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Image source: The Motley Fool. Friday, July 31, 2026 at 9:00 a.m. ET President and Chief Executive Officer - Peter A. Scott Need a quote from a Motley Fool analyst? Email [email protected] Operator: Hello, everyone. You for joining us, and welcome to Healthcare Realty's 2.52 million to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Doris Lo, Doris, please go ahead. Doris Lo: Thank you for joining us today for Healthcare Realty's second quarter 26 Earnings Conference Call. A reminder that except for the historical information contained within the matters discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. These forward-looking statements represent the company's judgment as of the date of this call. The company disclaims any obligation to update this forward-looking material. A discussion of risks and risk factors are included in our press release and detailed in our filings with the SEC. Certain non GAAP financial measures will be discussed on this call. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the quarter ended 06/30/2026. The company's earnings press release and earnings supplemental information are available on the company's website. I would now like to turn the call over to our President and CEO, Peter A. Scott. Peter A. Scott: Thanks, Doris. Joining me on the call today are Robert E. Hull, Daniel Gabbay, and Ryan E. Crowley. It has been exactly 1 year since we put out our strategic plan. At the core of the plan, we laid out clear and purposeful changes designed to improve operational performance, strengthen our portfolio, reestablish credibility, and maximize shareholder value. 1 year henceforth, and I am pleased to report we are outperforming every 1 of our key objectives over the last 4 quarters. Same store NOI growth has averaged 5.7%, Same store occupancy has increased to nearly 93%. Retention has averaged nearly 90%. Cash leasing spreads have averaged 4.1%. Leverage is down nearly a full turn. And we have raised guidance every single quarter along the way. Including by another $0.02 this quarter, driven by strong operations and leasing, a successful convertible bond offering, and accretive capital allocation. Our outperformance has been a collaborative effort across the entire organization, and it would not have been possible without the hard work of all 500+ employees and the support of our best in class board of directors. We have built a winning mentality and a culture of executing with purpose and intensity, that is now pervasive throughout the organization. Shifting to our recent leasing success. Year to date, we have executed 3.5 million square feet of leases. That is over 10% of our total portfolio. You can see the benefit of our leasing success in our weighted average remaining lease term, which stands at 65 months today an improvement of 15 months since we disclosed our strategic plan. Going forward, we have very limited near-term exploration risk, providing a clear path for earnings growth over the next several years. Our leadership team has also implemented a new leasing model designed to drive ROI across the portfolio. Over the last 4 quarters, lease IRRs have improved nearly 3 thousand basis points and our payback period is down nearly 25%. As we keep executing this quarter after quarter, our core earnings growth engine will re-rate meaningfully higher. Turning now to health system relationships. Which was an important facet of our strategic plan. Our dialogue with health systems has increased exponentially over the last year. And we are constantly collaborating to assess mutual value creation opportunities. Want to highlight a couple of recent health system transactions. First, CommonSpirit. In late June, we executed approximately 160 thousand square feet of renewals in 5 states at a positive 7% cash leasing spread. As part of this transaction, we agreed to sell common spirit 15 acres of land in Denver for $16 million removing our current land carry costs. CommonSpirit intends to use the land to expand the hospital. On top of that, we also retained future MOB development rights on the site. A great win-win transaction for both sides. Second, Wellstar. Year to date, we have executed 215 thousand square feet of renewal leases at a positive 4% cash leasing spread, along with 27 thousand square feet of new leases. As part of our lease negotiations, we agreed to sell Wellstar to Kennestone Cancer Center for $36 million which equates to more than $600 per square foot and a mid 5% cap rate. We plan to recycle these proceeds into JV acquisitions at a substantially higher yield. Another great example of a win-win outcome. Third, Ascension St. Thomas. Early July, we executed an LOI for 203 thousand square feet of leases across 3 campuses in Nashville. The cash leasing spread is positive 11%, and we expect these leases to be executed in the third quarter. As part of this transaction, Ascension and Healthcare Realty launch a comprehensive redevelopment of the Ascension St. Thomas West campus. Located in 1 of the most vibrant submarkets in Nashville. We plan to invest $35 million in our 3 medical office buildings, The hospital and health campus will undergo a $120 million modernization led by Ascension to enhance the consumer experience and develop new service lines. This is a great win-win outcome and further deepens our partnership with Ascension St. Thomas. Shifting now to capital allocation. Which is quickly becoming an important component of our earnings growth narrative. Our targeted approach continues to prioritize redevelopments joint venture acquisitions, and managing our balance sheet and returning capital to shareholders. In the second quarter, once again, we did exactly what we said we would do. First, redevelopments. During the quarter, we invested approximately $25 million in this portfolio, and we have leased it up to 67% an improvement of 1.4 thousand basis points over the last 4 quarters. We are underwriting 10% cash-on-cash yields across our redevelopment portfolio. We see some larger campuses in key markets like our West Campus in Nashville, entering the redevelopment portfolio in the near term. Second, joint venture acquisitions. We are fortunate to have a great partner in KKR who has a stated goal to grow in the medical office sector. Since our last earnings call, we have closed on or have under contract or an LOI approximately $200 million of assets or $40 million at our share. The going-in cash yield to HealthCare Realty on these transactions is approximately 7.5%. Which is highly accretive relative to our implied cap rate of approximately 6%. All of these high quality acquisition assets complement our existing sizable footprint within their respective markets, including Greenwich, Connecticut Charleston, South Carolina Port St. Lucie, Florida Seattle, Washington and Denver, Colorado. The medical office transaction market remains vibrant. Institutional capital clearly sees the same positive sector fundamentals we see, strong tenant demand, a severe lack of new supply, and rising NOI growth rates. Third, balance sheet and return of capital. During the second quarter, we moved quickly and decisively to address our near term debt maturities. We raised $1.1 billion in capital through our convertible bond issuance and delayed draw term loan. Blended interest rate on this capital is approximately 4%, saving us 100 basis points versus our original guidance. Importantly, we can be opportunistic and patient now before we access the debt capital markets again. We also bought back $75 million of stock in the second quarter, Since putting out our strategic plan, we have now repurchased $175 million of stock at a blended price of approximately $18.50, creating more than $30 million of value for shareholders. Our capital allocation priorities are currently being funded with free cash flow and disposition proceeds. Year to date, we have disposed of 6 buildings and 3 land parcels for approximately $75 million at a blended 5% cap rate. We also have an additional disposition pipeline of nearly $200 million in various stages. That amount could grow further if we are successful and opportunistically executing on low cap rate direct to health system sales at premium pricing levels. Let me finish now with what is on the horizon for HealthCare Realty 2.0. We have proven we can execute a new superior medical office model. The next several years are about scaling it. We set out to become the trailblazer in medical office, And today, we are not just talking about that ambition. We are delivering it. In addition, the pillars of organic growth occupancy, retention, cash leasing spreads, and consistent escalators They are real. And they are the engine underneath everything else we do. Now we are layering disciplined, accretive capital allocation on top of that engine. This is not a 1 quarter story. It is a durable, repeatable framework and we intend to keep pulling on every lever. Are pleased to see our valuation improving, but let me be very clear. We are not satisfied. And we are not slowing down. We see meaningful upside ahead of us, as the only public REIT that is actively growing its medical office platform we intend to lead this sector, not just participate in it. We have the team, portfolio, balance sheet, and momentum to define what best in class looks like. For outpatient medical, and we are just getting started. With that, let me turn the call over to Robert. Robert E. Hull: Thanks, Peter and good morning, everyone. Healthcare Realty delivered another strong operating quarter. We executed 23 leases, totaling 1.5 million square feet. Including 350 thousand square feet of new leasing. Same store cash leasing spreads averaged 4.8% Average escalators were 3%. And the weighted average lease term was nearly 6 years. Tenant retention was a standout at 88.5%. Helping drive approximately 25 basis points of absorption and lifting same store occupancy to nearly 93%. We also ended the quarter with approximately 460 thousand square feet of signed not occupied leases representing roughly 140 basis points of future occupancy and giving us visibility into additional gains in the back half of the year. Our health system relationships are playing a major role in generating our outstanding results. Peter mentioned a few major deals in his remarks. But we also had significant second quarter leasing activity with Baylor Scott and White in Dallas Fort Worth, UW Medicine in Seattle, Kaiser in San Francisco, and HCA in Houston. This activity further demonstrates the great progress we are making with our partners. Redevelopment leasing also advanced. We executed nearly 60 thousand square feet of new leasing during the quarter. Moving these properties to 67% leased. And we are building a strong pipeline of activity that will translate into additional leasing gains in coming quarters. Broader supply demand fundamentals remain favorable. Medical outpatient completions as a percentage of inventory are hovering near all time lows. While sector occupancy continues to reach record highs. We are also seeing increased health system M&A activity, as systems look to build scale, strengthen market position, and improve financial performance. Acquisitions can expand patient reach, broaden services, improve payer leverage, and create cost efficiencies. Over time, these benefits can support stronger margins, better balance sheets, and lower cost capital for these systems. For landlords, this activity can translate into stronger tenant credit and additional capital sources to support health system growth that drives demand for outpatient medical space. Against this favorable backdrop, our new and renewal lease pipeline remains robust, at more than 3 million square feet. Including several large health system transactions that continue to progress. Finally, tenant satisfaction. Our recent annual third party tenant survey showed year over year improvement across every metric. These results are further evidence that the operating platform changes we made improving the tenant experience, and strengthening execution across the portfolio. As we move into the back half of the year, we expect strong leasing momentum high tenant retention, and improving lease economics to continue driving same store NOI growth. With that, I will turn it over to Daniel to discuss financial results. Daniel Gabbay: Thanks, Robert. I will briefly comment on our earnings balance sheet and capital allocation and our higher revised guidance for the year. Our momentum continued in Q2. With normalized FFO per share of $0.41 and same store cash NOI growth of 5.1%. Which includes almost our entire portfolio. Additionally, FAD per share was $0.32, resulting in a quarterly dividend payout ratio of 76%. In May, we opportunistically accessed the capital markets during a reprieve in global conflicts and issued $700 million of exchangeable senior unsecured notes due 2032 at a coupon of 3%. The issuance was strongly received and upsized by $100 million during the marketing process. We utilized proceeds to repay our $600 million senior unsecured notes due in August this year, which had a coupon of 3.5%. We can currently repurchase $75 million of shares with the offering, which was both financially accretive and additive to the overall deal execution. When factoring in the capped call, exchangeable notes have an effective conversion price of $27.41 per share. Or 40% above our closing price on the day of marketing. Also during the quarter, we raised a $400 million delayed draw term loan. Exchangeable notes and delayed draw term loan effectively address our maturities through 2027, and with an additional $1.2 billion in liquidity on our line of credit, we have ample flexibility through 2029. In the meantime, we will remain opportunistic evaluating the bank and bond markets for any future steps to further extend our maturity profile at attractive rates. As Pete noted, we remain disciplined and decisive if there are acquisition opportunities in our joint venture with KKR. Since the end of March, we have closed on or under contractor LOI for nearly $200 million in acquisitions or $40 million at share. These transactions will be efficiently match funded with dispositions throughout the year. Such as our land sale to CommonSpirit, and our MOB sale to Wellstar. Most importantly, will continue to keep our leverage in the mid-5x area. Turning to guidance, which you can find on page 11 of our supplemental report, we increased full year normalized FFO per share guidance by $0.02 to $1.64 at the midpoint, and we increased the upper end of the range to $1.66 per share. Our same store cash NOI outlook is now 4.25 to 5%, up 50 basis points at the bottom of the range up 25 basis points at the upper end of the range. These results are driven by strong leasing outcomes and 4% to 5% cash releasing spreads year-to-date in our same store portfolio. Uses of capital increased $115 million for the year, to reflect the incremental share repurchases we made alongside the exchangeable notes as well as the $40 million to fund our share of the JV acquisitions mentioned earlier. Disposition guidance, therefore, increased by a similar amount. Again, recall, our guidance only reflects acquisitions, redevelopments, or other uses of capital announced to date. 1 last housekeeping item before we go to Q&A. In addition to filing our earnings results, we will be refiling our securities shelf and ATM prospectus supplement since the shelf is due to expire in August. We will also file the resale registration statement as required by the registration rights in connection with the exchangeable notes. With that, operator, let's go ahead with Q and A. Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute. Your device. Please stand by while we compile the q and a roster. Your first question comes from the line of John Kilichowski with Wells Fargo. John, please go ahead. John Kilachowski: Hi, good morning. Thanks for taking my question. Peter, in the opening remarks, you talked about trending ahead. You are a year out from your strategic plan, and you are trending ahead on all I am kind of curious now, where does that put you in terms of your outlook on that $1.99 or $1.97 to $1.99 range that you gave in that strategic plan. Peter A. Scott: Yeah. Thanks, John. Hey. it is Peter here. Good question you are looking for. 2028 guidance. But it is AFFO and not FFO, AFFO, just to be clear. But, look. As I said on the oh, no worries. No worries. I said in my prepared remarks, we are tracking ahead of schedule. I think a couple of things I would just point to. Thanks to the convert deal and better-than-expected same store NOI. This year. And actually, what we are seeing as we look out to the next couple of years and as fundamentals continue to firm up, we certainly feel like we are ahead of schedule on that. And if you go back a year ago, 2026 was really expected to be a flat year of earnings since we had you know, about $0.07 of dilution from portfolio optimization, and we also had some refinancing headwinds. Our $1.64, which is the midpoint today, the year is not done. You know, we are halfway through. You know, that is actually $0.03 of growth. When you look at this year versus, you know, last year. And, also, we are only getting about a half year benefit from that. Convert this year. So I am not going to give an exact number, except to say that we feel quite good about, you know, how we are trending just a couple quarters into the, 12 quarters of projections we put out, that 3-year plan. John Kilachowski: Thank you. And then my second 1 is on the KKR. JV now. We are seeing you acquire alongside them. I noticed no flywheel image in the supplemental yet, but I am curious just about the sizing of that opportunity. And then also with the match funding piece, you know, the end of last year, there was this idea of getting out of the noncore assets, and there was some great pricing there. But just curious what you are funding it with and how you are managing to keep this sort of NAV accretive that you are still selling out of some of the things that you do not want to own but are still able to achieve these great cap rates to afford sort of that spread? Peter A. Scott: Yeah. it is a really good question. And, obviously, KKR has been a great partner. They came in as part of a recap couple years ago and always had ambition to grow that vehicle. I would say that health care realty was holding that vehicle back from being able to grow. There was not a lot of free cash flow and there was a, you know, optimization plan that was discussed but actually had not been put into effect yet. So it was very difficult, and, obviously, the dividend issue was very difficult for that you know, joint venture to grow, and we are pleased now that we have done about a half a dozen deals so far. This year. it is about $300 million in total. With the stuff that is either closed or under contract. And it is it is pretty attractive yields to us. it is attractive yields to them. You know, how we think about funding that, which I think is the crux of your question, You know, to date, we have actually focused on capital recycling. And free cash flow to basically fund all of our capital allocation initiatives. I think, look, at the end of the day, it is our job as executives to maximize earnings growth. So as we think about funding capital allocation priorities, if funding them is more advantageous through dispositions, because of the cap rate we are able to get, then we will certainly focus on that. You know? If accessing the equity markets becomes more accretive than, you know, the dispositions, then we certainly could pivot to that. We have not done that. To date at this point in time. Or we certainly could look at both. But I think what is most important for us is we are going to look at every lever to maximize know, earnings growth going forward. And I will also just point out, and I know this is a long winded answer, you put out a good note last night. We are going to maintain discipline. Here. We kind of use the d word, not the o word. that is come up a lot. So we are not looking to create that you know, flywheel you are talking about there. Certainly, it is accretive today for us to think about capital allocation priorities, but we are going to maintain discipline as we think about it. Very helpful. Thank you. Yep. Operator: Your next question comes from the line of Michael Mueller with JPMorgan. Michael, please go ahead. Nahum: Good morning, guys, and thanks for taking the question. You have Nahum on for Michael this morning. I guess my first question, looks like you guys have built a pretty sizable redevelopment pipeline to this point. What does the shadow pipeline look like? And you guys think you will be able to sustain a size close to this over the next few years? Peter A. Scott: Yeah. I can take that 1. it is Peter here. You know, we actually are really pleased with the progress we have made on the redevelopment pipeline and the preleasing Hopefully, everyone heard it in my prepared remarks. But when you look back a year ago, we have improved preleasing in that portfolio by 1.4 thousand basis points, which is pretty significant. And we actually have a nice pipeline as well, you know, building on that. So I would expect to see continued absorption as the year progresses. You know, we have got around 25 assets in redevelopment today. We have made a big push to try and identify the assets we want to go into redevelopment. So they go in on the front end of our 3 year plan that we had put out. So that pool has increased the last couple of quarters. It will increase a little bit more as the year progresses. We have not put the 3 assets of the Ascension St. Thomas campus in yet. Those will go in as the year progresses. I would expect that number to probably go up to maybe 30 or so. But then also, we will get the benefit of assets completed that will cycle out. So I would think we will probably reach a peak towards the end of this year. I think it will always be part of the ongoing business. I mean, I have been around this business for a long time, and where rental rates are trending, I think there is a real opportunity for us to spend capital on assets in our existing portfolio. And increase occupancy and or rental rate and get a very, very nice return on that. So I think we are at the front end of that, and I think it will be a continuous part of our business going forward even outside of the strategic plan, but it will not be as large. Outside of the strategic plan as it is trending right now. Nahum: Got it. Thanks. And maybe just a quick follow-up sticking on redevelopment. I think the supplement shows about 9% to 12% returns for the current pipeline. Could you guys walk us through what would need to happen to maybe achieve the low end and high end of that range and maybe where you guys, you know, currently think the pipeline stands within there? Peter A. Scott: Yeah. I mean, I think the pipeline is probably right in the middle of there. I think some markets, you will get a higher yield. In other markets, it may be on the lower side of that. I think Nashville is probably a pretty good example where it is probably more like a 9, as opposed to a 12. But, you know, for this market, for what those assets would trade for, on a stabilized basis with improvements. I mean, you are creating pretty significant value. I am just talking about cash-on-cash yield, not about NAV, you know, value creation. On that. And, again, it comes from basically, you know, 2 important pieces. 1 is an uplift in rental rates, which is very real. And then the other would be absorption within the assets. You know, some of the assets that are in there are assets that had been underinvested into for quite some time. And we have said that in the past. So we see a pretty significant upside in occupancy. So if you are getting upside in occupancy and you are getting an uplift in rate, you are gonna get to the higher end of those cash on cash yields. If you are just getting more of a rate uplift, and a little bit of occupancy uplift, you are probably gonna be on the lower end of that range. Got it. Thanks, guys. Yep. Operator: Your next question comes from the line of Michael Carroll with RBC. Michael, please go ahead. Michael Carroll: Yep. Thanks. I wanted to circle back on the Ascension agreement that you guys highlighted in your prepared remarks and in the supplemental. Can you provide some color on the extent of the $35 million planned investment that HR is making? And is that a revenue generating investment? Or is it are you I guess, it is a set Ascension's rents increasing? Or is that just reflected in the 200 thousand square feet of leases that you completed? Peter A. Scott: Yeah. So, Mike, there is actually a couple pieces to that. And first of all, we are really pleased that we got this agreement announced. In fact, actually, Ascension press released it a couple of weeks ago, so we felt like it was important to get this out. And in our earnings release. And we have got a very close relationship with the Ascension St. Thomas team that is based down here in Nashville. And I do not know, 5+ years ago, there was a big redevelopment plan on the Midtown campus that was under occupied and that campus is now 100% leased effectively and pretty sporty. Rental rates. I think it is kinda leading rental rates in the Nashville market, and I know many of you have seen it. So this is a campus that is in, you know, West Nashville closer to, Belmead. So it is actually, like, right at the entrance way to the most expensive houses here in Nashville. And it is been an underinvested campus for quite some time. it is about 80% occupied today. And the hospital has not been invested into in a long time. And Ascension has a real mandate to invest more capital into the Nashville market. I mean, it is a target market for them. So we collaborated together to figure out what we think makes the most sense. And you know, we extended, the Ascension leases 10 years. At that campus at a pretty nice mark to market. I mean, you are talking about a double-digit mark-to-market of 11%. that is not in our numbers that we reported last quarter, so that certainly gonna help us when we report our numbers. Spread over a lot of leases in the third quarter. And we see that campus going from 80% occupancy up to over time, probably close to 100%, like in the Midtown campus, it generates $7 million of NOI today. We believe it is gonna be $10 million+ of NOI when all is said and done between absorption as well as the, the favorable leases that we have put in place. So, again, as I said, that is kind of in that 9% to 10% range that is part of our cash on cash yields. But, again, I cannot actually emphasize enough that you are gonna get some pretty significant I think, NAV, how you benefit from them because the cap rate is certainly gonna compress on that asset. Michael Carroll: Okay. Good. No. that is helpful. And then similarly, just on the CommonSpirit investment that you talked about or the sale. Yeah. I guess, is CommonSpirit building on that specific land site? And when you say that HR is maintaining future MOB development rights, is it within that campus that you will just do a land lease where they own the land and then you will develop it. it is not on that site or is it just on other parcels nearby? Peter A. Scott: Yeah. No. It will be on that site, Mike, I mean, that is a great win. The common spirit hospital beds are full. that is actually a hospital that is right at the foothills of the Rockies. And it is got a great, you know, ortho as well, and they need to expand. And the only way they could expand is with the land that we owned. Adjacent to the you know, hospital. So they have development rights to build you know, and expand the hospital there. And then we were able to retain your typical development agreement to the extent that a medical office building gets built on that, parcel of land, it would be a development that we have the first right to do, and it would be under a ground lease structure. Very similar to how typical developments get. You know, completed on campus here. So we were able to take what was a nonincome producing asset, in fact, an asset where we were losing money, monetize it, and also achieve some pretty healthy leases alongside of it as well. So we felt like that was a great win. CommonSpirit achieved what they were looking to achieve, and we achieved what we were looking to achieve. And the relationship is as strong as it is ever been with CommonSpirit right now. Great. I appreciate it. Yep. Thanks, Mike. Operator: Your next question comes from the line of Michael Stroyeck with Green Street. Michael, please go ahead. Michael Stroyeck: Thanks, and good morning. Curious just on the magnitude of releasing spreads by occupancy. How large is the divergence of those spreads you are seeing between, call it, your stabilized portfolio and your lease up portfolio? Peter A. Scott: Yeah. Do not know that I have all those numbers. You know, at the tip of my fingers right now, Mike. But I would just say that, to achieve close to 5% this quarter on cash leasing spreads, which I think is your question. I mean, you have gotta have the vast majority of your leases you know, rolling up at some pretty nice you know, levels. I would say, to be to be fair, we are probably getting better cash leasing spreads on more well occupied buildings as opposed to the lease up buildings just because I think we have a lot more leverage in a building that is full And we are actually going through a process and it is been helping us you know, figure out exactly how hard we can push. We are gonna rank all of our buildings. And on the ones where we feel like we have got high occupancy, strong markets, you know, I would not be surprised to see double digit cash leasing spreads. On those. And then in buildings where we are trying to lease up the asset, you know, we are we are probably not gonna get as robust of a cash leasing spread, but we are a lot of absorption associated with it. But it all blends today to around 5%. You know, high fours. And that is trending, you know, favorably. So we feel quite pleased with where it is headed. Makes sense. Then maybe we could switch gears and talk to transaction market a bit. Michael Stroyeck: What are you seeing in terms of the strength of the private market bid today have higher rates in recent months led to any sort of reset in pricing expectations or just general, you know, thinning of bidding tents from some of the more levered buyers? Peter A. Scott: We do track it. We track it pretty closely. And we have not seen a big impact in right now, cap rates with rates having backed up, but it is still, obviously, you know, early days. We do like our strategy. Of doing, you know, single asset or very small portfolio deals with KKR. I mean, when we talk about the $200 million that is under you know, contract right now or closed, that is spread over 5 different, you know, transactions. So we feel like if there is a backing up of you know, cap rates at all, we will be able to take advantage of that in the future. But to date, we have not seen a backing up, We are an unlevered buyer within that vehicle, which I think positions us you know, quite well. And I would just say that there is not a lot of other REITs that are actually showing up. When assets are on the market today. So I think we have a little bit of a competitive advantage from that perspective, but, obviously, there is a big you know, private market bid, but, typically, those buyers, in institutional capital needs a partner. To oversee those assets. So like I said, I think we are we are pretty well positioned. But again, we are going to be very disciplined. I keep using the d word. On how we think about this. We are gonna manage our balance sheet effectively. We are going to continue to allocate capital to redevelopments. And we will continue to look at acquisitions to the extent that we feel like it is augmenting our earnings growth. Understood. Thanks for the time. Michael Stroyeck: Yep. Operator: Next question comes from the line of David Rogers with Raymond James. Dave, please go ahead. Dave Rogers: Yeah. Good morning, everybody. Hey, Peter. You talked about in your opening comments just the strength of the lease IRRs that you have improved and obviously the spreads are part of that, concessions must be down. But maybe dive a little bit more into that of how much of that is, obviously, you guys have done a good job, but how much that is also just the market improving on the leasing front? But give us a little more color on kind of those IRRs and what you have done. Peter A. Scott: Yeah. Well, I think it is a couple of things. I think, obviously, fundamentals have firmed up, Dave. that is certainly been helping. I will also point out retention. I mean, retention has increased and increased pretty significantly, and that is a function of I think, better service we are providing to our tenants combined with lack of, you know, new supply. And on renewal lease deals, the amount of capital required is a fraction of what is required on a new lease deal. So that is certainly helping us as well. And when we talk about the pillars of growth, you know, retention is 1 that we certainly put in there. I know cash leasing spreads tends to get everyone a little bit more excited but we look at, you know, all of the different, you know, pillars including retention, and that certainly has helped. So I think it is part fundamentals and then just part, you know, better retention. Limiting the amount of capital that has to go into to any kind of, lease deal we do. Thanks for that. Dave Rogers: And then maybe a follow-up on leasing as well. I think Robert had mentioned the 3 million square feet in the leasing pipeline, if I heard that right. Maybe talk about under the new HR what that looks like in terms of, you know, how much of that you think you close over time? I know you have a about a year worth of history to kind of determine that. But what does that look like, I guess, over the last year? How does that compare historically? So an execution rate, And I guess, where do you guys see that going overall? Robert E. Hull: Yeah. It is Robert. Yeah. The pipeline is strong right now. A little over 3 million square feet. About half of that is health system activity. We have seen an uptick there. As Peter mentioned, we have we have got a number of been improving our health system relationships and the dialogue there with the systems. We have seen a good bit of that activity over the past couple of quarters. You know, we did about a million and a half square feet of leasing this quarter. You know, that is, you know, a little down from last quarter. But I will say, think we mentioned this last quarter, 2 million square feet was a was a big number for us and that of that was a number of deals with these health systems that we had been working on for some time, and we dragged them across the line. So the 3 million square feet is in the pipeline is strong, and I think that kind of in that million-and-a-half range that we have been executing, it is probably a good pace to think about whenever we as we go forward. And then that is a combination of renewals and new leasing So I am comfortable with that, and I think as we just talked about, the demand out there for outpatient medical is very strong and getting, in my mind, stronger as we see the continued push from inpatient to the outpatient facilities by these health systems doing more procedures in the outpatient setting and it being more having higher margins for these systems. So I think we are just gonna continue to see that happen. Great. Thank you. Operator: Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Austin, please go ahead. Austin Wurschmidt: Thanks. Good morning, everyone. On the $3 million of upside of NOI at the Ascension campus in Nashville, you highlighted earlier. I am just wondering, is that part of the $20 million of upside within the lease up of the unstabilized pool And are there other assets or sort of relationships with chunkier upside opportunities that you are evaluating in the near term that kind of really help close that gap? Going from $75 million, you know, up to the $95 million stabilized number that you flagged in the presentation? Daniel Gabbay: Hey, Austin. it is Daniel. Good morning. I will grab that 1. Short answer on the Ascension campus is, is that when you think about that $20 million, that is not in there. And I think as we continue to look through the portfolio and as we have talked about, there could be incremental opportunities versus the $25 million or so asset we already have in redev. We look for incremental opportunities across all 560 plus properties in our portfolio all the time. And these things can change as well as you have different demand drivers, improving demand drivers in a market. So it is a great relationship with Ascension. They are a fantastic partner. So we are glad to, have that coming. And we will look to always continue to find more upsides in the portfolio. Austin Wurschmidt: And then p as you move into the phase of scaling the portfolio, through the disciplined capital allocation you spoke to, You mentioned you are nearing a peak on redevelopment. How close are you to evaluating more wholly owned opportunities through either development or just straight wholly owned acquisitions? Peter A. Scott: Yeah. that is actually really good question. I think just stepping back for a second, when you look at our 3-year plan, we did not assume really any capital allocation beyond redevelopments. Right? So the fact that a year after we put it out, we are seeing some progress on some prudent capital allocation on the JV acquisition side. I would say that we are pleased that we have gotten here a lot faster than maybe we had anticipated, which is great. Right? But we are gonna be extremely mindful of accretion as we put capital out the door And I think putting capital out the door in JVs today creates the most amount of accretion for us. Therefore, we are gonna prioritize joint ventures. that is not to say we could not consider something on balance sheet in the future. But, again, it is all just gonna come down to the types of assets we wanna buy and what is the earnings benefit. You know, from it. So that is just the lens in which we will look at everything. Great. Thanks for the time. Thanks, Austin. Operator: Your next question comes from the line of Seth Bergey with Citi. Go ahead, Seth. Nicholas Joseph: Thanks, Seth. it is Nick Joseph here with Seth. Maybe just on internal growth. You are trending ahead on full year cash since your NOI guidance. So just wanted you to touch on the back half assumptions and what is going into the implied deceleration there. Peter A. Scott: Yeah. Maybe Nick, let me start, and then I am gonna have Daniel just touch on 2026, generally speaking. By the way, nice to have you on the call. Always good to hear your voice. I just as we think about same store NOI growth and earnings growth, and I have said this a couple of times, in the past. Mean, we are very aware that earnings growth and valuation multiple are highly correlated. In fact, I am sure the correlations are at the highest they have ever been. In the real estate sector. So you can rest assured that we are gonna focus on earnings growth, and pull on every lever to achieve that. And, you know, last quarter, I did spend a lot of time going through the pillars of growth and how those are shaping up. Outpatient medical. So I think as we look at what do we think it is gonna take to be successful in the health care REIT space, to get a better valuation multiple mean, I think our same store growth probably has to be in the, you know, 4% area on a stabilized basis. We are doing better than that. Today because of some occupancy and absorption And then, obviously, when you think about earnings growth, like to see mid single digit earnings growth on a stabilized basis as well. And when you look at where we trade today, I do not believe we are getting credit for our ability to achieve those numbers that I just, you know, laid out. But that is the upside opportunity, and that is what, you know, gets us excited as a team here. Every day. And we are pleased that it is improved, since, we put out our strategic plan. And since I was able to join the company. A year plus ago, but they are still obviously work to do. Daniel Gabbay: Daniel, why do not you talk about 2026 in general in the back half of the year? And hey, Nick. Again, thanks for the question. I think Peter thematically has done it, spot on. I mean, numerically, right, we have increased our guidance range. We increased it more at the low end of the range by 50 basis points. We took up the top end of the range of 25 basis points on the same store NOI growth. For the year. And I think that speaks to our performance year to date. That speaks to our conviction in the business and the changes we have made about driving results every single day. Obviously, we are over 7 months of the year. Right? So if we continue to perform, I think we feel very good, through the guidance. Numbers that we have provided. And as Peter said, we are always trying to drive towards you know, outperforming, and being at the top end of our guidance range. But there is still 5 more months of the year to go. So I think that are the sort of things that we think about when we think about our same store NOI guidance range. And as it relates to FFO translation, we have obviously anniversaried through a lot of dispositions from last year that create a drag on year over year FFO per share growth. We successfully addressed the August 2026 maturity of the bond, with our highly success highly successful exchangeable note offering, which removes some of the drag that we had there. So everything we are doing every single day is to drive to that core organic earnings growth in our business that is mid single digit. And we continue to put through those efforts. So it is really about doing that. it is on our it is on our leasing side. We are happy with the JV acquisitions with KKR. And we are looking to continue to deliver every day. But it is a simple business in those respects, and we are gonna lease We are gonna have high retention and push those cash leasing spreads and continue to keep pushing on that occupancy in the same store NOI growth. Makes sense. Thank you. Thanks, Nick. Operator: Your next question comes from the line of Omotayo Okusanya with Deutsche Bank. Omotayo, please go ahead. Omotayo Okusanya: Yes. Good morning, everyone. First of all, I just wanted to focus on the KKR transaction and trying to understand a little bit more the, the, like, 7.5% cap rate on those deals. Again, you guys are selling assets at sub-5%. So just kind of curious about the pricing there, and if there was anything unique. Is it market? it is just seems like really, really attractive pricing and opportunities to do more like that. Peter A. Scott: Yeah. So, Tayo, let me just start with that. I mean, when you think about the dispositions and we do characterize you know, the type of asset operating or land. There is some land within our dispositions, so that certainly benefits the cap rates. That said, I would probably focus on the Kennesstone Cancer Center. And the $600 per square foot and a kind of mid-5% you know, cap rate that we quoted on that. I mean, that is the type of, you know, asset sale we could consider doing if we wanted to you know, fund acquisition opportunities with, you know, asset sales and we have certainly got a pipeline of things we are looking at and we have got a pipeline of dispositions that will close through the balance of the year. So we appreciate that if we can create some type of arbitrage, it makes sense, and we will we will look at that. As to the you know, yields on the acquisitions, and maybe I will just spend a second on the, the 200 million You know, as I said, that it is 6 assets, but it was 5 different you know, transactions. So the going in cash cap rate is in the low sixes, but the yield to health care realty, which is what is gonna drive our earnings, is actually right around that 7.5%, and that is on a cash. Basis as well. We get, obviously, asset management fees on the capital within the venture, which helps boost those returns for us. We think that is the right way to quote it. You know, the occupancy on those assets is in the low nineties. Weighted average lease term is you know, 7 years, and there is actually a pretty strong mark to market in the markets that we mentioned. I mean, Greenwich, Connecticut is a very strong market. Charleston, South Carolina, Seattle, Washington. So even though the going in cap rate or the going in yields are what they are, we think they certainly have upside to them, over the whole periods just given the mark to market know, opportunity. So I would expect to do deals similar to this going forward, if we are fortunate to transact. But I wanted to spend a second on the mid-7s yield to us and what that means from a going in cap rate. Exclusive of any asset management fee. that is helpful. Omotayo Okusanya: And then on the JV side, any update on the Nuveen JV and kind of what is happening on that end and if we could see additional activity there. Apart from the KKR JV. Peter A. Scott: Yeah. Look. We talk to Nuveen quite often. You know, I think those are more just discrete JVs, and they are not growth vehicles. Like what the KKR vehicle is, but I would say we have got, you know, great you know, dialogue with Nuveen and not much else to report on those JVs today. Gotcha. Omotayo Okusanya: And if I could squeeze 1 more in, tenant improvements and leasing costs. Again, that is coming down pretty nicely. it is still about 22%. Of net rent Just kind of curious again where you see that going forward as you are kind of negotiating with your tenants whether, again, you are having opportunities to kind of lower that just because again, demand's getting better. there is less supply. Just for the industry fundamentals continue to enable you to kind of drive that lower and then to also enable you to possibly drive the annual rent escalator higher. Daniel Gabbay: Hey, Tayo. it is Daniel. Great question. As you noted in the supplemental trend, these numbers are coming down year over year. We have always talked about you know, these numbers, remaining in the for the renewal leases, it is you know, consistently seen this so far this year in the sort of mid-double digits in the teens. As Peter's always talked about, right, renewal leases are less expensive from capital perspective than new leases. New leases numbers have come down significantly in terms of the percent of annual rent that we are providing in terms of TISLCs. So driving all those results. that is why we have better IRRs, better payback periods in all of our leases. As you have higher retention and a higher occupied portfolio, right, you just have more of a skew towards renewal versus new definitionally. And that is advantageous as we look to drive those numbers down. So that is a continued focus for us. Trying to be efficient with every dollar of capital in the company. Great. Omotayo Okusanya: Good execution here from you guys and the team. Well done. Thanks, Kyle. Operator: Your next question comes from the line of Michael Goldsmith with UBS. Michael, go ahead. Michael Goldsmith: Morning. Thanks a lot for taking my questions. Same store NOI growth was in the first quarter was 6.9% and the second quarter 5.1%. This well above the historical MOB norm. So what went different today, or is this just the strategic plan playing out? And I know you have discussed 4 drivers of the business in the past. Maybe you can touch on whether any of those have changed that is driving these results. Peter A. Scott: Yeah. Hey, Michael. it is Peter here. I mean, look. We certainly are seeing a benefit from absorption. In the first and, you know, second quarters, and you can just look back over the last however many quarters. And as we have had a lot of leasing success, that absorption benefit is going to you know, fade a little bit. But we are seeing you know, on the other side of the spectrum, cash leasing spreads are firming up. And so we still feel like we can generate much better growth going forward than we have historically. And as I said, last quarter, and I will continue to repeat, you know, the 2 to 3% kind of steady-Eddie descriptions of medical office, like, that was all well and good in a low interest rate environment. But that does not work in a higher interest rate environment. So we have to do better, and we will do better. And we are doing better. So we will push on all of those levers, but we have gotten the benefit in the first and second quarters of some pretty significant year over year occupancy gains, which that will stabilize over time. We have a mostly multitenant portfolio. We are getting close to 93% leased in our same store pool. You are going to have some frictional, you know, vacancy. It just happens. You are not gonna retain or renew every single you know, tenant for a variety of reasons. But and then that gives us an opportunity to push on cash lease spread. So we feel like we are in a pretty good spot. And then I did not answer Tayo's question on escalators. I think 3% escalators today has become kind of the norm. that is that is definitely improved. that is another lever. And we certainly if we can push, we will continue to push. I think as rates rise, that is certainly an easy thing to push on. On our tenants as well to point to why we justify a better-than-3% escalator, but I would say we have been pleased with getting 3% up to this point. Thanks for that. Michael Goldsmith: Your stock has rerated meaningfully from the levels where you repurchased shares earlier in the year. So how does today's expected return from share repurchases compare with this 7% plus yield you are achieving through JV acquisitions and the 9% to 12% redevelopment yields you are underwriting has a relative attractiveness of buybacks changed. Peter A. Scott: Yeah. I mean, the short answer is yes. It has changed, and we are going to look at you know, what the buyback math is relative to recycling that capital into redevelopments or you know, capital allocation. But buybacks, it is always a lever that we can turn on. It provides immediate accretion if we decided to, you know, pursue. it is not a program that we just turn on and let a financial institution manage it for us over a period of time. I mean, we are active. We are active traders. On it, when we do turn it on, and we will get more aggressive in days where we feel like the opportunity presents itself. But at the moment, you know, I think buybacks do not screen as favorably, but that does not mean that we are not rooting for this, but obviously, if there is some dislocation, we can obviously turn it back on immediately, and it provides immediate accretion. Thanks. Michael Goldsmith: And if I could squeeze 1 more in, same store occupancy is now at 92.7%. Total portfolio occupancy continues to move higher. Has your view of normalized occupancy ceiling changed given the continued lack of new supply? Or do you still view 92, 93% as the right long term target? Peter A. Scott: Yeah. Good question. I think there is certainly a bias for it to be increasing. Which is which is a positive. I mean, when you look at sector wide, occupancy, I mean, it is been trending higher for I think, 20 to 30 quarters. We certainly should be able to do just as well as the overall sector. And can we do better than that You know? Perhaps. And I think we feel like there is some additional absorption in the back half of the year. As well. So it is trending a little bit higher. For sure. Thank you very much. Good luck in the back half. Thanks, Michael. Operator: Your next question comes from the line of Michael Gorman with BTIG. Michael, please go ahead. Michael Gorman: Yeah. Thanks. Good morning. A lot of ground covered here. Just a quick 1. Peter, as you look at the transaction markets, obviously, you have got active dialogues with all of your health systems. You have got a great partner with KKR. Have there ever been any transactions or any of those relationships where wanting to control their real estate, they may be do not want a joint venture that involves a manager involved in owning their assets. Has that been a limitation at all when looking at the transactions market? Where you have to do something on balance sheet rather than through the partnership if you wanted to participate. Peter A. Scott: Hey. Michael. Good question. To date, no. it is kind of seamless to the tenants in the building. In fact, I do not know that our tenants would be aware if it is a wholly owned building or if it is a joint venture building. We are the asset manager within the venture. We control leasing. We control property management. The health care realty brand and everything you would expect is within the building. So I would tell you today that, no. We have not had any, you know, pushback on a wholly owned versus an institutional capital joint venture asset. And I think that is probably pretty consistent. Where you could have some you know, items to deal with is only on contributing assets into a joint venture whereby you trigger some ROFR rights for the health system, but that is not what we are talking about here. We are not talking about a defensive JV and a capital raising. Exercise. Okay. Great. That is helpful. I will leave it there. Thank you. Great. Thank you. Operator: There are no further questions at this time. I will now turn the call back to Peter A. Scott for closing remarks. Peter, go ahead. Peter A. Scott: Great. Thank you, and thanks to everybody for joining us on this call. We look forward to continuing to communicate with you, over the coming months. Everyone enjoy the rest of their summers. Talk soon. Thanks. Bye. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Healthcare Realty Trust, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Healthcare Realty Trust wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,405!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,344,091!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Healthcare Realty Trust (HR) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Normalized FFO per Share: $0.41 for Q2 2026. Same-Store Cash NOI Growth: 5.1% for Q2 2026. FAD per Share: $0.32 for Q2 2026, with a quarterly dividend payout ratio of 76%. Full-Year Normalized FFO Guidance: Increased by $0.02 to $1.64 at the midpoint, with the upper end raised to $1.66 per share. Full-Year Same-Store Cash NOI Outlook: Raised to 4.25% to 5%. Same-Store Cash Leasing Spreads: Averaged 4.8% in Q2 2026. Tenant Retention: 88.5% in Q2 2026. Same-Store Occupancy: Nearly 93%. Leasing Volume: Executed 323 leases totaling 1.5 million square feet, including 350,000 square feet of new leasing. Capital Raised: $1.1 billion through a convertible bond issuance and delayed draw term loan, with a blended interest rate of approximately 4%. Share Repurchases: $75 million of stock bought back in Q2 2026. Dispositions: Year-to-date, disposed of six buildings and three land parcels for approximately $75 million at a blended 5% cap rate. Joint Venture Acquisitions: Closed on or have under contract or LOI approximately $200 million of assets, or $40 million at the company's share, with a going-in cash yield of approximately 7.5%. Warning! GuruFocus has detected 9 Warning Signs with HR. Is HR fairly valued? Test your thesis with our free DCF calculator. Release Date: July 31, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Healthcare Realty Trust Inc (NYSE:HR) outperformed all key strategic plan objectives over the past four quarters, including 5.7% average same-store NOI growth and nearly 93% same-store occupancy. The company raised full-year 2026 normalized FFO per share guidance by $0.02 to $1.64 at the midpoint, driven by strong operations, leasing, and a successful convertible bond offering. Executed 3.5 million square feet of leases year-to-date, representing over 10% of the total portfolio, with a weighted average remaining lease term improved by 15 months to 65 months. Completed accretive capital allocation, including $200 million in JV acquisitions with KKR at a 7.5% yield to HR, and $75 million in share repurchases at a blended price of $18.50, creating over $30 million in shareholder value. Strengthened health system relationships with major deals, including CommonSpirit, Wellstar, and Ascension St. Thomas, featuring positive cash leasing spreads and strategic land sales at premium pricing. Redevelopment portfolio leased up to 67%, a 1,400 basis point improvement over four quarters, with underwriting 10% cash-on-cash yields and a strong pipeline for future absorption. Successfully addressed near-term debt maturities by raising $1.1 billion at a blended interest rate of approximately 4%, saving 100 basis points versus original guidance and providing ample liquidity through 2029. Tenant retention remained strong at 88.5%, with signed-not-occupied leases representing 140 basis points of future occupancy, providing visibility into additional gains in the back half of the year. Cash leasing spreads averaged 4.8% in Q2, with average escalators at 3%, and lease IRRs improved nearly 3,000 basis points over the last four quarters. The company is the only public REIT actively growing its medical office platform, with a robust leasing pipeline of over 3 million square feet and favorable supply-demand fundamentals. Same-store NOI growth decelerated from 6.9% in Q1 to 5.1% in Q2, and the company expects absorption benefits to fade, potentially leading to lower growth rates in the future. The company's stock valuation remains below what management believes is justified, and they are not getting credit for their ability to achieve mid-single-digit earnings growth. Share repurchases are now less attractive compared to JV acquisitions and redevelopment yields, limiting the potential for immediate accretion from buybacks. The company faces ongoing frictional vacancy in its multi-tenant portfolio, which could limit occupancy gains and require continued leasing efforts. Disposition guidance increased by $115 million for the year, reflecting the need to fund capital allocation initiatives, which could signal a reliance on asset sales. The redevelopment pipeline is expected to peak at around 30 assets by year-end, and the company may not sustain the same level of redevelopment activity beyond the strategic plan period. The company's guidance only reflects acquisitions and redevelopments announced to date, leaving uncertainty about future capital allocation and its impact on earnings. The transaction market remains competitive, and while the company has a competitive advantage, there is a risk of cap rate expansion if interest rates continue to rise. The company's leverage remains in the mid-5 times area, which may limit financial flexibility and increase sensitivity to interest rate movements. The company's success is heavily dependent on health system relationships, and any deterioration in these partnerships could negatively impact leasing and growth prospects. Q: Pete, in the opening remarks, you talked about trending ahead, you're a year out from your strategic plan and you're trending ahead on all metrics. I'm kind of curious now where does that put you in terms of your outlook on that $1.85 or $165 million to $185 million AFFO range that you gave in that strategic plan?A: (Peter Scott, President and CEO) We are tracking ahead of schedule. Thanks to the convertible deal and better-than-expected same-store NOI this year, we feel quite good about how we're trending just a couple of quarters into the 12 quarters of the projections we put out in that three-year plan. Our $1.64 midpoint for 2026 represents $0.03 of growth versus last year, and we're only getting about a half-year benefit from the convert this year. Q: On the KKR JV now we're seeing you acquire alongside them. I'm curious just about the sizing of that opportunity? And then also with the match funding piece, just curious what you're funding it with and how you're managing to keep this sort of NAV accretive that you're still selling out of some of the things that you don't want to own, but are still able to achieve these great cap rates to afford sort of that spread?A: (Peter Scott, President and CEO) KKR has been a great partner. We've done about a half a dozen deals so far this year, about $300 million in total with the stuff that's either closed or under contract. To date, we've focused on capital recycling and free cash flow to fund all of our capital allocation initiatives. If accessing the equity markets becomes more accretive than the dispositions, we could pivot to that. We're going to maintain discipline here and look at every lever to maximize earnings growth going forward. Q: You have no (inaudible) on for Mike this morning. I guess my first question, it looks like you guys have built a pretty sizable redevelopment pipeline to this point. What does the Saddle pipeline look like? And do you guys think you'll be able to sustain a size close to this over the next few years?A: (Peter Scott, President and CEO) We are really pleased with the progress we've made on the redevelopment pipeline and the pre-leasing. We've improved pre-leasing in that portfolio by 1,400 basis points. We've got around 25 assets in redevelopment today. I would expect that number to probably go up to maybe 30 or so, reaching a peak towards the end of this year. I think it will always be part of the ongoing business, but it won't be as large outside of the strategic plan as it's trending right now. Q: I wanted to circle back on the Ascension agreement that you guys highlighted in your prepared remarks and in the supplemental. Can you provide some color on the extent of the $35 million planned investment that HR is making? And is that a revenue-generating investment? Or is it I guess, is Ascension's rents increasing? Or is that just reflected in the 200,000 square feet of leases that you completed?A: (Peter Scott, President and CEO) We extended the Ascension leases 10 years at that campus at a pretty nice mark-to-market of 11%. We see that campus going from 80% occupancy up to over time, probably close to 100%. It generates $7 million of NOI today. We believe it's going to be $10 million plus of NOI when all is said and done between absorption as well as the favorable leases that we've put in place. That is part of our cash-on-cash yields in that 9% to 10% range. Q: Curious just on the magnitude of re-leasing spreads by occupancy. How large is the divergence of those spreads you're seeing between, call it, your stabilized portfolio and your lease-up portfolio?A: (Peter Scott, President and CEO) We're probably getting better cash leasing spreads on more well occupied buildings as opposed to the lease-up buildings just because we have a lot more leverage in a building that's full. On the ones where we feel like we've got high occupancy, strong markets, I wouldn't be surprised to see double-digit cash leasing spreads on those. In buildings where we're trying to lease up the asset, we're probably not going to get as robust of a cash leasing spread, but we've got a lot of absorption associated with it. It all blends today to around 5%, high 4s, and that's trending favorably. Q: Maybe we could switch gears and talk to the transaction market a bit. What are you seeing in terms of the strength of the private market bid today, higher rates in recent months led to any sort of reset in pricing expectations or just general thinning of bidding tents from some of the more levered buyers?A: (Peter Scott, President and CEO) We have not seen a big impact in right now, cap rates with rates having backed up, but it's still obviously early days. We do like our strategy of doing single asset or very small portfolio deals with KKR. We're an unlevered buyer within that vehicle, which I think positions us quite well. There's not a lot of other REITs that are actually showing up when assets are on the market today, so I think we have a little bit of a competitive advantage from that perspective. Q: Pete, you talked about in your opening comments, just the strength of the leased IRRs that you've improved. And obviously, the spreads are part of that, concessions must be down. But maybe dive a little bit more into that of how much of that -- obviously, you guys have done a good job, but how much of that is also just the market improving on the leasing front, but give us a little more color on kind of those IRRs and what you've done?A: (Peter Scott, President and CEO) I think it's a couple of things. Obviously, fundamentals have firmed out, and that's certainly been helping. I will also point out retention. Retention has increased pretty significantly, and that's a function of better service we're providing to our tenants, combined with lack of new supply. On renewal lease deals, the amount of capital required is a fraction of what's required on a new lease deal. So I think it's part fundamentals and then just part better retention, limiting the amount of capital that has to go into any kind of lease deal we do. Q: On the $3 million of upside of NOI upside at the Ascension campus in Nashville, you highlighted earlier, I For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management reports outperforming all key objectives one year into their strategic plan, driven by a cultural shift toward execution intensity and operational discipline. Performance attribution is credited to strong same-store NOI growth averaging 5.7% and occupancy gains reaching nearly 93% over the last four quarters. Leasing success is attributed to a new ROI-focused model that improved lease IRRs by nearly 3,000 basis points and reduced payback periods by approximately 25%. Strategic positioning has shifted toward deepening health system relationships, evidenced by win-win transactions with CommonSpirit, Wellstar, and Ascension St. Thomas. The company is leveraging its scale as the only public REIT actively growing its medical office platform to lead the sector rather than just participate. Operational context highlights a significant reduction in near-term expiration risk, with weighted average lease terms improving by 15 months since the plan's inception. Guidance for 2026 was raised by $0.02 at the midpoint, reflecting strong leasing outcomes and the benefit of a successful convertible bond offering. The company expects strong leasing momentum and high tenant retention to continue driving same-store NOI growth in the back half of the year. Capital allocation will prioritize joint venture acquisitions with KKR, targeting yields around 7.5% which are highly accretive relative to the company's implied cap rate. Management assumes a peak in the redevelopment pipeline toward the end of the year, with 10% cash-on-cash yields expected across these investments. Future earnings growth is expected to be fueled by a 'durable, repeatable framework' of organic growth pillars layered with disciplined capital recycling. Executed a $1.1 billion capital raise through convertible notes and term loans, effectively addressing debt maturities through 2027 and saving 100 basis points in interest costs. Monetized non-income producing land in Denver for $16 million while retaining future development rights, removing carry costs and supporting health system expansion. Launched a $155 million comprehensive redevelopment and modernization project with Ascension St. Thomas in Nashville to enhance consumer experience and service lines. Repurchased $75 million of stock in Q2, totaling $175 million since the strategic plan began, though management noted buybacks currently screen less favorably than other investments. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed they are tracking ahead of the 3-year strategic plan schedule due to better-than-expected same-store NOI and favorable refinancing. Noted that 2026 was originally expected to be a flat year but is now showing growth despite portfolio optimization dilution. The JV has approximately $200 million of assets currently under contract or LOI, focusing on high-quality markets like Seattle and Denver. Funding currently prioritizes capital recycling and free cash flow to maximize earnings growth while maintaining leverage in the mid-5x range. The pipeline is expected to peak at around 30 assets by year-end before stabilizing as a continuous but smaller part of the ongoing business. Yields are driven by both significant rental rate uplifts and occupancy absorption in previously underinvested assets. Management has not yet seen a significant backing up of cap rates in the private market despite higher interest rates. They believe their status as an unlevered buyer within the JV provides a competitive advantage as other REITs remain less active in the transaction market.

Interested in Healthcare Realty Trust Incorporated? Here are five stocks we like better. Strong operating performance: Healthcare Realty reported 5.7% average same-store NOI growth, nearly 93% occupancy, 88.5% tenant retention and 4.8% second-quarter cash leasing spreads, supported by 1.5 million square feet of executed leases. Redevelopment and health-system activity expanded: The company announced major agreements with CommonSpirit, Wellstar and Ascension Saint Thomas, while its redevelopment portfolio reached 67% leased and is expected to generate approximately 9%–12% cash-on-cash yields. Guidance and balance-sheet flexibility improved: Healthcare Realty raised full-year normalized FFO guidance to a midpoint of $1.64 per share and increased same-store cash NOI growth guidance to 4.25%–5%; debt refinancing and $1.2 billion of liquidity provide flexibility through 2029. 5 Dividend Kings to Buy in July with Irresistible Value and Yield Healthcare Realty Trust (NYSE:HR) reported second-quarter results marked by higher occupancy, leasing activity, same-store net operating income growth and an increase to its full-year funds-from-operations outlook. Management said the company’s performance continues to run ahead of objectives outlined in its strategic plan one year ago. President and CEO Peter Scott said same-store NOI growth averaged 5.7% over the past four quarters, while same-store occupancy rose to nearly 93%. Tenant retention averaged nearly 90%, cash leasing spreads averaged 4.1%, and leverage declined by nearly one turn, he said. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now Campbell's Soup Stock: Deep Value and a 7% Dividend Yield “We are outperforming every one of our key objectives over the last four quarters,” Scott said, citing leasing execution, capital-market activity and capital allocation. Executive Vice President and COO Rob Hull said Healthcare Realty executed 323 leases covering 1.5 million square feet during the quarter, including 350,000 square feet of new leasing. Same-store cash leasing spreads averaged 4.8%, average annual escalators were 3%, and the weighted-average lease term was nearly six years. → Microsoft Just Flipped the AI Spending Narrative Overnight Was Hormel’s Q2 Earnings Report the Turnaround Investors Needed? Tenant retention was 88.5%, contributing to roughly 25 basis points of absorption and bringing same-store occupancy to nearly 93%, Hull said. The company ended the quarter with approximately 460,000 square feet of signed-but-not-occupied leases, representing about 140 basis points of future occupancy. Year to date, the company has executed 3.5 million square feet of leases, or more than 10% of its total portfolio, according to Scott. The weighted-average remaining lease term was 65 months, up 15 months from when the company disclosed its strategic plan. → Carrier Earnings Could Send the Stock to a New All-Time High Hull said the new and renewal leasing pipeline exceeded 3 million square feet, with about half tied to health systems. The company cited leasing activity with Baylor Scott & White in Dallas-Fort Worth, UW Medicine in Seattle, Kaiser in San Francisco and HCA in Houston. Management also pointed to sector conditions, including outpatient medical completions near all-time lows as a percentage of inventory and record-high sector occupancy. Hull said health-system merger and acquisition activity could support stronger tenant credit and increase demand for outpatient medical space over time. Healthcare Realty highlighted several agreements with health-system partners. In late June, the company completed about 160,000 square feet of CommonSpirit renewals across five states at a 7% positive cash leasing spread. It also agreed to sell CommonSpirit 15 acres of Denver land for $16 million, while retaining future medical office building development rights at the site. With Wellstar, the company executed 215,000 square feet of renewal leases year to date at a 4% positive cash leasing spread, plus 27,000 square feet of new leases. Healthcare Realty also agreed to sell the Kennestone Cancer Center to Wellstar for $36 million, or more than $600 per square foot, at a mid-5% cap rate. In early July, the company signed a letter of intent with Ascension Saint Thomas covering 203,000 square feet across three Nashville campuses. The proposed leases carry an 11% positive cash leasing spread and are expected to be executed in the third quarter. Healthcare Realty plans to invest $35 million in three medical office buildings on the Ascension Saint Thomas West Campus, while Ascension plans a separate $120 million hospital and campus modernization. Scott said the West Campus currently generates about $7 million of NOI and could generate more than $10 million after the redevelopment and leasing efforts are completed. The Ascension opportunity was not included in the company’s previously discussed $20 million upside estimate for its unstabilized lease-up pool, CFO Dan Gabbay said. During the second quarter, Healthcare Realty invested approximately $25 million in its redevelopment portfolio, which was 67% leased, up 1,400 basis points over the past four quarters. Management is underwriting approximately 10% cash-on-cash yields across that portfolio, with a stated range of 9% to 12% depending on rental-rate growth and occupancy gains. The company continued to emphasize redevelopment investments, joint-venture acquisitions, debt management and share repurchases. Since the end of March, Healthcare Realty and its KKR joint venture have closed on or have under contract or letter of intent for nearly $200 million of acquisitions, representing approximately $40 million at Healthcare Realty’s share. Scott said the going-in cash yield to Healthcare Realty on those transactions is about 7.5%, while the underlying going-in cap rate is in the low-6% range. The assets are located in markets including Greenwich, Connecticut; Charleston, South Carolina; Port St. Lucie, Florida; Seattle; and Denver. Management said the company is funding capital-allocation priorities through free cash flow and property dispositions. Year to date, it has sold six buildings and three land parcels for about $75 million at a blended 5% cap rate, and it has an additional disposition pipeline of nearly $200 million. In May, Healthcare Realty issued $700 million of exchangeable senior unsecured notes due 2032 at a 3% coupon. The offering was upsized by $100 million, and proceeds were used to repay $600 million of senior unsecured notes due in August that carried a 3.5% coupon. The company also raised a $400 million unsecured delayed-draw term loan. Gabbay said the financing actions addressed debt maturities through 2027. With an additional $1.2 billion of liquidity on its line of credit, the company has flexibility through 2029, he said. The blended interest rate on the convertible bond issuance and delayed-draw term loan was approximately 4%, which Scott said was 100 basis points below the company’s original guidance assumption. Healthcare Realty repurchased $75 million of stock during the quarter. Since announcing its strategic plan, it has repurchased $175 million of shares at a blended price of about $18.50 per share, according to Scott. For the second quarter, Healthcare Realty reported normalized FFO of $0.41 per share, same-store cash NOI growth of 5.1% and funds available for distribution of $0.32 per share. The quarterly dividend payout ratio was 76%. The company raised full-year normalized FFO guidance by $0.02 to a midpoint of $1.64 per share and increased the upper end of its range to $1.66 per share. It also increased same-store cash NOI growth guidance to 4.25% to 5%, raising the low end by 50 basis points and the high end by 25 basis points. Gabbay said the updated outlook reflects strong leasing outcomes and year-to-date same-store cash re-leasing spreads of 4% to 5%. Management said it expects strong leasing momentum, high retention and improving lease economics to continue supporting NOI growth in the second half of the year. Healthcare Realty Trust (NYSE: HR) is a real estate investment trust specializing in the ownership, acquisition and management of outpatient medical facilities. Headquartered in Nashville, Tennessee, the company's portfolio is focused primarily on medical office buildings and outpatient healthcare properties that serve hospitals, health systems and other healthcare providers. Its business model centers on securing long-term, triple-net leases to generate stable income streams from a diversified tenant base. The company's properties are located across key metropolitan markets in the United States, including major healthcare hubs in the Southeast, Southwest and in select coastal regions. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Healthcare Realty Trust Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

NASHVILLE, Tenn., July 30, 2026 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the second quarter ended June 30, 2026. In addition, the Company announced an increased 2026 Normalized FFO guidance range of $1.62 to $1.66 per share (diluted), a $0.02 increase at the midpoint from April guidance, and an increased Same Store Cash NOI growth guidance range of 4.25% to 5.00% (+50bps increase at the low end and +25bps at the high end from April guidance). SECOND QUARTER 2026 HIGHLIGHTS GAAP Net loss of $(0.13) per share, NAREIT FFO of $0.36 per share, Normalized FFO of $0.41 per share, and FAD of $109.4 million (payout ratio of 76%) Same store cash NOI growth of 5.1%, tenant retention of 88.5% and 4.8% cash leasing spreads Second quarter lease executions totaled 1.5 million square feet, including 350,000 square feet of new lease executions Since last quarter, closed or under contract/LOI on approximately $200 million of joint venture acquisitions (approximately $40 million at share) at a blended cash yield to the Company of approximately 7.5% Since last quarter, closed or under contract on $83 million (at share) of dispositions at a sub-5% cap rate Run Rate Net Debt to Adjusted EBITDA of 5.6x Issued $700 million of 3.00% Exchangeable Senior Notes due 2032. Proceeds were primarily used to repay the Company’s $600 million Senior Notes due 2026 Repurchased 3.8 million shares of common stock in connection with the Exchangeable Senior Notes offering Entered into a $400 million unsecured delayed draw term loan agreement with a May 15, 2029 maturity date SECOND QUARTER 2026 RESULTS LEASING ACTIVITY During the second quarter, the Company executed 323 new and renewal leases for 1.5 million square feet with a weighted average lease term of 5.7 years and average annual escalators of 3.0%. Key highlights include: CommonSpirit Health. 157,000 square feet of new and renewal leases, maintaining occupancy of more than 90% across five markets Wellstar Health System. 66,000 square feet of new and renewal leases in the Atlanta market across three properties that are 94% occupied Baylor Scott & White Health. 57,000 square feet of new and renewal leases in the Dallas/Ft. Worth market across seven properties that are 90% occupied Ascension Health. Renewed approximately 66,000 square feet across four on campus properties CAPITAL ALLOCATION Acquisition Activity Since last quarter, the Company has closed or is under contract/LOI to acquire approximately $200 million of assets (approximately $40 million at share) in its strategic joint venture with KKR: Port St. Lucie, FL. Acquired a newly constructed, surgery center-anchored MOB attached to a vibrant hospital for $21 million ($4 million investment at share). The Company now owns three properties totaling 110,000 square feet in the market Greenwich, CT. Acquired an exceptionally well-located, health system anchored MOB for $65 million ($13 million investment at share). The 106,000 square foot acquisition complements the Company’s 10 other assets in the market and expands our relationship with “A+” rated Yale New Haven Health and “BBB+” rated Stamford Health Other Acquisitions. Under LOI to acquire four additional assets in Charleston, SC, Seattle, WA and Denver, CO for $111 million ($22 million at share). The assets are located in attractive sub-markets adjacent to existing Company properties. The transactions are expected to close in the third quarter Disposition Activity Since last quarter, the Company has closed or is under contract to sell approximately $83 million (at share) of assets. Selected transactions include: Atlanta, GA. The Company is under contract for the opportunistic $36 million direct sale of a 59,000 square foot MOB to the affiliated hospital. The closing is expected to occur in the fourth quarter Austin, TX. During the quarter, the Company monetized a non-core retail property for $9 million Denver, CO. The Company is under contract for the sale of three land sites direct to the affiliated health system for $16 million. The sale is expected to occur by year-end 2026 Development and Redevelopment During the second quarter, the Company leased approximately 60,000 square feet and invested approximately $25 million across its redevelopment portfolio. In early July, the Company executed an LOI with Ascension Saint Thomas to launch a comprehensive redevelopment at the Ascension Saint Thomas West campus in Nashville, TN. Located in the heart of one of the most vibrant submarkets in Nashville, the hospital and health campus will undergo a $120 million modernization led by Ascension. Ascension's investment will include meaningful upgrades to clinical infrastructure, operating rooms, cardiac catheterization labs, as well as a new Heart and Kidney Transplant Center and a new Thoracic Surgery and Chest & Lung Center. Ascension is a Top 10 U.S. health system by revenue, and recently closed on its acquisition of AmSurg, a leading owner/operator of outpatient ambulatory surgery centers across the U.S. Healthcare Realty will invest $35 million to modernize its three buildings and agreed to over 200,000 square feet of new and renewal leases across three campuses in the greater Nashville market with Ascension. These leases are expected to be signed in the third quarter. Balance Sheet As of June 30, 2026, the Company had approximately $1.6 billion of liquidity across the revolving facility (net of commercial paper issuance), delayed draw term loan, and cash on hand. Key capital market activity during the quarter includes: Issued $700 million of 3.00% Exchangeable Senior Notes due 2032. Proceeds were primarily used to repay the Company’s $600 million Senior Notes that was due to mature in August 2026 and concurrently repurchased 3.8 million shares of common stock for $75 million. The Notes are exchangeable at an initial exchange rate of 43.466 shares of the Company's common stock per $1,000 principal amount of Notes, which represents an initial exchange price of $23.01 per share. Additionally, the Company entered into capped call transactions for $29 million, with an initial cap price of $27.41 per share, to reduce potential future share dilution Entered into a $400 million unsecured delayed draw term loan with a May 15, 2029 maturity date. The Company has the ability to draw the proceeds at any time through May 15, 2027. As of June 30, 2026 there were no outstanding borrowings DIVIDEND The Board unanimously approved a common stock dividend in the amount of $0.24 per share to be paid on August 26, 2026, to Class A common stockholders of record on August 11, 2026. Additionally, the eligible holders of operating partnership units will receive a distribution of $0.24 per unit, equivalent to the Company's Class A common stock dividend. GUIDANCE The Company further increased full year 2026 guidance ranges as follows: The 2026 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. The Company's guidance also does not include any future acquisitions, developments or share issuances or repurchases, other than as discussed in the detailed guidance assumptions on Page 11 of the 2Q 2026 Supplemental. There can be no assurance that the Company's actual results will not be materially higher or lower than these expectations. If actual results or timing vary from these assumptions, the Company's expectations may change. See Page 11 of the 2Q 2026 Supplemental for additional details and assumptions. EARNINGS CALL On Friday, July 31, 2026, at 9:00 a.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 Dial-In Number: +1 833-461-5787 All Other Locations: +1 585-542-9983 Conference ID Number: 911 922 894 ABOUT HEALTHCARE REALTY Healthcare Realty Trust Incorporated (NYSE: HR) is the largest public, pure-play owner, operator and developer of medical outpatient buildings in the United States. For additional information contact [email protected]. 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 include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could," "budget" and other comparable terms. These forward-looking statements are based on the Company's current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Such risks and uncertainties include, among other things, the following: the Company’s expected results may not be achieved; risks related to future opportunities and plans for the Company, including the uncertainty of expected future financial performance and results of the Company; pandemics or other health crises; increases in interest rates; the availability and cost of capital at expected rates; 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; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to release space at similar rates as vacancies occur; the Company's ability to renew expiring leases; 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; other legal and operational matters; and other risks and uncertainties affecting the Company, including those described from time to time under the caption “Risk Factors” and elsewhere in the Company’s filings and reports with the SEC, including the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Moreover, other risks and uncertainties of which the Company is not currently aware may also affect the Company's forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated. The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing. For a detailed discussion of the Company’s risk factors, please refer to the Company's filings with the SEC, including this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Normalizing items primarily include restructuring, severance-related costs and other. Potential common shares are not included in the computation of diluted earnings per share when a loss exists (or when dividends paid are greater than income), as the effect would be an antidilutive per share amount. As a result, the outstanding limited partnership units in the Company's operating partnership ("OP"), totaling 4,247,299 units were not included. The Company utilizes the treasury stock method, which includes the dilutive effect of nonvested share-based awards outstanding of 613,021 for the three months ended June 30, 2026. Also includes the diluted impact of 4,247,299 OP units outstanding. Management considers funds from operations ("FFO"), FFO per share, normalized FFO, normalized FFO per share, and 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 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, and share-based compensation expense; 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. Cash NOI and 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 Cash NOI as rental income plus interest from financing receivables less property operating expenses. Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, lease termination fees, financing receivable amortization, tenant improvement amortization and leasing commission amortization. Cash NOI is historical and not necessarily indicative of future results. Same Store Cash NOI compares 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 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 five full quarters. Newly developed or redeveloped properties will be included in the same store pool five full quarters after substantial completion.

This article first appeared on GuruFocus. Normalized FFO per Share: $0.41, up from $0.40 sequentially. Same-Store Cash NOI Growth: 6.9%. Dividend Payout Ratio: 75% with FAD per share at $0.32. Same-Store Occupancy: Improved to 92.3%, a year-over-year increase of 110 basis points. Total Occupancy: Improved to 90.5%. Annual Escalators on Signed Leases: 3% plus. Retention Rate: 93.5%. Cash Leasing Spread: 4.2%. Stock Buybacks: $100 million repurchased year-to-date. Joint Venture Acquisition: $18 million at pro rata share. Redevelopment Investment: $25 million in redevelopment portfolio. Guidance Increase: Full year normalized FFO per share guidance increased by $0.01 to $1.59 to $1.65. Same-Store NOI Guidance: Increased by 25 basis points to 3.75% to 4.75%. Warning! GuruFocus has detected 8 Warning Signs with HR. Is HR fairly valued? Test your thesis with our free DCF calculator. Release Date: May 01, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Healthcare Realty Trust Inc (NYSE:HR) reported a record high of over 2 million square feet of leases signed in the first quarter. The company achieved a same-store NOI growth of nearly 7%, marking an all-time high. HR raised both FFO and same-store guidance early in the year, indicating strong performance and future potential. The company completed its first joint venture acquisition and continues to stabilize its redevelopment portfolio. HR's retention rate was 93.5%, which is a critical driver of earnings growth and reduces capital expenditures. Despite strong performance, HR's stock is trading at an 11 times FFO multiple, which is considered low compared to industry standards. The company faces challenges in breaking down historical stereotypes of the medical office sector, which is seen as having stable but low growth. HR's total occupancy is at 90.5%, which is below the sector-wide occupancy of 93%, indicating room for improvement. The company is dealing with the impact of a $600 million bond maturity, which requires careful capital management. HR's guidance does not include any additional acquisitions, redevelopments, or share repurchases for the remainder of the year, which may limit growth opportunities. Q: How should we interpret the 6.9% same-store NOI growth in Q1, and is there potential to maintain this level? A: Peter Scott, President and CEO, explained that the 6.9% growth was driven by significant occupancy ramp-up and margin improvements. While the first quarter had an easier comp, Scott views the guidance as an opportunity to raise expectations throughout the year, although maintaining near 7% growth might not be feasible. Q: How does Healthcare Realty Trust balance capital allocation between buybacks, JVs, and redevelopments while managing leverage? A: Scott emphasized a disciplined approach, highlighting that in Q1, they executed a mix of buybacks, JV acquisitions, and redevelopment investments. He noted the potential to sell core assets to recycle capital into these priorities, maintaining a balanced and disciplined capital allocation strategy. Q: What is the timeline for achieving the 92% to 93% total occupancy target, and how does the Signed Not Occupied (SNO) pipeline contribute? A: Scott and COO Robert Hull noted that redevelopments are a key driver, with significant pre-leasing in the SNO pipeline. Hull mentioned that nearly half of the SNO pipeline is in the lease-up redevelopment bucket, which is expected to drive occupancy gains throughout the year. Q: What is the rationale behind potentially selling core assets, and how does it align with earnings growth objectives? A: Scott explained that selling core assets could be accretive if proceeds are recycled into higher-yielding opportunities like JVs. He emphasized that this strategy could enhance the long-term growth profile by reallocating capital to assets with better growth potential. Q: How are JV partners viewing the outpatient medical space, and what is the depth of interest in this market? A: Scott mentioned that the JV with KKR is the primary growth focus, with strong interest from partners in the outpatient medical space. CIO Ryan Crowley added that the transaction market remains robust, with core assets pricing in the 5.5% to 6% cap rate range, indicating strong demand and liquidity. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. May 1, 2026 at 9:00 a.m. ET Chief Executive Officer — Peter Scott Chief Operating Officer — Robert Hull Chief Financial Officer — Daniel Gabbay Chief Investment Officer — Ryan Crowley Need a quote from a Motley Fool analyst? Email [email protected] Peter Scott: Thanks, Ron. Joining me on the call today are Rob Hull, our COO; and Dan Gabbay, our CFO. Also available for the Q&A portion of the call is Ryan Crowley, our CIO. It has been just over a year since I assumed the CEO role, and we have made significant progress in that short period of time. In many ways, we entered 2026 as an entirely new company. We added industry expertise to our revamped and more financially rigorous operating platform, we refined our portfolio, and we rightsized our balance sheet. All of this was in preparation to meet or exceed our 3-year earnings forecast. I am pleased to report the hard work and immense preparation is manifesting into better results. While 1 quarter does not guarantee a 3-year earnings forecast, it does create a solid foundation for outperformance while sustaining the winning mentality we have worked hard to instill at Healthcare Realty 2.0. Now let's turn to our results for the first quarter. Every day we are executing with purpose and intensity. We signed over 2 million square feet of leases an all-time high. We reported same-store NOI growth of nearly 7%, also an all-time high. We accretively bought back more stock. We completed our first joint venture acquisition. We continue to stabilize our redevelopment portfolio. And our capital markets plan is beginning to take shape. The net impact of all this, our first quarter results were far better than expectations. We are raising both FFO and same-store guidance early in the year. And there is more to come on the horizon with a strong leasing pipeline. I wanted to elaborate more on the earnings growth framework for Healthcare Realty 2.0. Earnings growth has unequivocally become the dominant metric that determines a premium multiple in the REIT industry. If you go into any AI platform and search medical office characteristics, you will note the typical catchphrases that have become synonymous with sector: stable cash flow, recession-resistant, Steady Eddie, and 2% to 3% growth. In a low interest rate environment, like we experienced from 2010 to 2020 when the 10-year treasury averaged low 2%, this all sounded great. Investors were able to generate alpha in medical office with very little risk. However, with the 10-year treasury at 4.3% today and our stock trading at an 11x FFO multiple, this simply won't cut it anymore. We see 2 challenges in front of us: put up better numbers, which we are doing, and break down these historical stereotypes. As the only public REIT focused exclusively on outpatient medical, we will be the trailblazer and redefine what success means in our sector. So let me walk you through the main pillars of organic growth. First, occupancy. Sector-wide occupancy is approaching 93% because of strong demand and limited supply growth. We see multiple years of sustained tailwinds in front of us driven by the rapid growth of the 65-plus population and the unabated shift in care to outpatient settings. At HR 2.0, our same-store occupancy improved this quarter to 92.3%, a year-over-year increase of 110 basis points. Total occupancy has improved to 90.5% and is a significant near-term earnings growth driver as we stabilize our lease-up and redevelopment portfolio. Second, annual escalators. Under the new asset management platform, our average annual escalator on signed leases is 3% plus. I cannot overemphasize the importance of the annual escalator on earnings growth. With our portfolio NOI at approximately $650 million, escalators will be the primary driver of core earnings growth going forward. Third, retention rate. Often overlooked, retention rate is a critical driver of earnings growth. Downtime and capital expenditures, which are the silent killer of earnings growth, are significantly lower for renewal lease deals compared to new lease deals. Therefore, the higher the retention rate, the less capital we have to commit, the higher the lease IRR, the more profitable the deal is to us. During the first quarter, our retention rate was 93.5%. Fourth, cash leasing spreads. With our portfolio optimization complete and our concentration of assets in higher growth markets, including the Sunbelt market, I would anticipate our cash leasing spreads improving. In the first quarter, our cash leasing spread was 4.2%. Importantly, 1 out of every 4 leases we signed had a cash leasing spread greater than 5%. When you add all this up, occupancy growth, annual escalators, higher retention and improved cash leasing spreads, we expect to generate materially higher earnings growth going forward. Our same-store results this quarter are a good indicator that we are heading in the right direction. And as a reminder, our core earnings growth in 2026 is tracking above 5% excluding the impact from the necessary portfolio optimization and deleveraging. I wanted to spend a moment on external growth and capital allocation, which are incremental to our organic pillars of growth. As we recently disclosed, our capital allocation approach will remain incredibly disciplined. During the first quarter, we did exactly what we said we would do. We bought back $100 million of stock, we completed in excess of $20 million of acquisitions and we invested $25 million in our redevelopment portfolio. Let me provide a little more context behind our priorities. First, stock buybacks. If we experience dislocation in our stock price, we will not hesitate to acquire shares. This provides us with significant and immediate accretion. We have $400 million of stock buyback capacity remaining under our current authorization. Second, acquisition. All external acquisitions will be done in joint ventures. Joint ventures currently encompass 5% of our total NOI, so there is ample room for this to grow. We would expect initial cash yields of greater than 7%, which exceeds our implied cap rate. In terms of magnitude, I could see us accretively allocating $50 million to $100 million of capital into our KKR joint venture in 2026. Third, redevelopment, which currently consists of 23 properties that are 64% pre-leased. Redevelopments are the primary source of the $50 million of NOI upside in our 3-year forecast, and we continue to track ahead of schedule. I would expect the number of assets in redevelopment to modestly tick up in the coming quarters as we front-load our spend into the earlier part of our 3-year plan. This will allow us to maximize the NOI upside opportunity sooner. As a reminder, our average cash-on-cash yield for the redevelopment portfolio is 10% and comes through a combination of increased occupancy and/or increased rental rate. Importantly, none of these priorities, buybacks, joint venture acquisitions and redevelopments, are mutually exclusive. In addition, while not part of our guidance, we are open to selling more assets, including core assets, and accretively recycling the proceeds into any one of our priorities to further improve earnings growth. Finishing now with a quick note on our Board. As part of our ongoing Board refreshment initiatives, longtime Director, Jay Leupp announced he will retire after our upcoming annual meeting. I would like to provide a sincere thanks to Jay for his contributions to the organization over the years. Upon Jay's departure, the average tenure of our remaining directors is less than 2 years. We plan to add a new director later this year, to more prioritize that person's experience and diversity. With that, let me turn the call over to Rob. Robert Hull: Thanks, Pete. The first quarter was the company's strongest ever for leasing. Our team executed over 290 leases, representing more than 2 million square feet. Lease economics across both new and renewal leases continued to improve. Annual escalators averaged 3.1% and the weighted average lease term was nearly 8 years, bolstering the portfolio's long-term growth profile. Tenant retention was 93.5%, driven by a number of early renewals across the portfolio. Included are 8 single tenant renewals totaling nearly 740,000 square feet, for an average extension of approximately 10 years. This meaningfully reduces our lease maturities through the end of 2027. And cash leasing spreads were strong, averaging 4.2%. Demand for medical outpatient buildings remains robust. We continue to see favorable sector fundamentals as absorption outstripped completions during the quarter and rental rates continued to climb. Health systems are seeing steady operating trends and investing in higher-margin outpatient services. These favorable industry fundamentals are translating into better performance for our portfolio. Health system relationships remain a key area of focus as their demand for space continues to grow, improving the credit profile of our portfolio. This quarter, we saw a substantial health system activity, including, in Atlanta, 176,000 square feet of new and renewal leases with Wellstar across 6 on-campus buildings, including a 59,000 square foot cancer center. The renewals carry an average term of 5 years with a blended cash leasing spread of approximately 4%. Wellstar is a leading health system in the Atlanta MSA with an A+ credit rating. In Charlotte, 6 renewal leases totaling 154,000 square feet with Advocate Health. The average term was more than 7 years with a blended cash leasing spread over 5%. Advocate Health is the leading health system in Charlotte with well over 50% market share and carries a AA credit rating. In Upstate New York, we leased 64,000 square feet of clinical and surgery center space to Trinity Health St. Peter's Hospital. The leases have an average term of nearly 6.5 years and annual escalators of 3%. Trinity Health is a top 10 health system nationally with a AA- credit rating. And in Charleston, 3 lease renewals for 55,000 square feet with MUSC Health, maintaining 100% occupancy across 2 buildings. The leases have an average term of 9 years with an average cash leasing spread of nearly 14%. MUSC is South Carolina's only comprehensive academic health system with 16 hospitals and regional medical centers. Looking ahead, occupancy gains over the remainder of the year will be driven by a robust new leasing pipeline of approximately 1.4 million square feet, strong tenant retention and our 490,000 square foot Signed Not Occupied or SNO pipeline. Turning to redevelopment. We saw a gain of 900 basis points sequentially in the lease percentage of our redevelopment portfolio. This quarter, we added 2 new projects, including a $25 million redevelopment of a 155,000 square foot MOB connected to Tufts Medical Center in Boston. The building is 100% pre-leased with a 10-year term and 3% annual escalators. We also completed a $35 million 2 MOB project located in Charlotte, adjacent to Novant Health Huntersville Medical Center. The redevelopment is 98% leased with a stabilized yield within our targeted range of 9% to 12%. The 2 buildings will move into same store once a full calendar year has passed since completion. Our results this quarter demonstrate the team's ability to drive accretive lease economics and strengthen our health system relationships. We are well positioned to build on this momentum through the balance of the year and deliver strong NOI growth to our shareholders. Now I will turn it over to Dan to discuss our financial results. Daniel Gabbay: Thanks, Rob. 2026 is off to a great start. We reported normalized FFO per share of $0.41, up sequentially from $0.40, and we achieved same-store cash NOI growth of 6.9%. Additionally, FAD per share was $0.32, resulting in a quarterly dividend payout ratio of 75%. Our outperformance this quarter was driven by 110 basis points of year-over-year same-store occupancy gains, 4.2% cash leasing spreads and our improved balance sheet. Q1 same-store occupancy finished at 92.3% and same-store margins expanded 60 basis points year-over-year. Notably, 95% of our total NOI is included in our same-store pool. Turning to capital allocation. As Pete mentioned, Q1 was active across all our strategic priorities. In March, we opportunistically repurchased an additional $50 million of shares as global conflicts pushed the stock market into correction territory. This brings our total repurchases year-to-date to $100 million or 5.7 million shares at a weighted average price of $17.38. And at quarter-end, we closed on a JV acquisition for $18 million at our pro rata share, and commenced 2 new redevelopments with an expected cost of $31 million. We remain confident in our ability to continue allocating capital towards accretive redevelopments and selective external growth while maintaining our year-end leverage target in the mid-5x area. I would like to call out a couple of items related to our balance sheet. First, we are putting in place a new $400 million unsecured delayed draw term loan. Our strong bank partnerships allowed us to move quickly during a period of heightened volatility. The facility is fully committed and expected to close in May. Drawn pricing is at SOFR plus 90 basis points and all-in pricing inclusive of transaction costs is approximately 4.8%. This is inside our 5% cost of debt assumption for 2026. We plan to draw the term loan in late July to repay our $600 million bond maturity, with the balance funded on our line of credit. Factoring in this transaction, we would still have $1 billion of remaining liquidity on our line which provides meaningful flexibility as we consider all of our future capital markets alternatives. As discussed last quarter, we also launched our commercial paper program. We currently have roughly $250 million outstanding, which is fully backstopped by our line of credit. Borrowing costs today are approximately 40 to 50 basis points lower than our line. Finally, during the quarter, we also extended the maturities on $400 million of swaps associated with our existing unsecured term loans, locking in SOFR at 3.3% through debt maturity in 2029. These levels remain attractive as expectations for Fed cuts diminished during the quarter. Turning to 2026 guidance, which you can find on Page 11 of our Q1 supplemental report, we increased full year normalized FFO per share guidance by $0.01 to $1.59 to $1.65 per share or $1.62 at the midpoint. And we increased same-store cash NOI growth by 25 basis points to a revised range of 3.75% to 4.75%. These results are driven by strong leasing outcomes and 4% plus cash re-leasing spreads in our same-store portfolio. Uses of capital increased $75 million for the year to reflect the incremental share repurchases and acquisitions in Q1 that we discussed earlier. Our guidance does not include any additional acquisitions, redevelopments or incremental share repurchases for the remainder of the year. Funding sources increased by $75 million to match the capital allocation activity in the quarter. One last item before we go to Q&A. You probably noticed that we published a revised supplemental reporting package and updated investor presentation last night. We are pleased to provide cleaner, simpler disclosure going forward in our supp on the total portfolio while also maintaining key information and performance metrics that we have previously provided. The materials commence with our portfolio-level information across top markets and tenants followed by our same-store redevelopment and ancillary financial information. To recap, we are very excited about our Q1 results and upside for the year. Our core earnings growth model that Pete described is working across the board, and absent the dilution from our 2025 dispositions, we are already delivering mid-single-digit growth. We, therefore, remain confident and laser-focused as we target the upper end of our revised FFO per share and same-store NOI guidance. With that, operator, let's open up the call for Q&A. Operator: Our first question comes from the line of John Kilichowski with Wells Fargo. William John Kilichowski: Maybe first, if we could just start with the same-store guide we appreciate the bump here, but the 6.9% certainly stands out in 1Q. How do we think about that conservatism there? What drove the 6.9%? Was it comps? Was it just a great quarter? And is there an ability to repeat something a little bit closer to that going forward? Peter Scott: John, it's Pete here. I think as you pointed out, we had a great first quarter, posting same-store of nearly 7%. And the main pieces of that were we did see a pretty significant ramp-up in occupancy year-over-year and also some margin improvements. And that's something, if you go all the way back to our strategic deck, we said those were 2 important metrics that we wanted to improve, and we have. And we also had some strong leasing in the first quarter. I think to your comments about deceleration implied in our same-store guidance, and I think you touched on this just a bit in your note last night, I don't really think about it necessarily as deceleration. I mean I think about it as an opportunity to raise guidance a few more times as the year progresses. So I like to look at it as the glass is half-full, not necessarily the glass is half-empty. I will say we had an easier comp in the first quarter. I think that was pretty well known. If you looked at our results last quarter -- or excuse me, last year, we had a tough first quarter and it ramped up significantly in quarters 2 through 4. I still expect our growth to be quite strong and much longer than historical norms for the balance of the year. But we might not see something all the way at that like near 7% level, but I would expect it to continue to be strong. William John Kilichowski: Got it. That's very helpful. And then the second one, Pete, you gave some very helpful color in the opening remarks on the capital allocation opportunities and the buyback and doing what's best. I'm curious how you feel about the push and pull of doing what's most accretive but also managing leverage. You put a ton of effort into getting the balance sheet into a good place. And now you've kind of done that, you take up leverage ever so slightly, like it's still in a good spot. But what's that point at which you're like, okay, the buyback is now off the table, we can't lever up past this and the incremental proceeds need to go towards, like you said, the JVs or the redev versus that? Peter Scott: Yes. It's a good question and I'm glad you brought it up because I did want to spend a lot of time on it in the prepared remarks and on this call. In the first quarter, we did all 3. I think it was a nice mix of buyback, we did a JV acquisition, and we allocated capital to redevelopments. All 3 are accretive to our earnings growth. So we're pleased about that, especially since we can utilize balance sheet capacity for it. So I think it's the right mix to continue to focus on all 3. I will highlight the word disciplined, right? I have seen, and I'll again repeat the O word pop up from time to time, and I would not characterize it as that. I would characterize this as a very, very disciplined capital allocation approach. And to your point about leverage, I would also point out that we will not shy away from selling more assets, including core assets, right? So not selling lower quality. That was a lot of what we did last year to get the portfolio to where we wanted it to be today. Our focus could be on selling more core assets and accretively recycling that back into the 3 priorities. We just think it's good to have a good mix of different options available to us, and we think it's the right mix right now. Operator: Your next question comes from the line of Nick Yulico with Scotiabank. Nicholas Yulico: I wanted to first ask on total occupancy. I know you have that 92% to 93% target. You said you're at 90.5% in the first quarter. I think sort of twofold here, one is just latest thoughts on sort of the time frame for achieving that target. And then I think a component of that is leasing up development, redevelopment, where there is just some pure vacancy today. And I think, Rob, you gave some stats on like a Sign Not Occupied pipeline, but I'm wondering if you had any of that time Signed Not Occupied specifically you could cite for that development/redevelopment pool? Peter Scott: Yes. Nick, it's Pete here. I'll start and maybe I'll have Rob jump in on the backside. We do see redevelopments as a great way to invest capital and get a nice cash-on-cash return. It's the 10% cash-on-cash return that we are targeting on average. And as we think about that portfolio, we did improve our disclosures a couple of quarters ago to track the percent pre-leased within that bucket. That's actually where a lot of our SNO sits right now. So our 90.5% of occupancy today does not get the benefit of a lot of that pre-leasing that we've been able to do in the redevelopments. But we will continue to disclose that. And as you saw, there's 900 basis points effectively of sequential occupancy gains within that -- or I'd say leased gains within that portfolio. It hasn't turned into occupancy yet. So I don't know, Rob, if you want to give any more color behind that. Robert Hull: Yes, I'll just add to that, this is a substantial -- in our SNO pipeline, 90,000 square feet, nearly half of that in that kind of lease-up redevelopment bucket. So a substantial amount, which is where we see a lot of the opportunity to drive occupancy over the course of this year. I would also say that our pipeline remains strong at the 1.4 million square feet. That's a good leading indicator of where we're headed. Tenant retention is still a major source of occupancy gains. And we expect all 3 of those to contribute meaningfully this year. Nicholas Yulico: Okay. Great. That's really helpful, guys. Second question. Pete, I want to go back to the commentary about you're open to selling core assets. And I guess -- and then also going back to your point about earnings growth and that being a focus. Is this an opportunity -- is this more than just a sort of opportunity to sell at a strong cap rate and sort of arbitrage that on the investing side, which is maybe like a onetime earnings benefit? Or are you also open to selling core assets because in some ways you're going to get a low cap rate and they're also structurally slower growth assets for every reason, maybe they're safer profile of the lease, whatever it is, that if you're actually selling core assets, you could be improving sort of a long-term growth profile? Peter Scott: Yes. I would go back to my comment in the prepared remarks about 5% of our portfolio, the NOI being in joint ventures right now. And we get some pretty nice advantageous fees. So any going-in cap rate for like a core-plus asset is an enhanced yield to us with regards to our initial cash yield. I think that's one of the beauties of JVs and that's why a lot of REITs employ JVs as an important part of their business model. I think 5% is low. I think 5% could grow. I won't give a number as to where it could grow, but I think it could grow well beyond 5%. And I think I'll look at selling core assets and recycling that capital back into potentially JVs as a use of proceeds could be done accretively and I think would be a good thing for our portfolio as well as for shareholders. Operator: Your next question comes from the line of Seth Bergey with Citi. Seth Bergey: Just want to kind of go back to the JV comments. How are partners thinking about how many partners are you kind of in discussions with that are interested in investing in outpatient medical? And can you just talk about kind of the overall depth of the transaction market and interest in the outpatient medical space? Peter Scott: Yes. Maybe I'll start with that and Ryan can talk briefly about the transaction market. As you think about our JV exposures, we do have a few different JVs, but there's really just one at the moment that is what I would call more a growth JV. And that's with our partner at KKR that was set up a couple of years ago. There was a pool of assets that was contributed by the company into that joint venture. But the hope was that, that joint venture would grow over time by acquiring third-party assets or, I'd say, external growth. It's another good way to characterize that. Nothing happened over the last couple of years, really because there was no capital or balance sheet capacity here for any desire at Healthcare Realty to grow, even though our partner had a desire to grow. So I would say what we're focused on right now is growing with that 1 partner. I don't know that I want to get into any additional JVs that we could potentially look to set up over time. The other JVs that we do have, they're more discrete assets. Those were set up many years ago prior to that KKR joint venture, and I would not look at those necessarily as growth ventures. Our growth is really going to be focused with that 1 partner right now. And then Ryan, do you want to talk about the transaction market briefly? Ryan Crowley: Sure, Pete. I'll say that the momentum that built from the transaction market last year has certainly carried into 2026. If anything, the strength of that private bid has only increased and financing remains really available. There's plenty of demand and liquidity out there. If you want me to talk about cap rates, I'd say that core assets are pricing today in the 5.5% to 6% range. And frankly, core-plus isn't much above those levels. Seth Bergey: Great. And then just coming back to some of the -- your opening comments about retention and escalators. Just given that occupancy for outpatient medical is kind of in that low 90s places, where do you think those metrics could ultimately go in terms of just new lease economics? Peter Scott: Yes. Good question, Seth. I mean what I would say is we completely revamped our approach to leasing about the middle of last year and we've become just much more financially rigorous as we underwrite deals. And I think what you're starting to see is the benefits of that change is starting to work its way into both the amount of leases we're getting done as well as the output of those. So retention, as you point out, at 93.5% is really strong. We did get the benefit of doing a couple of very, very large leases in our single tenant bucket that were pushed out quite a way. So if you look at our weighted average lease term, it actually almost went up about a year this quarter, which is a pretty big change in 1 quarter. I would say from a retention perspective, I don't know that I would model 93.5% going forward. But if it used to be 75% to 80%, I'd like to think that it could be more like 80% to 85% going forward. And then on the cash leasing spreads, we did put up a good quarter this quarter. It was over 4%. I'll point out 1 out of every 4 lease deals that we did was greater than 5%. And we are focusing heavily on that, to try and push as much as we can on that metric. I'd like to think it can even improve upon 4%, but this will take perhaps a little bit of time to continue to work into the system. But we are optimistic and we'll continue pushing. Operator: Your next question comes from the line of Michael Carroll with RBC Capital Markets. Michael Carroll: Pete, I wanted to circle back on those early renewals that you're able to execute during the quarter. I mean what drove those decisions? Is that something that you approached the tenant about? Or did they approach you about it? And given that those assets now have much longer term, is that something that you sell now or could potentially sell just given that you have about 10 years on some of those leases? Peter Scott: Yes. I mean we certainly could. I don't know that I can go into each one of those. It would take too long on this call to go through all the different assets within that bucket. But certainly, if it's a single tenant expiration and it's got less term on it, I mean you guys can go talk to the folks in the triple-net world, but when there's not a lot of term on a single-tenant asset, it's really not worth anything. So we've certainly unlocked some value in extending those. But I won't really comment at the moment on what our lands are for those in particular. I will say extending the weighted average lease term was actually quite important. We got a question on that a couple of quarters ago. And I felt confident we were going to do it. I would say many of these discussions on those lease deals took multiple quarters to get done. So I think you're seeing multiple quarters of work in our results that we put out in the first quarter. Robert Hull: I would just add to that, Pete, that, to your question about the systems approach us, in some cases, they did. And I would say that it's kind of an indication of the environment that we're in. Vacancy is getting lower. It's more expensive to build new products. And so we're seeing an uptick in discussions with health systems, and I think that's where you're seeing us able to drive lease economics. Michael Carroll: That's helpful. And then on the investment side, I know [ like in prior calls ], I mean there's been a lot of discussions on how attractive some of those opportunities are, it does look like, given the stuff that you've done year-to-date, you're kind of approaching the top end of the guidance range provided. I mean how do we kind of compare those 2? So you're seeing good opportunities, but it's not reflected in guidance. Is that just you trying to be cautious, not wanting to over-extend yourself without having some type of source of funds coming in? Or how do we explain those 2 differences? Peter Scott: Yes. I mean one thing and then I'll turn it to Dan. I mean, look, Mike, it is early in the year. Obviously, we put up some good results and we're able to raise guidance in the first quarter. So I feel quite pleased with that. But there's more quarters to go, more for us to do, and I think there's more upside for us to go capture as well as we execute with purpose. But maybe I'll have Dan talk about balance sheet capacity. Daniel Gabbay: Yes. And Mike, as we started talking about at the beginning of the year, we have balance sheet capacity. We've always talked about having upwards of $100 million to $200 million, sort of in that range, of balance sheet capacity as we entered the year. We've used some of that. We continue to have capacity. And as Pete mentioned, we have the ability, if there's the right assets to sell and harvest at great valuations, we can recycle more capital into external growth. As it relates to our guidance specifically, we're taking the approach with guidance that what you see in sources and uses is what we've announced to date and we don't include any future acquisitions or share repurchases in our guidance going forward. And we've given folks our outlook on -- for the year of dispositions as well, which is tracking nicely. And we're already including this $45 million loan repayment we talked about in our press release being repaid, actually it's this week. And so we are halfway on our dispositions already towards the midpoint of our target. So feeling good about those sources and uses. And as we have more activity, we'll continue to update those ranges and update you and the market as those transpire. Operator: Your next question comes from the line of Michael Goldsmith with UBS. Michael Goldsmith: I'm here with Justin Haasbeek. Maybe first, your same-store occupancy was up 110 basis points to 92.3% in the quarter. So really the question is how high can occupancy go in the same-store portfolio? Or maybe asked another way, how should we think about frictional vacancy for your portfolio in outpatient medical? Peter Scott: Yes. Michael, it's Pete. And thanks for picking up coverage. We appreciate it. I mean, look, we're in the low 92% area. If you go back to our strategy deck, we said we'd like to get to 92% to 93%. I think as we've improved our portfolio, I'd like to think we can get closer to the 93%. We've said actually that we believe there is some absorption as the year progresses as well, which is a positive for us, and that certainly will help our same-store. As to your question around just like frictional vacancy, I mean, I think that's probably about right, like mid to high single digits. I mean we just don't have a very, very large triple-net, single-tenant portfolio, which typically when you see other REITs that own assets like we do, will have higher occupancy levels because of that. We have a big multi-tenant portfolio, which is actually, we think, a positive in an environment where you've got more demand and less supply right now. So I think you'll always have a little bit of vacancy as doctors retire and things like that. But I feel like we're getting close to it. We're very focused on getting the total occupancy in the portfolio, the 90.5%, I mean getting that up to 92% to 93%, I mean that's going to be the big opportunity for us as we think about exceeding our 3-year forecast over the next few years. Michael Goldsmith: Got it. And then just as a follow-up, when you annualize your first quarter normalized FFO, you get pretty close to the high end of the guidance range. So just wondering if there's some conservatism baked in or another drag outside of the August debt maturity that we should be aware of? Or just how we should think about it? Peter Scott: I think you're thinking about it the right way. The only drag, I would point out is what's going to happen with that bond that does come due in August. But we did put out that delayed draw term loan, the announcement on that. So I feel like we've been able to significantly derisk that. And frankly, we've got plenty of runway now with that term loan where -- I'm a big believer in the capital markets. You can never time them perfectly, but you can certainly access those markets at times when you can become a price maker and not a price taker. I felt like we were in the price taker bucket without putting that term loan in place. And with that bullet maturity coming up in August, and with the dislocation in the markets the last couple of weeks, we pivoted very, very quickly. And I credit Dan and his team for putting that together and I thank our banking partners for that. Because I think the all-in cost on that is in the mid-4s. When you compare that to bond pricing today, we'd probably be 50 to 75 basis points wider. So that's a really good financing for us to put in place. Operator: Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Austin Wurschmidt: Pete, I appreciate you highlighting some of the various items that you're targeting to improve the growth profile and just returns associated with medical office. If 2% to 3% internal growth doesn't cut it for the reasons you highlighted, I guess, what's the right growth level you think is achievable? And just the time line it takes to reset that internal growth based on the lease maturity schedule. Peter Scott: Yes. Good question. I mean yes, I agree, 2% to 3% NOI growth just, as much as I'd like to say it works, it just won't work anymore. So I don't know that 7% is the right number for us to anchor ourselves to right now, for the reasons I mentioned in a question before. But probably something right in between. And then I will go back and focus you on a comment I said in my prepared remarks. And I get this is us working around some magic numbers behind the scenes. But if you back out the dilution from the portfolio optimization and the deleveraging from last year and you look at our actual organic growth this year, it's actually above 5%. So I'd probably start anchoring around a number like that. I mean obviously, we have other things we have to factor in as well with regards to our balance sheet and our refinancings over the next couple of years. But I think from a pure organic growth perspective, that's probably the best number I can anchor you to. Austin Wurschmidt: That's helpful. And then switching gears, Ryan or Pete, as a follow-up to some comments earlier, you flagged the cap rates are in the 5.5%, 6% range for core assets, core-plus isn't much above that. I mean is that what we should be thinking about on future dispositions? And what gives you the confidence then that you can source deals at going-in yields in excess of 7%? And I think you said in the prepared remarks, especially if these are lease-up opportunities with higher growth potential. Peter Scott: Yes. Well, I'd point you to the deal we just did in Birmingham. It's a $90 million deal, a core asset, 100% occupied, newly developed, 12-year weighted average lease term. The going-in cap rate on that was a 6% and our going-in yield was in the low 7s from a cash perspective. I'd say from a GAAP perspective, which we don't really talk about a lot, you're actually north of an 8% on that. So as we think about stock buybacks and the FFO yield versus putting capital to work in investments, we do have to look at GAAP yields from time to time. So that's a core-plus asset that we feel quite good about the accretion on that because the going-in yield is actually wider than or above our implied cap rate, and that's an important metric that we would look at. I'd say if we were looking to sell core assets, I would expect to be getting pricing even inside of that. That would be our take. Not every asset we're going to sell is going to be core. I think we will look to do just some typical core-plus pruning as well. But to the extent we looked at selling core assets, and we've got a lot of them, I would expect us to do quite well if we decided to transact. Operator: Your next question comes from the line of Rich Anderson with Cantor Fitzgerald. Richard Anderson: So perhaps a cynical question first. You said at the top, and you just kind of got -- went through the growth number, Steady Eddie growth isn't going to cut it in this market, and you're saying maybe somewhere between 3% and 7% will cut it. I recognize you can't be very precise there. I wonder if that will sway the conversation around the growth profile of MOBs, we'll see. But I guess the question I have is if you're solving for a growth level and then sort of work backwards to achieve it, there have been dangers in the past of people doing unnatural things to sort of break the status quo. So how do you avoid sort of the complications around that? How do you avoid sort of losing reputational capital if the rest of the MOB market isn't sort of buying into this new paradigm shift? I'm just curious how do you manage all of those sort of moving parts as you reassess the growth of the business. Peter Scott: Rich, good question, and thanks for your cynicism. But let me just spend a second on the value creation opportunity and maybe expand on my premium multiple comments that were in the prepared remarks. If you think about our current valuation, in my opinion, that implies basically minimal to no growth going forward, right? I mean I'm biased, I think it's way too low. But I think it implies very, very, very little growth when you look at how we stack up within the entire REIT industry. And I think it's very much backwards-looking. But I respect that, that's where we are right now, and we're still only a year into putting out our -- less than a year to putting out our strategic plan. So as I said, we have a challenge in front of us. One, we have to put up better numbers. I think this quarter, and actually if you look at the last couple of quarters, they've been much better than they've been historically. And we obviously have to redefine what we think success is in our sector. I would say success for us is not going from an 11x FFO multiple to a 30x FFO multiple. I mean I tip my cap to those companies that trade at those stratospheric levels, and then they're doing a fantastic job keeping the market excited and it's great for them. Success for us is not going all the way to those stratospheric levels. It is taking our multiple from 11x to something commensurate with where I think other similar growth characteristics or other REIT sectors that grow at a similar level to where we can grow are. And they're not at 11x. They are better than 11x. I think they are about 3 to 4 turns better than where we trade right now. I'll let you guys do the math, but that's pretty significant value creation from where we trade today. So I'm not looking to all of a sudden persuade everybody and say, oh my God, these guys are now going to grow at such an amazing level that they deserve this stratospheric level type multiple. We're very, very much rooted in realism here and what we think the right total return profile is. But it's a lot better, we think, from an earnings growth perspective than the old Steady Eddie model. Richard Anderson: Okay. Perfectly fair. And second question, on selling core assets, I know it's a little bit of a conversation piece today. What governors do you have on yourself to limit how much of that you're willing to do? Because you don't want to be guilty of throwing the baby out with the bath water. I recognize that there is sort of an accretive transfer of capital. But you -- someone just brought up core numbers -- core cap rates for core assets, I should say, are 5.5% to 6%, and not so core are just a little bit above that. So I just wonder what the real risk-reward benefit is of being overly aggressive with the core to asset sales. Peter Scott: Yes. I will go back to the word disciplined, Rich, like we're going to be disciplined, and I said we are open to selling core assets and recycling that capital accretively. And if you go back and take a look at all the numbers I've been discussing in here, they are all very modest type figures. So I would not look at this as we're just going and liquidating the highest-quality stuff. And you know this even better than we do, there's a limit from a tax gain capacity from how much we can do as well. But I think in moderation, we will certainly look to dispose of or potentially contribute some core assets into ventures as well where we still retain a stake in those. So like I said, we're looking at all options. I know we get questions on balance sheet capacity and our ability to recycle capital into our capital allocation priorities. And I felt like just pointing out we're not just going to utilize the balance sheet for this and lever up. We will certainly look at taking advantage of our portfolio to allow us to continue to further that. Operator: Our next question comes from the line of Daniella de Armas Rosales from JPMorgan. Daniella de Armas Rosales: Your spreads in the quarter were strong with 4% average. But can you give us some color on the 13% of renewals that had negative spreads? And do you think those roll-downs are largely behind you? Peter Scott: Yes. We tend to focus on the blended number of over 4% and actually achieving a lot higher on the upside. I would say that selectively, if we feel like, and I would go back to my comment earlier, if we feel like the better play for us is to retain a tenant as opposed to seeing them walk from a building, we will add time selectively look at modest roll-downs because we will look at the whole financial package as we look at this. What's it going to cost to re-lease that? What's the downtime? What's the CapEx? So I don't know that I would say, going forward, we're always going to have every lease 5% or above. We'll certainly strive to do something like that. But at times, we may selectively make a decision to allow a tenant to stay for a variety of reasons. But at the end of the day, we would make that decision because the IRR for that lease is much better than the alternative. Operator: Your next question comes from the line of Michael Stroyeck with Green Street. Michael Stroyeck: Maybe going back to same-store NOI growth, are there any known tenant move-outs or any other moving pieces that you expect to weigh on NOI growth during the rest of the year outside of just tougher year-over-year comps? Peter Scott: No. I mean if I look at the remaining lease expiration for 2026, I mean, that number, if you go back and look last quarter versus this quarter, has come down significantly. I gave you some thoughts on retention before in the 80% to 85% area. I'd expect the remaining lease expirations for this year to kind of track within that range. We'll retain the vast, vast majority of those tenants. So there's nothing that jumps out to me. I would just point out that we had a bit of an easier comp this quarter that we won't have in the next couple of quarters. But I would still look at the blended midpoint of 4.25% today. And as we've said, we think there is probably a little bit of upside as the year progresses on that, or at least that's what we would hope if we execute. And that's still really strong growth. So I would focus -- while we are focusing on the strong number this quarter, 1 quarter you got to average out over the entire year. But I think for the year, it's still quite strong growth relative to historical norms. Michael Stroyeck: Got it. That's helpful. And then maybe following up on an earlier acquisition yield discussion. You outlined the 6% yield going to 7% on that recent Alabama deal. So just clarifying, is that 7%-plus yields that you're underwriting, is that more of a stabilized yield or is that actually expected year 1 you expect to see? Peter Scott: That's year 1. That's not a stabilized yield. That's what we're going in at. Robert Hull: Mike, I'd just point out that when we talk about the JVs, that's inclusive of the advantageous fee arrangements that we have with our partners, that we've talked about so far this year. Operator: Your final question comes from the line of Juan Sanabria with BMO Capital Markets. Robin Haneland: This is Robin Haneland sitting in for Juan. Just curious on the strategic 3-year plan, if there's any updates compared to initial expectations, and whether you could share with us the next low-hanging fruits? Peter Scott: Yes. Look, I think what I would say on that is that we're tracking ahead of schedule at this point in time. And frankly, we're 1 quarter into a 12-quarter forecast. And to be tracking ahead of schedule, I think, is a testament to the hard work that the entire organization has put into preparing for kicking off this 3-year forecast, and also for the financial rigor that we're improving in this organization. I hate to continue to repeat that word, but I think if you guys were in here every day, you would see it and be quite impressed. The other thing I would just point out with regards to this year, I mean, this year was expected to be a flat year from an FFO perspective. And I think 1 quarter into the year and we're already exceeding from that perspective, and we'd like to continue to have an opportunity if we execute to increase guidance for the balance of the year as we go along. Obviously, we have to continue to execute with the intensity that we have been. So as I would say, I feel like we're tracking ahead of schedule. Not ready to say much more than that at this point in time being 1 quarter in, but it's good to be saying that at least that early on. Robin Haneland: And I was just also curious on if there are any signs of supply picking up and I'd be curious to know how far rents are off from being able to pencil. Peter Scott: I want to talk about supply, Ryan, because it really hasn't picked up? Ryan Crowley: We've seen new completions drop in recent quarters and new starts have remained fairly flat. They're actually tracking well below historical industry average of, call it, 1.5% to 2%, in what is a 1% of inventory range. So no, not much on that front. . Operator: And with no further questions in queue, I will now turn the call back over to the company for closing remarks. Peter Scott: Great. Well, thanks, everyone, for joining the call. We have a couple of industry conferences coming up later this month. We look forward to seeing you there. And then if we don't see you there, we'll see you at NAREIT. Thanks very much. Operator: Thank you again for joining us today. This does conclude today's presentation. You may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Healthcare Realty (HR) Q1 2026 Earnings Transcript was originally published by The Motley Fool

Record leasing and occupancy gains: The company signed over 2 million sq ft across 290+ leases, achieved 93.5% tenant retention and saw same-store occupancy rise to 92.3% (total occupancy 90.5%) as demand for outpatient medical space outstripped completions. Stronger operating results and raised guidance: Same-store cash NOI surged 6.9% and normalized FFO was $0.41; management raised full-year 2026 normalized FFO guidance to $1.59–$1.65 per share (midpoint $1.62) and lifted same-store NOI growth guidance. Disciplined capital allocation and debt actions: The company repurchased $100 million of stock YTD (with ~$400M remaining capacity), is pursuing JV-led acquisitions (notably with KKR) and redevelopments, and secured a $400 million delayed-draw term loan to help refinance a $600 million bond while maintaining roughly $1 billion of available liquidity. Interested in Healthcare Realty Trust Incorporated? Here are five stocks we like better. Dividend Resilience: Why These Kings Are Safe After a Volatile Q1 Healthcare Realty Trust (NYSE:HR) reported what management called a better-than-expected start to 2026, driven by record leasing activity, higher occupancy, and improved same-store performance. On the company’s first-quarter 2026 earnings call, President and CEO Pete Scott said the organization has made “significant progress” since he assumed the role just over a year ago, pointing to a revamped operating platform, a refined portfolio, and a “right-sized” balance sheet. “We signed over 2 million sq ft of leases, an all-time high,” Scott said, adding that same-store NOI growth of nearly 7% was also an all-time high. The company also increased share repurchases during the quarter, completed its first joint venture acquisition, and continued stabilizing its redevelopment pipeline. → Corning Beats Q1 Estimates but Drops 9% on Guidance Miss 5 Under-the-Radar Consumer Staples Stocks With Pricing Power Chief Operating Officer Rob Hull said the quarter was “the company’s strongest ever for leasing,” with more than 290 leases executed representing over 2 million square feet. Hull said lease economics improved across new and renewal leasing, with annual escalators averaging 3.1% and a weighted average lease term of nearly eight years. Tenant retention was 93.5%, supported by early renewals, including eight single-tenant renewals totaling nearly 740,000 square feet and an average extension of approximately 10 years. Hull and Scott both emphasized demand conditions for outpatient medical space, with Hull noting that “absorption outstripped completions during the quarter” and rental rates continued to rise. Scott said sector occupancy is approaching 93% due to “strong demand and limited supply growth.” → Meta Posted Its Best Sales Growth Since 2021—So Why Did Shares Fall? Hormel Stock Near Lows, But Tariff Relief Could Boost Outlook Within Healthcare Realty’s portfolio, Scott said same-store occupancy increased to 92.3%, up 110 basis points year over year, while total occupancy improved to 90.5%. Scott described total occupancy as a “significant near-term earnings growth driver” as the company works to stabilize both lease-up and redevelopment portfolios. Hull highlighted health system leasing activity in several markets, including: Atlanta: 176,000 square feet of new and renewal leasing with Wellstar across six on-campus buildings, including a 59,000-square-foot cancer center; blended cash leasing spread of about 4% and average term of five years. Charlotte: six renewal leases totaling 154,000 square feet with Advocate Health; average term of more than seven years and blended cash leasing spread over 5%. Upstate New York: 64,000 square feet leased to Trinity Health St. Peter’s Hospital; average term nearly 6.5 years and 3% annual escalators. Charleston: three renewals totaling 55,000 square feet with MUSC Health, maintaining 100% occupancy across two buildings; average term nine years and average cash leasing spread nearly 14%. → Is Oracle Undervalued as Cloud Growth Accelerates? Looking ahead, Hull said occupancy gains are expected to be supported by a new leasing pipeline of approximately 1.4 million square feet and a signed-not-occupied (SNO) pipeline of 490,000 square feet. In response to a question about occupancy targets, Hull added that “nearly half” of the SNO pipeline is tied to lease-up and redevelopment. Chief Financial Officer Dan Gabbay reported normalized FFO per share of $0.41 for the quarter, up from $0.40 sequentially, and same-store cash NOI growth of 6.9%. He said FAD per share was $0.32, resulting in a quarterly dividend payout ratio of 75%. Gabbay attributed the quarter’s outperformance to occupancy gains, cash leasing spreads of 4.2%, and what he described as an improved balance sheet. Same-store margins expanded by 60 basis points year over year, and Gabbay noted that 95% of total NOI is included in the company’s same-store pool. For full-year 2026, Gabbay said the company increased normalized FFO per share guidance by $0.01 to a range of $1.59 to $1.65 per share, with a midpoint of $1.62. The company also raised same-store cash NOI growth guidance by 25 basis points to a range of 3.75% to 4.75%. Scott said the strong first-quarter same-store result reflected a “pretty significant ramp up in occupancy year-over-year” and margin improvements, while also acknowledging the quarter benefited from an “easier comp.” Still, he said he views the full-year guidance range as an opportunity to raise expectations as the year progresses, adding that while the company may not repeat a near-7% quarter, he expects growth to remain “quite strong” versus historical norms. Management reiterated a “disciplined” capital allocation approach. Scott said the company repurchased $100 million of stock in the first quarter, completed more than $20 million of acquisitions, and invested $25 million in the redevelopment portfolio. He added the company has $400 million of remaining repurchase capacity under its current authorization. Gabbay provided additional details on repurchases, saying the company bought back 5.7 million shares year-to-date for $100 million at a weighted average price of $17.38, including an additional $50 million repurchase in March amid broader market volatility. On external growth, Scott said acquisitions will be pursued through joint ventures, and he referenced the company’s relationship with KKR as its primary “growth JV.” Scott said joint ventures currently account for about 5% of total NOI and suggested that figure could increase. He also said he could see the company allocating $50 million to $100 million of capital into the KKR joint venture in 2026, while targeting initial cash yields greater than 7%. During the Q&A, Chief Investment Officer Ryan Crowley said transaction-market momentum from last year has carried into 2026, with “plenty of demand and liquidity” and financing “readily available.” Crowley said core asset pricing is in the 5.5% to 6% cap rate range, with “core plus” not much higher. Scott later cited a Birmingham deal as an example, describing it as a $90 million, 100% occupied, newly developed asset with a 12-year weighted average lease term, a 6% going-in cap rate, and a cash going-in yield “in the low 7%s.” Scott emphasized that the yield referenced was “year one,” not a stabilized figure, and Gabbay added that joint venture yields include “advantageous fee arrangements” with partners. On redevelopment, Scott said the portfolio includes 23 properties that are 64% pre-leased and represents a primary source of a projected $50 million of NOI upside in the company’s three-year forecast. Hull said the redevelopment portfolio’s leased percentage improved by 900 basis points sequentially during the quarter. He also highlighted two projects: a $25 million redevelopment of a 155,000-square-foot building connected to Tufts Medical Center in Boston that is 100% pre-leased with a 10-year term and 3% annual escalators, and the completion of a $35 million, two-building redevelopment in Charlotte adjacent to Novant Health Huntersville Medical Center that is 98% leased with a stabilized yield within the company’s 9% to 12% targeted range. Gabbay said the company expects to close a new $400 million unsecured delayed draw term loan in May. He said drawn pricing is SOFR plus 90 basis points, with all-in pricing including transaction costs of approximately 4.8%, which he said is inside the company’s 5% cost of debt assumption for 2026. The company plans to draw the term loan in late July to repay a $600 million bond maturity, with the remainder funded on its line of credit. Gabbay said the company would still have about $1 billion of remaining liquidity on its line after the transaction. Gabbay also said the company has about $250 million outstanding under its commercial paper program, fully backstopped by the credit line, and that borrowing costs are currently about 40 to 50 basis points lower than the line. Additionally, he said Healthcare Realty extended maturities on $400 million of swaps tied to existing unsecured term loans, locking in SOFR at 3.3% through debt maturity in 2029. Scott said the delayed draw term loan meaningfully reduced risk tied to the August bond maturity, describing recent market volatility as an impetus for the company to move quickly. He said the facility’s all-in cost in the “mid-fours” compared favorably with bond pricing, which he said would likely be “50 to 75 basis points wider.” Scott said the company’s three-year earnings framework is focused on organic drivers including occupancy, annual escalators, retention, and cash leasing spreads. He said the average annual escalator on signed leases is now “3%+,” and described escalators as a primary driver of core earnings growth going forward given portfolio NOI of about $650 million. Scott also said that, excluding the impact of portfolio optimization and deleveraging, core earnings growth in 2026 is tracking above 5%. Management also said it remains open to asset sales, including core assets, to recycle proceeds into priorities such as buybacks, joint venture acquisitions, and redevelopments. Scott repeatedly characterized the approach as “disciplined,” and said sales would not be about liquidating the highest-quality assets. On governance, Scott said longtime director Jay Leupp plans to retire following the upcoming annual meeting. Scott said that after Leupp’s departure, the average tenure of remaining directors will be less than two years, and the company plans to add a new director later in the year with a focus on experience and diversity. Healthcare Realty Trust (NYSE: HR) is a real estate investment trust specializing in the ownership, acquisition and management of outpatient medical facilities. Headquartered in Nashville, Tennessee, the company's portfolio is focused primarily on medical office buildings and outpatient healthcare properties that serve hospitals, health systems and other healthcare providers. Its business model centers on securing long-term, triple-net leases to generate stable income streams from a diversified tenant base. The company's properties are located across key metropolitan markets in the United States, including major healthcare hubs in the Southeast, Southwest and in select coastal regions. The article "Healthcare Realty Trust Q1 Earnings Call Highlights" was originally published by MarketBeat.