Healthcare Realty Beats Q2 Estimates - Analyst Blog

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Healthcare Realty Trust Inc. ( HR ) - a real estate investment trust (REIT) - reported second-quarter 2013 normalized funds from operations (FFO) per share of 32 cents, beating the Zacks Consensus Estimate by 2 cents. However, this was below the prior year quarter figure of 34 cents.

Normalized funds available for distribution (FAD) in the reported quarter was 33 cents per share, compared with 36 cents in the year-ago period.

Total revenue increased 8.3% year over year to $84.1 million in the reported quarter and exceeded the Zacks Consensus Estimate of $81 million.

Behind the Headlines

In the reported quarter, same-store properties revenues nudged up 0.9% year over year to $68.7 million. On the other hand, same-store properties expenses rose 1.8% year over year to $24.9 million. Consequently, same-store properties net operating income (NOI) increased 0.4% year over year to $43.8 million.

Moreover, at the quarter-end, the 12 stabilizing properties (SIP) were 69% leased and has escalating occupancy of 48%.

Portfolio Restructuring Activity

Healthcare Realty inked a deal to acquire four MOB properties and signed a letter of intent to purchase the fifth one. The purchase price of 5 assets, which are 95% occupied and span 528,000 square feet, is roughly $156 million. The transactions are expected to close in the third quarter of 2013.

During the reported quarter, Healthcare Realty divested 5 smaller assets, spanning about 158,000 square feet, for $12.0 million. 

Liquidity

As of Jun 30, 2013, Healthcare Realty had cash and cash equivalents worth approximately $1.2 million, compared with $94.2 million at the prior quarter-end.

Dividend

Concurrent with the earnings release, Healthcare Realty declared a dividend of 30 cents per share in the reported quarter. This dividend is payable on Aug 30, 2013 to stockholders of record as of Aug 15. The dividend is equivalent to 90.9% of normalized FAD.

Our Viewpoint

We are encouraged with another decent result at Healthcare Realty. The ongoing strategic opportunistic acquisitions and divestitures bode well for company's long-term profitability. Moreover, the company shifted its focus from a single-tenant/Master Lease model to a multi-tenant operating model, thus mitigating concentration risks and driving probability. We expect this to provide significant upside potential to the stock going forward.

Another healthcare REIT, Ventas Inc. 's ( VTR ) second-quarter 2013 normalized FFO per share of $1.01 missed the Zacks Consensus Estimate by a penny but rose 6.3% year over year. While a rise in share count, higher debt levels and an increase in net cash balances acted as dampeners for the quarter, Ventas' results benefited from strategic investments made in 2012.

Healthcare Realty currently carries a Zacks Rank #2 (Buy). Other well-performing REITs include Extra Space Storage Inc. ( EXR ) and Franklin Street Properties Corp. ( FSP ). Both these stocks have a Zacks Rank #2.

Note: 1. FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

2. FAD, a measure to ascertain the ability of REITs to generate cash, is derived by subtracting straight-line rent and non-recurring real estate expenses from funds from operations.



EXTRA SPACE STG (EXR): Free Stock Analysis Report

FRANKLIN ST PPT (FSP): Free Stock Analysis Report

HEALTHCARE RLTY (HR): Free Stock Analysis Report

VENTAS INC (VTR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: EXR , FAD , FSP , HR , VTR

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