Healthcare Realty Trust Incorporated Q4 FY2025 earnings call

• Revamp of asset management platform complete: New leadership team, improved lease economics (cash leasing spreads up 60 basis points, tenant retention up 220 basis points, lease IRRs and payback period improved). - Achieved $10,000,000 run-rate G&A savings: Total G&A expense at $45,000,000, property NOI margins up 60 basis points. - Completed asset disposition plan: Sold $1,200,000,000 of assets at a blended 6.7% cap rate, exited 14 noncore markets, improved geographic footprint. - Balance sheet initiatives complete: Reduced net debt to EBITDA to 5.4x, extended debt maturities, increased liquidity, outlook upgraded to Stable, dividend rightsized. - 2025 results: Normalized FFO $1.61 per share, same-store NOI growth 4.8%, ~5,800,000 square feet of leases executed, strong 2026 health system dialogue. - Capital allocation priorities: Prioritizing redevelopment (attractive yields on cost ~10%), stock buybacks (authorized to purchase more, $50,000,000 bought in Jan), and JV transactions (only pursue if earnings accretive).

No specific product segment financials are provided in the transcript.

• 2026 normalized FFO midpoint $1.61 per share, same-store cash NOI growth expected to be in the range of 3.5%-4.5%. - Capital allocation remains disciplined, focusing on redevelopment, stock buybacks, and JV transactions. - Midpoint FFO guidance is flat year-over-year but includes approximately 5% core earnings growth offsetting dilution from dispositions and deleveraging.

Forward-looking statements involve estimates, assumptions, risks, and uncertainties. Risks and risk factors are detailed in the company's press release and filings with the SEC.

Q: Curious on the same-store NOI guidance for 2026, piece parts of assumptions A: Escalators, retention, absorption, and cash leasing spreads are drivers. Escalators account for ~75% of same-store growth, retention is trending mid to low 80s, absorption is expected, and cash leasing spreads have ticked up.

Q: Absorption potential, redevelopment project timing A: Absorption is in the same-store pool, redevelopment has good momentum with a sequential 500 basis points increase in Q4 leases, and more lease-up expected in 2027.

Q: Acquisition potential, profile of potential acquisitions A: There is modest balance sheet capacity, JV transactions are considered, and only will be pursued if earnings accretive with an implied cap rate in the low 7s.

Q: Dispositions going forward, plan A: $175,000,000 of sales are embedded in guidance, some deals closing early, $60,000,000 baked in, and noncore assets may be sold.

Q: Retention goal, visibility on expirations A: Expect improved lease expiration schedule, retention is expected to be in the 80%-85% range.

Q: CapEx range, deployment discipline A: CapEx is in the range of 15%-20% of NOI, with a focus on redevelopment as the highest and best use of capital.

Q: Change in office repositionings, balance sheet mix of fixed/floating rate debt A: No notable change in office repositionings, the balance sheet has been repaired, and the floating rate mix is mid-single digits to upper-single digits.

Q: Joint venture details, private capital returns A: Existing JV arrangements are in place, private capital returns vary from upper teens IRRs for value-add to lower for core product.

Q: Redevelopment scope, obstacles in turnaround A: Average redevelopment project is ~$10,000,000, and the tough part was letting go of team members, which was necessary for cost structure.

Q: Build-to-suits, rebuttal to health care selling MOBs A: Build-to-suits are preleased, costs are high, MOBs are undervalued, and there is multiple expansion opportunity to create long-term value.