Healthcare Realty Trust Inc.
), a real estate investment trust (REIT), reported first quarter
2013 normalized funds from operations (FFO) per share of 32
cents, in line with the Zacks Consensus Estimate, but a cent
lower year over year. The company experienced a rise in revenues
in the quarter, which also exceeded the Zacks Consensus Estimate.
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Funds available for distribution (FAD) in the reported quarter
were $29.0 million or 33 cents per share compared with $28.0
million or 36 cents per share in the year-ago period.
Behind the Headlines
Total revenue increased 8.4% year over year to $82.6 million in
the reported quarter and also exceeded the Zacks Consensus
Estimate of $80 million. NOI for the same-store portfolio
increased 2.5% year over year in the reported quarter. Healthcare
Realty renewed 72 leases in its same-store portfolio, spanning
270,168 square feet, with a retention rate of 84.2%.
Moreover, at the end of the reported quarter, the 12 stabilizing
properties (SIP) were 65% leased with occupancy escalating to 45%
while NOI for the SIP properties came in at around $1.3 million
Healthcare Realty continued its strategic shift towards
lower-risk, on-campus medical office buildings. About 77% of the
total medical office properties were located on or adjacent to
hospital campuses at the end of the first quarter of 2013,
compared with 75% at the prior-year quarter end.
During the quarter, Healthcare Realty acquired 2 facilities for a
total value of $32.5 million. The buildings span approximately
95,000 square feet in total and are both 100% occupied.
As of Mar 31, 2013, Healthcare Realty owned 200 properties,
spanning approximately 13.5 million square feet, located across
28 U.S. states.
As of Mar 31, 2013, Healthcare Realty had $94.2 million of cash
and cash equivalents, compared with $6.8 million as of the prior
During the reported quarter, the company raised $39.7 million
through its at-the-market equity program for funding recent
acquisitions. Furthermore, the company issued $250 million of
unsecured senior notes due in Apr 2023 with a coupon rate of
3.75% and redeemed its 5.125% 2014 unsecured senior notes in Apr
2013. Moreover, it extended the maturity date to Apr 2017 and
reduced borrowing costs under its unsecured $700 million
revolving credit facility.
Concurrent with the earnings release, Healthcare Realty declared
a dividend of 30 cents per share in the reported quarter. The
dividend is equivalent to 88.2% of normalized FAD.
We are encouraged with the decent results at Healthcare Realty.
The company is well-positioned with a low risk, highly stable
portfolio of physician-oriented medical office buildings (MOB)
and clinical and surgical outpatient real estate properties.
Also, the company has almost completed the strategic shift away
from a single-tenant/Master Lease model to a multi-tenant
operating model, thereby reducing concentration risk and
augmenting probability. We expect this, along with company's
ongoing opportunistic acquisitions, to provide significant upside
potential to the stock going forward.
One of the REITs,
) has yet again come up with impressive first-quarter 2013
results. Its normalized FFO reached $1.03 per share in the first
quarter, 4 cents ahead of the Zacks Consensus Estimate of 99
cents and 13% ahead of the year-ago FFO of 91 cents per share,
primarily driven by the strategic investments in 2012.
Healthcare Realty currently holds a Zacks Rank #3 (Hold). REITs
that are performing better than Healthcare Realty include
Extra Space Storage Inc.
Franklin Street Properties Corp.
), both carrying a Zacks Rank #2 (Buy).
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