Company does not consider inpatient rehab hospitals (IRFs), skilled nursing facilities (SNFs) or long-term acute care hospitals (LTACHs) to be hospital campuses for distance calculations.
(3)
Beginning in Q1 2016, the Company adopted a definition of an adjacent property as being no more than 0.25 miles from a hospital campus.
(4)
Includes total square feet of buildings located on-campus, adjacent and off-campus/anchored by healthcare systems.




 
 
 
 
 
 
HEALTHCARE REALTY 12

 
3Q 2016 SUPPLEMENTAL INFORMATION


Lease Maturity, Size and Building Square Feet (1) 
(dollars in thousands)



LEASE MATURITY SCHEDULE
 
 
 
 
 
 
 
 
 
 
MULTI-TENANT
 
SINGLE-TENANT NET LEASE
 
TOTAL
 
 
Number of Leases
 
Square Feet
 
% of Square Feet

 
Number of Leases

 
Square Feet

 
% of Square Feet

 
Number of Leases
 
Square Feet
 
% of Total Square Feet

2016
 
182
 
542,977
 
5.3
%
 
—

 
—

 
—
%
 
182
 
542,977
 
4.3
%
2017
 
416
 
1,737,427
 
17.0
%
 
5
 
334,454
 
14.6
%
 
421
 
2,071,881
 
16.6
%
2018
 
338
 
1,540,765
 
15.1
%
 
—

 
—

 
—
%
 
338
 
1,540,765
 
12.4
%
2019
 
340
 
1,527,025
 
14.9
%
 
9
 
371,805
 
16.3
%
 
349
 
1,898,830
 
15.2
%
2020
 
247
 
1,319,613
 
13.0
%
 
1
 
83,318
 
3.6
%
 
248
 
1,402,931
 
11.2
%
2021
 
185
 
792,810
 
7.8
%
 
2
 
143,868
 
6.3
%
 
187
 
936,678
 
7.5
%
2022
 
93
 
681,845
 
6.7
%
 
2
 
137,016
 
6.0
%
 
95
 
818,861
 
6.6
%
2023
 
109
 
817,518
 
8.0
%
 
1
 
75,000
 
3.3
%
 
110
 
892,518
 
7.1
%
2024
 
57
 
410,729
 
4.0
%
 
1
 
51,903
 
2.3
%
 
58
 
462,632
 
3.7
%
2025
 
40
 
400,199
 
3.9
%
 
2
 
91,561
 
4.0
%
 
42
 
491,760
 
3.9
%
Thereafter
 
50
 
443,990
 
4.3
%
 
11
 
995,822
 
43.6
%
 
61
 
1,439,812
 
11.5
%


BY LEASE SIZE
 
 
NUMBER OF LEASES
Square Footage
 
Multi-Tenant Properties (2)
 
Single-Tenant
Net Lease Properties

0 - 2,500
 
964
 
—

2,501 - 5,000
 
570
 
—

5,001 - 7,500
 
187
 
1
7,501 - 10,000
 
112
 
1
10,001 +
 
224
 
32
Total Leases
 
2,057
 
34

BY BUILDING SQUARE FEET
Size Range by Square Feet
 
% of Total

 
Total Square
Footage
 
Average
Square Feet
 
Number of
Properties
>100,000
 
43.6
%
 
6,338,911
 
144,066
 
44
<100,000 and >75,000
 
23.6
%
 
3,428,941
 
85,724
 
40
<75,000 and >50,000
 
18.1
%
 
2,633,672
 
62,706
 
42
<50,000
 
14.7
%
 
2,140,297
 
28,162
 
76
Total
 
100.0
%
 
14,541,821
 
71,989
 
202


(1)
Excludes mortgage notes receivable, land held for development, construction in progress, corporate property and assets classified as held for sale.
(2)
The average lease size in the multi-tenant properties is 4,966 square feet.

 
 
 
 
 
 
HEALTHCARE REALTY 13
 
3Q 2016 SUPPLEMENTAL INFORMATION


Occupancy Information (1) 
(dollars in thousands) 


OCCUPANCY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016

 
2015

 
 
 
Investment at  9/30/2016

Square Feet at 9/30/2016

 
Q3

 
Q2

 
Q1

 
Q4

 
Q3

Multi-Tenant
 
 
 
 
 
 
 
 
 
 
 
 
Same store properties

$2,300,520

10,288,750

 
87.8
%
 
87.8
%
 
87.9
%
 
87.6
%
 
87.4
%
Acquisitions
402,267

1,003,876

 
95.0
%
 
95.0
%
 
91.8
%
 
89.7
%
 
89.9
%
Development completions (2)
5,057

12,880

 
100.0
%
 
15.2
%
 
N/A

 
N/A

 
N/A

Reposition (3)
148,489

951,568

 
59.3
%
 
57.0
%
 
56.5
%
 
56.7
%
 
51.4
%
Total

$2,856,333

12,257,074

 
86.2
%
 
85.7
%
 
85.6
%
 
85.3
%
 
84.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Single-Tenant Net lease
 
 
 
 
 
 
 
 
 
 
 
 
Same store properties

$677,171

2,284,747

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Acquisitions
—

—

 
—

 
—

 
100.0
%
 
100.0
%
 
100.0
%
Total

$677,171

2,284,747

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Same store properties

$2,977,691

12,573,497

 
90.0
%
 
90.0
%
 
90.0
%
 
89.8
%
 
89.6
%
Acquisitions
402,267

1,003,876

 
95.0
%
 
95.0
%
 
93.3
%
 
91.4
%
 
91.7
%
Development completions (2)
5,057

12,880

 
100.0
%
 
15.2
%
 
N/A

 
N/A

 
N/A

Reposition (3)
148,489

951,568

 
59.3
%
 
57.0
%
 
56.5
%
 
56.7
%
 
51.4
%
Total

$3,533,504

14,541,821

 
88.4
%
 
88.0
%
 
87.9
%
 
87.6
%
 
86.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
# of Properties
 
 
 
 
 
 
 
 
 
 
 
 
Same store properties
 
 
 
170

 
169

 
166

 
166

 
160

Acquisitions
 
 
 
15

 
15

 
16

 
16

 
17

Development completions (2)
 
 
 
1

 
1

 
N/A

 
N/A

 
N/A

Reposition (3)
 
 
 
16

 
17

 
17

 
16

 
18

Total
 
 
 
202

 
202

 
199

 
198

 
195


(1)
Excludes mortgage notes receivable, land held for development, construction in progress, corporate property and assets classified as held for sale.
(2)
Development completions consist of one property that was completed in April 2016 and is currently 100% leased.
(3)
Reposition includes properties that are not stabilized based on specific criteria that are further discussed in the Company's Form 10-Q.



 
 
 
 
 
 
HEALTHCARE REALTY 14
 
3Q 2016 SUPPLEMENTAL INFORMATION


Same Store Properties
(dollars in thousands) 
QUARTERLY (1)
 
 
 
 
 
 
 
 
 
 
Q3 2016

 
Q2 2016

 
Q1 2016

 
Q4 2015

 
Q3 2015

 
Q2 2015

 
Q1 2015

 
Q4 2014

Multi-tenant
 
 
 
 
 
 
 
 
 
 
 


 


 


Revenues
 
$74,258
 
$73,040
 
$72,025
 
$71,820
 
$70,503
 
$69,680
 
$69,059
 
$68,420
Expenses
 
31,686
 
30,783
 
30,274
 
32,342
 
30,926
 
29,639
 
30,161
 
29,824
NOI
 
$42,572
 
$42,257
 
$41,751
 
$39,478
 
$39,577
 
$40,041
 
$38,898
 
$38,596
Occupancy
 
87.8
%
 
87.6
%
 
87.8
%
 
87.6
%
 
87.2
%
 
87.5
%
 
87.1
%
 
87.2
%
Number of properties
 
136
 
136
 
136
 
136
 
136
 
136
 
136
 
136
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
Single-tenant net lease
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$16,459
 
$16,457
 
$16,529
 
$16,518
 
$16,451
 
$16,345
 
$16,370
 
$16,167
Expenses
 
445
 
389
 
456
 
481
 
419
 
396
 
395
 
434
NOI
 
$16,014
 
$16,068
 
$16,073
 
$16,037
 
$16,032
 
$15,949
 
$15,975
 
$15,733
Occupancy
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
98.4
%
 
98.4
%
 
98.4
%
 
89.7
%
Number of properties
 
34
 
34
 
34
 
34
 
34
 
34
 
34
 
34
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$90,717
 
$89,497
 
$88,554
 
$88,338
 
$86,954
 
$86,025
 
$85,429
 
$84,587
Expenses
 
32,131
 
31,172
 
30,730
 
32,823
 
31,345
 
30,035
 
30,556
 
30,258
Same Store NOI
 
$58,586
 
$58,325
 
$57,824
 
$55,515
 
$55,609
 
$55,990
 
$54,873
 
$54,329
Occupancy
 
90.0
%
 
89.9
%
 
90.0
%
 
89.9
%
 
89.5
%
 
89.7
%
 
89.4
%
 
89.3
%
Number of properties
 
170

 
170

 
170

 
170

 
170

 
170

 
170

 
170

% NOI year-over-year growth
 
5.4
%
 
4.2
%
 
5.4
%
 
2.2
%
 


 
 
 
 
 
 
TRAILING TWELVE MONTHS (1)
 
 
Twelve Months Ended September 30,
 
 
2016

 
2015

 
% Change

Multi-tenant
 
 
 
 
 
 
Revenues
 
$291,143
 
$277,662
 
4.9
%
Expenses
 
$125,085
 
$120,550
 
3.8
%
NOI
 
$166,058
 
$157,112
 
5.7
%
Revenue per average occupied square foot
 
$32.30
 
$30.94
 
4.4
%
Average occupancy
 
87.6
%
 
87.2
%
 
 
Number of properties
 
136
 
136
 
 
 
 
 
 
 
 
 
Single-tenant net lease
 
 
 
 
 
 
Revenues
 
$65,963
 
$65,333
 
1.0
%
Expenses
 
$1,771
 
$1,644
 
7.7
%
NOI
 
$64,192
 
$63,689
 
0.8
%
Revenue per average occupied square foot
 
$28.87
 
$28.78
 
0.3
%
Average occupancy
 
100.0
%
 
99.4
%
 
 
Number of properties
 
34
 
34
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
Revenues
 
$357,106
 
$342,995
 
4.1
%
Expenses
 
$126,856
 
$122,194
 
3.8
%
Same Store NOI
 
$230,250
 
$220,801
 
4.3
%
Revenue per average occupied square foot
 
$31.61
 
$30.51
 
3.6
%
Average occupancy
 
89.9
%
 
89.4
%
 
 
Number of Properties
 
170
 
170
 
 
(1)
Excludes recently acquired or disposed properties, mortgage notes receivable, development completions, construction in progress, land held for development, corporate property, reposition properties and assets classified as held for sale.


 
 
 
 
 
 
HEALTHCARE REALTY 15
 
3Q 2016 SUPPLEMENTAL INFORMATION


Reconciliation of Non-GAAP Measures
(dollars in thousands) 
QUARTERLY NOI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2016

 
Q2 2016

 
Q1 2016

 
Q4 2015

 
Q3 2015

 
Q2 2015

 
Q1 2015

 
Q4 2014

Rental income (a)
 

$102,534

 

$101,472

 

$98,740

 

$97,466

 

$95,383

 

$95,450

 

$95,034

 

$93,648

Property lease guaranty revenue (b)
 
817

 
885

 
1,002

 
851

 
999

 
937

 
1,102

 
1,029

Exclude straight-line rent revenue
 
(1,223
)
 
(2,091
)
 
(2,132
)
 
(1,929
)
 
(2,309
)
 
(2,475
)
 
(2,832
)
 
(3,122
)
Revenue
 
102,128

 
100,266

 
97,610

 
96,388

 
94,073

 
93,912

 
93,304

 
91,555

Property operating expense
 
(37,504
)
 
(36,263
)
 
(35,406
)
 
(36,758
)
 
(35,247
)
 
(33,927
)
 
(34,263
)
 
(33,386
)
NOI
 

$64,624

 

$64,003

 

$62,204

 

$59,630

 

$58,826

 

$59,985

 

$59,041

 

$58,169

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions / Development completions
 
(4,638
)
 
(4,227
)
 
(3,065
)
 
(2,646
)
 
(1,660
)
 
(1,165
)
 
(1,202
)
 
(327
)
Reposition
 
(841
)
 
(903
)
 
(825
)
 
(962
)
 
(835
)
 
(766
)
 
(805
)
 
(1,358
)
Dispositions / other
 
(559
)
 
(548
)
 
(490
)
 
(507
)
 
(722
)
 
(2,064
)
 
(2,161
)
 
(2,155
)
Same store NOI
 

$58,586

 

$58,325

 

$57,824

 

$55,515

 

$55,609

 

$55,990

 

$54,873

 

$54,329

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Rental income reconciliation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating
 

$85,264

 

$83,283

 

$80,501

 

$79,466

 

$76,960

 

$75,470

 

$74,654

 

$73,153

Single-tenant net lease
 
16,047

 
16,098

 
16,107

 
16,071

 
16,114

 
17,505

 
17,548

 
17,373

Straight-line rent
 
1,223

 
2,091

 
2,132

 
1,929

 
2,309

 
2,475

 
2,832

 
3,122

Total consolidated rental income
 

$102,534

 

$101,472

 

$98,740

 

$97,466

 

$95,383

 

$95,450

 

$95,034

 

$93,648

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b) Other operating income reconciliation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property lease guaranty revenue
 

$817

 

$885

 

$1,002

 

$851

 

$999

 

$937

 

$1,102

 

$1,029

Interest income
 
129

 
115

 
123

 
123

 
144

 
156

 
157

 
163

Other
 
179

 
170

 
156

 
142

 
170

 
134

 
132

 
128

Total consolidated other operating income
 

$1,125

 

$1,170



$1,281

 

$1,116

 

$1,313

 

$1,227

 

$1,391

 

$1,320

TRAILING TWELVE MONTHS NOI
 
 
 
 
Twelve Months Ended September 30,
 
 
 
2016

 
2015

 
% Change

Same store NOI
 
$230,250
 
$220,801
 
4.3
 %
Reposition
 
3,531
 
3,764
 
(6.2
)%
Subtotal
 
$233,781
 
$224,565
 
4.1
 %
Acquisitions / Development completions
 
14,576
 
4,354
 
234.8
 %
Dispositions / other
 
2,104
 
7,102
 
(70.4
)%
NOI
 

$250,461

 

$236,021

 
6.1
%
EBITDA
 
 
 
 
 
 
 
 
 
 
Q3 2016

 
Q2 2016

 
Q1 2016

 
Q4 2015

 
Trailing Twelve Months

Net income
 
$11,834
 
$12,145
 
$9,156
 
$18,658
 
$51,793
Interest expense
 
13,759
 
14,815
 
14,938
 
14,885
 
58,397
Depreciation and amortization
 
31,984
 
31,290
 
30,393
 
29,575
 
123,242
Acquisition costs
 
649
 
232
 
1,618
 
1,068
 
3,567
Gain on sales of real estate properties
 
—

 
(8)
 
—

 
(9,138)
 
(9,146)
Impairments on real estate assets
 
—

 
—

 
—

 
687
 
687

EBITDA
 

$58,226

 

$58,474



$56,105



$55,735

 

$228,540

Timing impact of acquisitions and dispositions (1)
 
1,284
 
190
 
547
 
577
 
2,598
Stock based compensation
 
1,851
 
1,850
 
1,859
 
1,471
 
7,031
Adjusted EBITDA
 

$61,361

 

$60,514

 

$58,511

 

$57,783

 

$238,169

(1)
Adjusted to reflect quarterly EBITDA from properties acquired or disposed in the quarter.

 
 
 
 
 
 
HEALTHCARE REALTY 16
 
3Q 2016 SUPPLEMENTAL INFORMATION



Same Store Leasing Statistics (1) 

 
 
 
 
 
 
 
 
 
 
 

 
 
2016

 
 
 
 
2015

 
2014

 
Q3

Q2

Q1

 
Q4

Q3

Q2

Q1

 
Q4

Contractual rent increases occurring in the quarter
 
 
 
 
 
 
 

 
 
Multi-tenant properties
2.8
%
2.9
%
2.9
%
 
3.0
%
2.9
%
3.1
%
3.0
%
 
2.9
%
Single-tenant net lease properties
1.7
%
2.2
%
1.0
%
 
1.6
%
2.6
%
2.2
%
0.7
%
 
6.9
%
Total
2.5
%
2.7
%
2.5
%
 
2.8
%
2.8
%
2.9
%
2.6
%
 
4.0
%
 
 
 
 
 
 
 
 
 
 
 
Multi-tenant renewals
 
 
 
 
 
 
 
 
 
 
Cash leasing spreads
4.3
%
6.3
%
7.2
%
 
3.7
%
2.1
%
5.0
%
3.6
%
 
4.0
%
Tenant retention rate
90.1
%
81.2
%
87.2
%
 
91.2
%
82.4
%
87.3
%
83.1
%
 
88.6
%


 
 
 
 
 
As of 9/30/2016
 
 
Multi-tenant

 
Single-tenant Net Lease

Contractual Rental Rate Increases by Type
 
 
 
Annual increase
 
 
 
CPI
2.1
%
 
57.6
%
Fixed
83.8
%
 
26.6
%
Non-annual increase
 
 
 
CPI
2.2
%
 
5.3
%
Fixed
4.1
%
 
10.5
%
No increase
 
 
 
Term < 1 year
4.6
%
 
—
%
Term > 1 year
3.2
%
 
—
%
 
 
 
 
Tenant Type
 
 
 
Hospital
44.9
%
 
82.6
%
Physician and other
55.1
%
 
17.4
%
 
 
 
 
Lease Structure
 
 
Gross
15.1
%
 
—
%
Modified gross
29.7
%
 
—
%
Net
55.2
%
 
100.0
%
 
 
 
 
Ownership Type
 
 
Ground lease
63.4
%
 
10.9
%
Fee simple
36.6
%
 
89.1
%


(1)
Excludes recently acquired or disposed properties, mortgage notes receivable, construction in progress, land held for development, corporate property, reposition properties and assets classified as held for sale.


 
 
 
 
 
 
HEALTHCARE REALTY 17
 
3Q 2016 SUPPLEMENTAL INFORMATION


Components of Net Asset Value
(dollars in thousands) 
 
Asset Type
 
Q3 2016 Same Store NOI(1)
 
Q3 2016 Acquisitions/Development Completions NOI (2)

 
Q3 2016 Reposition NOI(3)

 
 Timing Adjustments(4)

 
Q3 2016 Adjusted NOI
 
 Annualized Adjusted NOI
 
% of
Adjusted NOI

MOB / Outpatient
 
$47,570
 
$4,638
 
$954
 
$1,743
 
$54,905
 
$219,620
 
83.2
%
Inpatient rehab
 
4,672
 
—

 
—

 
—

 
4,672
 
18,688
 
7.1
%
Inpatient surgical
 
4,481
 
—

 
—

 
—

 
4,481
 
17,924
 
6.8
%
Other
 
1,863
 
—

 
68
 
—

 
1,931
 
7,724
 
2.9
%
Total NOI
 
$58,586
 
$4,638
 
$1,022
 
$1,743
 
$65,989
 
$263,956
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL SHARES OUTSTANDING (AS OF OCTOBER 28, 2016) 115,878,537


DEVELOPMENT PROPERTIES
 
Land held for development

$17,438

 
Construction in progress
45,734

 
Subtotal

$63,172

 
 
 
OTHER ASSETS
 
Assets held for sale(5)

$24,526

 
Reposition properties (net book value)(3)
14,411

 
Cash and other assets(6)
97,253

 
Subtotal

$136,190

 
 
 
 
 
 
DEBT
 
Unsecured credit facility

$81,000

 
Unsecured term loan
150,000

 
Senior notes
900,000

 
Mortgage notes payable
115,944

 
Other liabilities(7)
83,698

 
Subtotal

$1,330,642


(1)
See Same Store Properties schedule on page 15 for details on same store NOI.
(2)
Adjusted to reflect quarterly NOI from properties acquired or developments completed during the full eight quarter period that are not included in same store NOI.
(3)
Reposition properties includes 16 properties which comprise 951,568 square feet. The NOI table above includes 10 of these properties comprising 701,710 square feet that have generated positive NOI totaling approximately $1.0 million. The remaining 6 properties, comprising 249,858 square feet, have generated negative NOI of approximately $0.2 million and are reflected at a net book value of $14.4 million in the table above.
(4)
Timing adjustments related to current quarter acquisitions and the difference between leased and occupied square feet on previous developments.
(5)
Assets held for sale includes three real estate properties that are excluded from same store NOI and reflect net book value or the contractual purchase price, if applicable.
(6)
Includes cash of $12.6 million and other assets of $84.7 million that are expected to generate future cash or NOI and assets that are currently causing non-cash reductions to NOI. Other assets include prepaid assets of $66.5 million and above-market intangible assets (net) of $18.2 million.
(7)
Includes only liabilities that are expected to reduce future cash or NOI and that are currently producing non-cash benefits to NOI. Included are accounts payable and accrued liabilities of $71.4 million, security deposits of $6.9 million, market-rate lease intangibles of $3.4 million, and deferred operating expense reimbursements of $2.0 million. Also, excludes deferred revenue of $34.3 million.

 
 
 
 
 
 
HEALTHCARE REALTY 18
 
3Q 2016 SUPPLEMENTAL INFORMATION


Components of Expected 2016 FFO
(dollars in thousands, except per square foot data)
SAME STORE QUARTERLY RANGE OF EXPECTATIONS
 
 
 
 
 
 
Low

 
High

Occupancy
 
 
 
 
Multi-Tenant
 
87.5
%
 
89.0
%
Single-Tenant Net Lease
 
100.0
%
 
100.0
%
 
 
 
 
 
TTM Revenue per Occupied Square Foot (1)
 
 
 
 
Multi-Tenant
 

$31.00

 

$33.00

Single-Tenant Net Lease
 

$28.00

 

$29.00

 
 
 
 
 
Multi-Tenant TTM NOI Margin (1)
 
56.0
%
 
58.0
%
 
 
 
 
 
Multi-Tenant Contractual Rent Increases by Type (% of SF)
 
 
 
 
Annual Increase
 
80.0
%
 
90.0
%
Non-annual Increase
 
6.0
%
 
8.0
%
No Increase (term < 1 year)
 
4.0
%
 
6.0
%
No Increase (term > 1 year)
 
3.0
%
 
5.0
%
 
 
 
 
 
Contractual Increases Occurring in the Quarter
 
 
 
 
Multi-Tenant
 
2.8
%
 
3.0
%
Single-Tenant Net Lease
 
1.0
%
 
3.0
%
 
 
 
 
 
Multi-Tenant Cash Leasing Spreads
 
3.0
%
 
6.5
%
 
 
 
 
 
Multi-Tenant Lease Retention Rate
 
75.0
%
 
90.0
%
 
 
 
 
 
TTM NOI Growth (1)
 
 
 
 
Multi-Tenant (2)
 
4.5
%
 
6.5
%
Single-Tenant Net Lease
 
0.0
%
 
3.0
%
 
 
 
 
 
ANNUAL RANGE OF EXPECTATIONS
 
 
 
 
 
 
Low

 
High

 
 
 
 
 
Normalized G&A (3)
 
$30,500
 
$32,500
 
 

 

Funding Activity
 
 
 
 
Acquisitions
 
$225,000
 
$250,000
Dispositions
 
(50,000)
 
(75,000)
Re/Development
 
40,000
 
50,000
1st Generation TI and Planned Capital Expenditures for Acquisitions
 
12,000
 
18,000
2nd Generation Tenant Improvements
 
15,000
 
25,000
Leasing Commissions
 
4,000
 
8,000
Capital Expenditures
 
14,000
 
22,000
 
 
 
 
 
Cash Yield
 
 
 
 
Acquisitions
 
5.50
%
 
6.00
%
Dispositions
 
7.50
%
 
8.50
%
Development (stabilized)
 
6.75
%
 
8.00
%
Redevelopment (stabilized)
 
7.50
%
 
8.50
%
 
 
 
 
 
Leverage (Debt/Cap)
 
32.0
%
 
36.0
%
(1)
TTM = Trailing Twelve Months
(2)
Long-term same store NOI Growth, excluding changes in occupancy, is expected to range between 2% and 4%.
(3)
Normalized G&A excludes acquisition expenses and includes amortization of non-cash share-based compensation awards of $7.4 million inclusive of $2.4 million related to 2015 performance awards.


 
 
 
 
 
 
HEALTHCARE REALTY 19
 
3Q 2016 SUPPLEMENTAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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