2Q2019 |
Supplemental Information |
FURNISHED AS OF JULY 30, 2019 - UNAUDITED |
FORWARD LOOKING STATEMENTS & RISK FACTORS |
This Supplemental Information report contains disclosures that are “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words and phrases such as “can,” “may,” “payable,” “indicative,” "predictive," “annualized,” “expect,” “expected,” “range of expectations,” "would have been," "budget," and other comparable terms in this report. These forward-looking statements are made as of the date of this report and are not guarantees of future performance. These statements are based on the current plans and expectations of Company management and are subject to a number of unknown risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from those described in this release or implied by such forward-looking statements. Such risks and uncertainties include, among other things, the following: changes in the economy; increases in interest rates; the availability and cost of capital at expected rates; changes to facility-related healthcare regulations; competition for quality assets; negative developments in the operating results or financial condition of the Company's tenants, including, but not limited to, their ability to pay rent and repay loans; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to re-lease
space at similar rates as vacancies occur; the Company's ability to renew expiring long-term single-tenant net leases; the Company's ability to timely reinvest proceeds from the sale of assets at similar yields; government regulations affecting tenants' Medicare and Medicaid reimbursement rates and operational requirements; unanticipated difficulties and/or expenditures relating to future acquisitions and developments; changes in rules or practices governing the Company's financial reporting; the Company may be required under purchase options to sell properties and may not be able to reinvest the proceeds from such sales at rates of return equal to the return received on the properties sold; uninsured or underinsured losses related to casualty or liability; the incurrence of impairment charges on its real estate properties or other assets; and other legal and operational matters. Other risks, uncertainties and factors that could cause actual results to differ materially from those projected are detailed under the heading “Risk Factors,” in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2018 and other risks described from time to time thereafter in the Company's SEC filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Table of Contents |
4 | Highlights | |
5 | Salient Facts | |
6 | Corporate Information | |
7 | Balance Sheet | |
8 | Statements of Income | |
9 | FFO, Normalized FFO, & FAD | |
10 | Capital Funding & Commitments | |
11 | Debt Metrics | |
12 | Debt Covenants | |
13 | Acquisition & Disposition Activity | |
14 | Re/Development Activity | |
15 | Portfolio | |
16 | Associated Health Systems | |
17 | Top Tenants | |
18 | MOB Proximity to Hospital | |
19 | Lease Maturity, Lease & Building Size | |
20 | Historical Occupancy | |
21 | Occupancy Reconciliation | |
22 | Same Store Leasing Statistics | |
23 | Same Store Performance | |
24 | Reconciliation of NOI | |
25 | Reconciliations of NOI & EBITDA | |
26 | Components of Net Asset Value | |
27 | Components of Expected FFO |
Copies of this report may be obtained at www.healthcarerealty.com or by contacting Investor Relations at 615.269.8175 or communications@healthcarerealty.com.
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 3 |
Highlights |
QUARTERLY HIGHLIGHTS |
• | For the trailing twelve months ended June 30, 2019, same store cash NOI grew 3.6%. |
◦ | Revenues increased 2.8% and revenue per average occupied square foot increased 2.9%. |
◦ | Operating expenses increased 1.6%. |
◦ | Average occupancy was stable at 89.5% versus 89.6% the same period a year ago. |
• | Same store cash NOI for the second quarter increased 3.0% over the second quarter of 2018. |
• | Predictive growth measures in the same store multi-tenant portfolio include: |
◦ | Average in-place rent increases of 2.91%, up from 2.84% a year ago, partially attributable to future annual contractual increases of 3.17% for leases commencing in the quarter. |
◦ | Weighted average cash leasing spreads of 5.0% on 305,000 square feet renewed: |
◦ | 8% (<0% spread) |
◦ | 2% (0-3%) |
◦ | 53% (3-4%) |
◦ | 37% (>4%) |
◦ | Tenant retention of 87.4%. |
• | Portfolio leasing activity in the second quarter totaled 534,000 square feet related to 169 leases: |
◦ | 367,000 square feet of renewals |
◦ | 167,000 square feet of new and expansion leases |
◦ | 26,000 square feet of net positive sequential absorption |
• | Second quarter acquisitions of $102.2 million included five properties totaling 293,000 square feet that were 94% leased. Acquisitions included: |
◦ | A medical office building adjacent to AA- rated Piedmont Healthcare's hospital in the Buckhead area of Atlanta for $28.0 million. The 48,000 square foot building is 100% leased. |
◦ | A medical office building adjacent to AA- rated Baylor Scott & White Health’s All Saints Medical Center in the Dallas-Fort Worth market for $17.0 million. The 90,000 square foot building is 85% leased and adjacent to a 140,000 square foot, on-campus medical office building developed by the Company. |
◦ | A medical office building adjacent to AA- rated MultiCare Health System’s Allenmore Hospital in the Seattle-Tacoma market for $7.7 million. The 30,000 square foot building is 100% leased and is adjacent to two on-campus medical office buildings, totaling 154,000 square feet, owned by the Company. |
◦ | Two medical office buildings for $49.5 million, totaling 126,000 square feet, that are 98% leased in aggregate. These properties are located near AA+ rated UW Medicine’s Northwest Hospital and Medical Center in Seattle where the Company owns two medical office buildings totaling 130,000 square feet. |
• | Second quarter dispositions of $13.0 million included four medical office buildings totaling 67,000 square feet in Tucson, AZ, three of which were located off-campus. |
• | In May 2019, the Company renewed and expanded its credit facilities by: |
◦ | Extending the $700 million unsecured credit facility maturity to 2023 and improving borrowing costs by 10 basis points. |
◦ | Extending its existing five-year term loan maturity to 2024, expanding the total capacity by $50 million to $200 million, and improving borrowing costs by 10 basis points. |
◦ | Entering into a new seven-year $150 million term loan facility with a nine-month delayed draw feature. The Company expects to draw from this facility in the first quarter of 2020. |
• | In the second quarter, the Company entered into $100 million of LIBOR-based swaps, bringing the Company's total LIBOR-based swaps to $175 million, with a weighted average rate of 2.29% plus the applicable margin rate. |
• | Net debt to adjusted EBITDA was 5.2 times. |
• | A dividend of $0.30 per common share was declared for the second quarter. Dividends paid for the quarter equaled 75.8% of normalized FFO and 93.4% of FAD. |
OTHER ITEMS OF NOTE |
• | The Company traditionally experiences an increase in property operating expenses during the third quarter related to seasonal utilities. Over the past three years, third quarter same store cash NOI growth has been sequentially flat as revenue growth has been offset by increases in utility expenses averaging $1.5 million due to seasonally high temperatures. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 4 |
Salient Facts |
AS OF JUNE 30, 2019 |
Properties | |||
$4.1B invested in 201 properties | |||
15.3M SF owned in 26 states | |||
11.1M SF managed by Healthcare Realty | |||
93.2% medical office and outpatient | |||
87.6% on/adjacent to hospital campuses | |||
3.6% same store cash NOI growth (TTM) | |||
Capitalization | |||
$5.6B enterprise value as of 7/26/2019 | |||
$4.1B market capitalization as of 7/26/2019 | |||
129.2M shares outstanding | |||
$0.30 quarterly dividend per share | |||
BBB/Baa2 credit rating | |||
26.4% debt to enterprise value at 6/30/2019 | |||
5.2x net debt to adjusted EBITDA | |||
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 5 |
Corporate Information |
CORPORATE HEADQUARTERS |
Healthcare Realty Trust Incorporated
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Phone 615.269.8175 Fax 615.269.8461
communications@healthcarerealty.com
www.healthcarerealty.com
EXECUTIVE OFFICERS |
David R. Emery
Executive Chairman of the Board
Todd J. Meredith
President and Chief Executive Officer
John M. Bryant, Jr.
Executive Vice President and General Counsel
J. Christopher Douglas
Executive Vice President and Chief Financial Officer
Robert E. Hull
Executive Vice President - Investments
ANALYST COVERAGE |
BMO Capital Markets
BTIG, LLC
CapitalOne Securities, Inc.
Citi Research
Green Street Advisors, Inc.
J.P. Morgan Securities LLC
Jefferies LLC
JMP Securities LLC
KeyBanc Capital Markets Inc.
Mizuho Securities USA Inc
Morgan Stanley & Co, LLC
Raymond James & Associates
SMBC Nikko Securities America, Inc.
Stifel, Nicolaus & Company, Inc.
Wells Fargo Securities, LLC
BOARD OF DIRECTORS |
David R. Emery
Executive Chairman of the Board
Healthcare Realty Trust Incorporated
John V. Abbott
Retired Chief Executive Officer
Aviation Asset Management Group, General Electric Company
Nancy H. Agee
President and Chief Executive Officer
Carilion Clinic
Edward H. Braman
Retired Audit Partner
Ernst & Young LLP
Peter F. Lyle
Vice President
Medical Management Associates, Inc.
Todd J. Meredith
President and Chief Executive Officer
Healthcare Realty Trust Incorporated
J. Knox Singleton
Retired Chief Executive Officer
Inova Health System
Bruce D. Sullivan
Retired Audit Partner
Ernst & Young LLP
Christann M. Vasquez
President
Dell Seton Medical Center at University of Texas
Seton Medical Center Austin
Seton Shoal Creek Hospital
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 6 |
Balance Sheet |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
ASSETS | ||||||||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | ||||||||||||
Real estate properties | ||||||||||||||||
Land | $247,772 | $230,206 | $230,206 | $217,322 | $214,755 | |||||||||||
Buildings, improvements and lease intangibles | 3,845,546 | 3,757,260 | 3,675,415 | 3,669,852 | 3,668,938 | |||||||||||
Personal property | 10,804 | 10,739 | 10,696 | 10,454 | 10,355 | |||||||||||
Construction in progress | 36,996 | 40,326 | 33,107 | 26,960 | 23,102 | |||||||||||
Land held for development | 24,647 | 24,647 | 24,647 | 24,645 | 24,633 | |||||||||||
Total real estate properties | 4,165,765 | 4,063,178 | 3,974,071 | 3,949,233 | 3,941,783 | |||||||||||
Less accumulated depreciation and amortization | (1,064,408 | ) | (1,035,800 | ) | (1,015,174 | ) | (989,585 | ) | (959,732 | ) | ||||||
Total real estate properties, net | 3,101,357 | 3,027,378 | 2,958,897 | 2,959,648 | 2,982,051 | |||||||||||
Cash and cash equivalents | 7,617 | 11,313 | 8,381 | 10,027 | 7,414 | |||||||||||
Assets held for sale, net | 6,615 | 10,568 | 9,272 | 8,826 | 8,788 | |||||||||||
Operating lease right-of-use assets 1 | 127,326 | 128,141 | — | — | — | |||||||||||
Financing lease right-of-use assets 1 | 9,095 | 9,259 | — | — | — | |||||||||||
Other assets | 176,537 | 175,864 | 214,697 | 222,582 | 216,437 | |||||||||||
Total assets | $3,428,547 | $3,362,523 | $3,191,247 | $3,201,083 | $3,214,690 | |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | ||||||||||||
Liabilities | ||||||||||||||||
Notes and bonds payable | $1,442,758 | $1,343,110 | $1,345,984 | $1,344,759 | $1,335,732 | |||||||||||
Accounts payable and accrued liabilities | 60,394 | 61,519 | 80,411 | 72,927 | 66,490 | |||||||||||
Liabilities of properties held for sale | 511 | 633 | 587 | 141 | 340 | |||||||||||
Operating lease liabilities 1 | 91,056 | 91,044 | — | — | — | |||||||||||
Financing lease liabilities 1 | 14,216 | 14,294 | — | — | — | |||||||||||
Other liabilities | 50,168 | 46,144 | 47,623 | 43,004 | 44,072 | |||||||||||
Total liabilities | 1,659,103 | 1,556,744 | 1,474,605 | 1,460,831 | 1,446,634 | |||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders' equity | ||||||||||||||||
Preferred stock, $.01 par value; 50,000 shares authorized | — | — | — | — | — | |||||||||||
Common stock, $.01 par value; 300,000 shares authorized | 1,292 | 1,292 | 1,253 | 1,252 | 1,252 | |||||||||||
Additional paid-in capital | 3,305,344 | 3,302,814 | 3,180,284 | 3,181,263 | 3,178,514 | |||||||||||
Accumulated other comprehensive income (loss) | (6,189 | ) | (1,611 | ) | (902 | ) | 473 | 5 | ||||||||
Cumulative net income attributable to common stockholders | 1,097,494 | 1,093,010 | 1,088,119 | 1,071,804 | 1,065,256 | |||||||||||
Cumulative dividends | (2,628,497 | ) | (2,589,726 | ) | (2,552,112 | ) | (2,514,540 | ) | (2,476,971 | ) | ||||||
Total stockholders' equity | 1,769,444 | 1,805,779 | 1,716,642 | 1,740,252 | 1,768,056 | |||||||||||
Total liabilities and stockholders' equity | $3,428,547 | $3,362,523 | $3,191,247 | $3,201,083 | $3,214,690 |
1 | Beginning in the first quarter of 2019 with the adoption of Accounting Standards Codification Topic 842, the Company recorded the present value of future lease payments on the Condensed Consolidated Balance Sheet. This amount was recorded as a right-of-use asset with a corresponding lease liability. The right-of-use asset also includes prepaid leases and acquisition market rate intangibles. The Company's leases where it is the lessee are primarily ground leases. All of the Company's ground leases that were in-place as of December 31, 2018 were recorded as operating leases. The Company assumed two ground leases in connection with an acquisition in the first quarter that were classified as finance leases. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 7 |
Statements of Income |
DOLLARS IN THOUSANDS |
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
Rental income | $114,351 | $110,696 | $111,149 | $111,452 | $109,566 | $110,229 | $105,806 | $105,078 | ||||||||||||||||||
Other operating | 1,966 | 1,961 | 2,019 | 2,010 | 2,068 | 1,895 | 1,943 | 1,947 | ||||||||||||||||||
116,317 | 112,657 | 113,168 | 113,462 | 111,634 | 112,124 | 107,749 | 107,025 | |||||||||||||||||||
Expenses | ||||||||||||||||||||||||||
Property operating | 44,286 | 42,725 | 42,815 | 44,135 | 41,737 | 41,818 | 40,590 | 40,628 | ||||||||||||||||||
General and administrative | 7,845 | 8,510 | 8,534 | 8,504 | 8,373 | 9,101 | 8,272 | 8,021 | ||||||||||||||||||
Acquisition and pursuit costs 1 | 422 | 305 | 200 | 141 | 120 | 277 | 302 | 507 | ||||||||||||||||||
Depreciation and amortization | 43,926 | 42,662 | 42,437 | 42,061 | 40,130 | 39,573 | 37,324 | 35,873 | ||||||||||||||||||
Bad debts, net of recoveries 2 | — | — | 18 | (62 | ) | 104 | — | (17 | ) | 4 | ||||||||||||||||
96,479 | 94,202 | 94,004 | 94,779 | 90,464 | 90,769 | 86,471 | 85,033 | |||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||
Gain on sales of real estate properties | 4,849 | 15 | 10,787 | 1,288 | 29,590 | — | — | (7 | ) | |||||||||||||||||
Interest expense | (13,850 | ) | (13,588 | ) | (13,602 | ) | (13,464 | ) | (13,069 | ) | (12,668 | ) | (13,707 | ) | (14,107 | ) | ||||||||||
Loss on extinguishment of debt | — | — | — | — | — | — | (44,985 | ) | — | |||||||||||||||||
Impairment of real estate assets | (5,610 | ) | — | — | — | — | — | 2 | (5,059 | ) | ||||||||||||||||
Interest and other income (expense), net | (743 | ) | 9 | (35 | ) | 41 | 38 | 493 | 261 | 354 | ||||||||||||||||
(15,354 | ) | (13,564 | ) | (2,850 | ) | (12,135 | ) | 16,559 | (12,175 | ) | (58,429 | ) | (18,819 | ) | ||||||||||||
Net income (loss) | $4,484 | $4,891 | $16,314 | $6,548 | $37,729 | $9,180 | ($37,151 | ) | $3,173 |
1 | Includes third party and travel costs related to the pursuit of acquisitions and developments. |
2 | Beginning in the first quarter of 2019 with the adoption of Accounting Standards Codification Topic 842, bad debts, net of recoveries associated with lease revenue was recorded within rental income. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 8 |
FFO, Normalized FFO, & FAD 1, 2 |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | |||||||||||||||||||
Net income (loss) | $4,484 | $4,891 | $16,314 | $6,548 | $37,729 | $9,180 | ($37,151 | ) | $3,173 | |||||||||||||||||
Gain on sales of real estate assets | (4,849 | ) | (15 | ) | (10,787 | ) | (1,288 | ) | (29,590 | ) | — | — | 7 | |||||||||||||
Impairments of real estate assets | 5,610 | — | — | — | — | — | (2 | ) | 5,059 | |||||||||||||||||
Real estate depreciation and amortization | 44,682 | 43,383 | 43,380 | 42,723 | 40,747 | 40,003 | 37,869 | 36,478 | ||||||||||||||||||
FFO | $49,927 | $48,259 | $48,907 | $47,983 | $48,886 | $49,183 | $716 | $44,717 | ||||||||||||||||||
Acquisition and pursuit costs 3 | 422 | 305 | 200 | 141 | 120 | 277 | 302 | 507 | ||||||||||||||||||
Lease intangible amortization 4 | 54 | 84 | — | — | — | — | — | — | ||||||||||||||||||
Revaluation of awards upon retirement | — | — | — | 70 | — | — | — | — | ||||||||||||||||||
Forfeited earnest money received | — | — | — | — | — | (466 | ) | — | — | |||||||||||||||||
Debt financing costs | 760 | — | — | — | — | — | 45,773 | — | ||||||||||||||||||
Normalized FFO | $51,163 | $48,648 | $49,107 | $48,194 | $49,006 | $48,994 | $46,791 | $45,224 | ||||||||||||||||||
Non-real estate depreciation and amortization | 1,536 | 1,465 | 1,439 | 1,506 | 1,481 | 1,466 | 1,439 | 1,388 | ||||||||||||||||||
Provision for bad debt, net | 150 | (75 | ) | 18 | (62 | ) | 104 | — | (17 | ) | 4 | |||||||||||||||
Straight-line rent income, net | (1 | ) | (270 | ) | (302 | ) | (413 | ) | (683 | ) | (1,330 | ) | (201 | ) | (1,156 | ) | ||||||||||
Stock-based compensation | 2,372 | 2,639 | 2,601 | 2,605 | 2,593 | 2,822 | 2,531 | 2,429 | ||||||||||||||||||
Normalized FFO adjusted for non-cash items | 55,220 | 52,407 | 52,863 | 51,830 | 52,501 | 51,952 | 50,543 | 47,889 | ||||||||||||||||||
2nd generation TI | (6,124 | ) | (4,326 | ) | (10,367 | ) | (6,950 | ) | (7,755 | ) | (5,867 | ) | (6,929 | ) | (4,481 | ) | ||||||||||
Leasing commissions paid | (2,601 | ) | (1,483 | ) | (2,182 | ) | (1,139 | ) | (1,947 | ) | (1,851 | ) | (2,705 | ) | (1,826 | ) | ||||||||||
Capital expenditures | (4,993 | ) | (3,462 | ) | (2,817 | ) | (6,229 | ) | (7,117 | ) | (4,184 | ) | (6,400 | ) | (4,203 | ) | ||||||||||
FAD | $41,502 | $43,136 | $37,497 | $37,512 | $35,682 | $40,050 | $34,509 | $37,379 | ||||||||||||||||||
Dividends paid | $38,771 | $37,614 | $37,571 | $37,570 | $37,569 | $37,556 | $37,467 | $34,964 | ||||||||||||||||||
FFO per common share - diluted | $0.39 | $0.39 | $0.39 | $0.39 | $0.39 | $0.40 | $0.01 | $0.37 | ||||||||||||||||||
Normalized FFO per common share - diluted | $0.40 | $0.39 | $0.40 | $0.39 | $0.40 | $0.40 | $0.38 | $0.38 | ||||||||||||||||||
FFO weighted average common shares outstanding - diluted 5 | 128,279 | 124,928 | 124,240 | 124,192 | 123,983 | 123,984 | 124,125 | 120,081 |
1 | Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as “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.” |
2 | FFO, Normalized FFO and Funds Available for Distribution ("FAD") do not represent cash generated from operating activities determined in accordance with accounting principles generally accepted in the United States of America and is not necessarily indicative of cash available to fund cash needs. FFO, Normalized FFO and FAD should not be considered alternatives to net income attributable to common stockholders as indicators of the Company's operating performance or as alternatives to cash flow as measures of liquidity. |
3 | Acquisition and pursuit costs include third party and travel costs related to the pursuit of acquisitions and developments. |
4 | The Company adopted the 2018 NAREIT FFO White Paper Restatement during the first quarter of 2019. This amended definition specifically includes the impact of acquisition related market lease intangible amortization in the calculation of NAREIT FFO. The Company historically included this amortization in the real estate depreciation and amortization line item which is added back in the calculation of NAREIT FFO. Prior periods were not restated for the adoption. |
5 | Diluted weighted average common shares outstanding for the three months ended June 30, 2019 includes the dilutive effect of nonvested share-based awards outstanding of 754,089. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 9 |
Capital Funding & Commitments |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
ACQUISITION AND RE/DEVELOPMENT FUNDING | |||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | |||||||
Acquisitions | $102,225 | $93,000 | $36,950 | $4,150 | $70,350 | ||||||
Re/development | 6,916 | 7,281 | 6,895 | 5,016 | 10,998 | ||||||
1st gen. TI & acquisition capex 1 | 4,647 | 2,752 | 3,394 | 3,866 | 4,668 | ||||||
MAINTENANCE CAPITAL EXPENDITURES | |||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | |||||||
$ Spent | |||||||||||
2nd generation TI | $6,124 | $4,326 | $10,367 | $6,950 | $7,755 | ||||||
Leasing commissions paid | 2,601 | 1,483 | 2,182 | 1,139 | 1,947 | ||||||
Capital expenditures | 4,993 | 3,462 | 2,817 | 6,229 | 7,117 | ||||||
$13,718 | $9,271 | $15,366 | $14,318 | $16,819 | |||||||
% of NOI | |||||||||||
2nd generation TI | 8.5 | % | 6.2 | % | 14.8 | % | 10.1 | % | 11.2 | % | |
Leasing commissions paid | 3.6 | % | 2.1 | % | 3.1 | % | 1.6 | % | 2.8 | % | |
Capital expenditures | 6.9 | % | 5.0 | % | 4.0 | % | 9.0 | % | 10.3 | % | |
19.0 | % | 13.3 | % | 21.9 | % | 20.7 | % | 24.3 | % | ||
LEASING COMMITMENTS | |||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | |||||||
Renewals | |||||||||||
Square feet | 366,524 | 575,195 | 341,032 | 572,554 | 346,539 | ||||||
2nd generation TI/square foot/lease year | $1.75 | $2.12 | $1.69 | $1.50 | $2.48 | ||||||
Leasing commissions/square foot/lease year | $0.43 | $0.60 | $0.49 | $0.75 | $0.57 | ||||||
WALT (in months) 2 | 53.0 | 46.3 | 51.4 | 34.0 | 75.6 | ||||||
New leases | |||||||||||
Square feet | 123,918 | 78,947 | 104,248 | 79,545 | 95,542 | ||||||
2nd generation TI/square foot/lease year | $5.18 | $5.06 | $4.72 | $4.28 | $4.04 | ||||||
Leasing commissions/square foot/lease year | $1.05 | $0.91 | $1.23 | $1.14 | $0.84 | ||||||
WALT (in months) 2 | 60.7 | 59.6 | 72.8 | 58.5 | 63.8 | ||||||
All | |||||||||||
Square feet | 490,442 | 654,142 | 445,280 | 652,099 | 442,081 | ||||||
2nd generation TI/square foot/lease year | $2.71 | $2.56 | $2.60 | $2.03 | $2.77 | ||||||
Leasing commissions/square foot/lease year | $0.60 | $0.64 | $0.72 | $0.82 | $0.62 | ||||||
Leasing commitments as a % of annual net rent | 15.7 | % | 14.4 | % | 16.0 | % | 12.0 | % | 15.8 | % | |
WALT (in months) 2 | 55.0 | 47.9 | 56.4 | 37.0 | 73.0 |
1 | Planned capital expenditures for acquisitions include expected near-term fundings that were contemplated as part of the acquisition. |
2 | WALT = weighted average lease term. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 10 |
Debt Metrics |
DOLLARS IN THOUSANDS |
SUMMARY OF INDEBTEDNESS AS OF JUNE 30, 2019 | ||||||||||||
INTEREST EXPENSE | PRINCIPAL BALANCE | BALANCE 1 | MONTHS TO MATURITY | CONTRACTUAL RATE | EFFECTIVE RATE | |||||||
Senior notes due April 2023 | $2,397 | $250,000 | $248,328 | 46 | 3.75 | % | 3.95 | % | ||||
Senior notes due May 2025 2 | 2,469 | 250,000 | 248,399 | 70 | 3.88 | % | 4.08 | % | ||||
Senior notes due January 2028 | 2,773 | 300,000 | 295,422 | 102 | 3.63 | % | 3.84 | % | ||||
Total senior notes outstanding | $7,639 | $800,000 | $792,149 | 74 | 3.74 | % | 3.95 | % | ||||
$700 million unsecured credit facility due May 2023 | 2,356 | 320,000 | 320,000 | 47 | LIBOR + 0.90% | 3.30 | % | |||||
$200 million unsecured term loan facility due May 2024 3 | 1,447 | 200,000 | 198,901 | 59 | LIBOR + 1.00% | 3.30 | % | |||||
$150 million unsecured term loan facility due June 2026 4 | — | — | — | 83 | LIBOR + 1.60% | N/A | ||||||
Mortgage notes payable, net | 1,589 | 131,632 | 131,708 | 59 | 4.95 | % | 4.81 | % | ||||
Total outstanding notes and bonds payable | $13,031 | $1,451,632 | $1,442,758 | 65 | 3.69 | % | 3.79 | % | ||||
Interest cost capitalization | (344) | |||||||||||
Unsecured credit facility fee and deferred financing costs | 967 | |||||||||||
Financing lease right-of-use assets | 196 | |||||||||||
Total quarterly consolidated interest expense | $13,850 | |||||||||||
DEBT MATURITIES SCHEDULE AS OF JUNE 30, 2019 | ||||||||||||||||
PRINCIPAL PAYMENTS | WEIGHTED AVERAGE RATE | |||||||||||||||
CREDIT FACILITY | TERM LOANS | SENIOR NOTES | MORTGAGE NOTES | TOTAL | MORTGAGE NOTES | OTHER | TOTAL | |||||||||
2019 | $2,374 | $2,374 | 5.06 | % | — | % | 5.06 | % | ||||||||
2020 | 23,064 | 23,064 | 6.06 | % | — | % | 6.06 | % | ||||||||
2021 | 17,594 | 17,594 | 5.56 | % | — | % | 5.56 | % | ||||||||
2022 | 12,977 | 12,977 | 3.84 | % | — | % | 3.84 | % | ||||||||
2023 | $320,000 | $250,000 | 30,230 | 600,230 | 4.23 | % | 3.50 | % | 3.53 | % | ||||||
2024 | $200,000 | 36,198 | 236,198 | 4.46 | % | 3.30 | % | 3.48 | % | |||||||
2025 | 250,000 | 315 | 250,315 | 6.63 | % | 3.88 | % | 3.88 | % | |||||||
2026 | 335 | 335 | 6.63 | % | — | % | 6.63 | % | ||||||||
2027 | 355 | 355 | 6.63 | % | — | % | 6.63 | % | ||||||||
Thereafter | 300,000 | 8,190 | 308,190 | 6.84 | % | 3.63 | % | 3.71 | % | |||||||
Total | $320,000 | $200,000 | $800,000 | $131,632 | $1,451,632 | 4.95 | % | 3.57 | % | 3.69 | % | |||||
Weighted average rate | 3.30 | % | 3.30 | % | 3.74 | % | 4.95 | % | 3.69 | % |
1 | Balances are reflected net of discounts and deferred financing costs and include premiums. |
2 | The effective interest rate includes the impact of the $1.7 million settlement of a forward-starting interest rate swap that is included in accumulated other comprehensive income on the Company's Condensed Consolidated Balance Sheets. |
3 | The effective interest rate includes the impact of interest rate swaps on $175.0 million at a weighted average rate of 2.29% (plus the applicable margin rate, currently 100 basis points). |
4 | As of June 30, 2019, there are no outstanding loans under the $150 million unsecured term loan due June 2026. This term loan has a delayed draw feature that allows the Company up to February 2020 to draw against the commitments. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 11 |
Debt Covenants |
DOLLARS IN THOUSANDS |
SELECTED FINANCIAL DEBT COVENANTS TTM ENDED JUNE 30, 2019 1 | ||||||
CALCULATION | REQUIREMENT | PER DEBT COVENANTS | EXCLUDING 2 LEASE ACCOUNTING IMPACT | |||
Revolving credit facility and term loan 3 | ||||||
Leverage ratio | Total debt/total capital | Not greater than 60% | 33.8 | % | ||
Secured leverage ratio | Total secured debt/total capital | Not greater than 30% | 3.1 | % | ||
Unencumbered leverage ratio | Unsecured debt/unsecured real estate | Not greater than 60% | 34.6 | % | ||
Fixed charge coverage ratio | EBITDA/fixed charges | Not less than 1.50x | 4.2x | |||
Unsecured coverage ratio | Unsecured EBITDA/unsecured interest | Not less than 1.75x | 4.7x | |||
Construction and development | CIP/total assets | Not greater than 15% | 1.1 | % | ||
Asset investments | Mortgages & unimproved land/total assets | Not greater than 20% | 1.0 | % | ||
Senior notes 4 | ||||||
Incurrence of total debt | Total debt/total assets | Not greater than 60% | 35.2 | % | 33.6 | % |
Incurrence of debt secured by any lien | Secured debt/total assets | Not greater than 40% | 3.2 | % | 3.0 | % |
Maintenance of total unsecured assets | Unencumbered assets/unsecured debt | Not less than 150% | 285.0 | % | 297.5 | % |
Debt service coverage | EBITDA/interest expense | Not less than 1.5x | 4.7x | 4.7x | ||
Other | ||||||
Net debt to adjusted EBITDA 5 | Net debt (debt less cash)/adjusted EBITDA | Not required | 5.2x | |||
Debt to enterprise value 6 | Debt/enterprise value | Not required | 26.4 | % |
1 | Does not include all financial and non-financial covenants and restrictions that are required by the Company's various debt agreements. |
2 | Excludes the impact of the adoption of Topic 842, Leases where lease liabilities are considered debt per the covenant definitions. |
3 | As part of the Company's amendment to the credit facility and term loan agreements during the second quarter of 2019, the financial covenants were updated to exclude the impact of the Topic 842, Lease Accounting from the covenant calculations. |
4 | The senior note covenants calculations apply to the senior notes due 2025 and 2028. The senior notes due 2023 have similar covenants but contain a less restrictive definition of total assets. |
5 | Adjusted EBITDA is based on the current quarter results, annualized. See page 25 for a reconciliation of adjusted EBITDA. Net debt does not include lease liabilities. |
6 | Based on the closing price of $31.32 on June 30, 2019 and 129,245,343 shares outstanding. Debt does not include lease liabilities. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 12 |
Acquisition & Disposition Activity |
DOLLARS IN THOUSANDS |
ACQUISITION ACTIVITY | ||||||||||
MARKET | TYPE 1 | MILES TO CAMPUS | ASSOCIATED HEALTH SYSTEM | CLOSING | PURCHASE PRICE | SQUARE FEET | LEASED % | CAP RATE 2 | ||
Washington D.C. 3 | MOB | 0.00 | Inova Health | 3/28/2019 | $46,000 | 158,338 | 75 | % | 5.2 | % |
Indianapolis, IN | MOB | 0.00 | Indiana University Health | 3/28/2019 | 47,000 | 143,499 | 100 | % | 5.1 | % |
Atlanta, GA | MOB | 0.14 | Piedmont Healthcare | 4/2/2019 | 28,000 | 47,963 | 100 | % | 5.7 | % |
Dallas, TX | MOB | 0.01 | Baylor Scott & White Health | 6/10/2019 | 17,000 | 89,990 | 85 | % | 6.2 | % |
Seattle, WA | MOB | 0.20 | MultiCare Health System | 6/11/2019 | 7,720 | 29,870 | 100 | % | 6.9 | % |
Seattle, WA | MOB | 0.27 | UW Medicine (Seattle) | 6/14/2019 | 19,005 | 47,255 | 96 | % | 5.8 | % |
Seattle, WA | MOB | 0.35 | UW Medicine (Seattle) | 6/28/2019 | 30,500 | 78,288 | 99 | % | 5.7 | % |
Total | $195,225 | 595,203 | 91 | % | 5.5 | % | ||||
DISPOSITION ACTIVITY | ||||||||||
LOCATION | TYPE 1 | MILES TO CAMPUS | ASSOCIATED HEALTH SYSTEM | CLOSING | SALES PRICE | SQUARE FEET | LEASED % | CAP RATE 4 | ||
Tucson, AZ 5 | MOB | Varies | Tenet 5 | 4/9/2019 | $13,000 | 67,345 | 95 | % | 6.2 | % |
Total | $13,000 | 67,345 | 95 | % | 6.2 | % |
HISTORICAL INVESTMENT ACTIVITY | ||||||||
ACQUISITIONS | RE/DEVELOPMENT FUNDING | TOTAL INVESTMENTS | DISPOSITIONS | |||||
2015 | $187,216 | $27,859 | $215,075 | $157,975 | ||||
2016 | 241,939 | 45,343 | 287,282 | 94,683 | ||||
2017 | 327,167 | 32,305 | 359,472 | 122,700 | ||||
2018 | 111,450 | 35,567 | 147,017 | 98,691 | ||||
YTD 2019 | 195,225 | 14,196 | 209,421 | 13,000 | ||||
Average (2015-2018) | 216,942 | 35,269 | 252,212 | 118,512 | ||||
% of Total | 86.0 | % | 14.0 | % | 100.0 | % |
1 | MOB = Medical office building |
2 | For acquisitions, cap rate represents the forecasted first year NOI / purchase price. |
3 | Includes two properties. |
4 | For dispositions, cap rate represents the in-place cash NOI / sales price. |
5 | Includes three off-campus medical office buildings and one on-campus medical office building sold to a single purchaser. The associated health system is Tenet for three of these buildings. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 13 |
Re/Development Activity |
DOLLARS IN THOUSANDS |
RE/DEVELOPMENT ACTIVITY | |||||||||||
LOCATION | MILES TO CAMPUS | SQUARE FEET | BUDGET | FUNDINGS THRU 6/30/2019 | REMAINING FUNDINGS | LEASED % | EXPECTED CASH NOI AT LEASED % | EXPECTED STABILIZED YIELD | |||
Same store redevelopment | |||||||||||
Charlotte, NC 1 | 0.00 | 40,278 | $12,000 | $9,751 | $2,249 | 79 | % | $159 | 7.2 | % | |
Development | |||||||||||
Seattle, WA | 0.00 | 151,000 | 64,120 | 37,297 | 26,823 | 60 | % | 617 | 7.0 | % | |
Total | 191,278 | $76,120 | $47,048 | $29,072 | 64 | % | $776 | ||||
RE/DEVELOPMENT EXPECTED CASH NOI AND OCCUPANCY RAMP UP TO LEASED % | |||||||||||||||
LOCATION | INITIAL OCCUPANCY | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | |||||||
Same store redevelopment | |||||||||||||||
Charlotte, NC 1 | |||||||||||||||
Cash NOI | $24 | $163 | $163 | $163 | $165 | $168 | $168 | ||||||||
Average occupancy | Q2 2019 | 40 | % | 79 | % | 79 | % | 79 | % | 79 | % | 79 | % | 79 | % |
Development | |||||||||||||||
Seattle, WA | |||||||||||||||
Cash NOI | — | — | (62 | ) | $407 | $617 | $617 | $617 | |||||||
Average occupancy | Q4 2019 | — | % | — | % | 10 | % | 40 | % | 60 | % | 60 | % | 60 | % |
Total Cash NOI | $24 | $163 | $101 | $570 | $782 | $785 | $785 |
1 | The redevelopment project, completed in 2Q 2019, is a 40,278 square foot vertical expansion to an existing medical office building. With the expansion, the building is 206,422 square feet. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 14 |
Portfolio 1 |
DOLLARS IN THOUSANDS |
MARKETS (BY SQUARE FEET) | ||||||||||||||||||||
MOB 93.2% | NON-MOB 6.8% | |||||||||||||||||||
MARKET | MSA RANK | INVESTMENT | COUNT | MULTI-TENANT | SINGLE-TENANT | INPATIENT REHAB 2 | INPATIENT SURGICAL | OFFICE | TOTAL | % OF TOTAL | ||||||||||
Dallas, TX | 4 | $501,965 | 26 | 2,094,564 | 156,245 | 145,365 | 2,396,174 | 15.7 | % | |||||||||||
Seattle, WA | 15 | 527,197 | 22 | 1,205,064 | 67,510 | 1,272,574 | 8.3 | % | ||||||||||||
Nashville, TN | 36 | 198,256 | 6 | 766,523 | 108,691 | 875,214 | 5.7 | % | ||||||||||||
Charlotte, NC | 22 | 177,981 | 16 | 860,735 | 860,735 | 5.6 | % | |||||||||||||
Los Angeles, CA | 2 | 187,334 | 12 | 594,163 | 63,000 | 657,163 | 4.3 | % | ||||||||||||
Denver, CO | 19 | 149,938 | 9 | 557,368 | 93,869 | 651,237 | 4.3 | % | ||||||||||||
Houston, TX | 5 | 133,500 | 8 | 533,857 | 57,170 | 591,027 | 3.9 | % | ||||||||||||
Richmond, VA | 44 | 148,206 | 7 | 548,801 | 548,801 | 3.6 | % | |||||||||||||
Atlanta, GA | 9 | 218,915 | 9 | 524,017 | 19,732 | 543,749 | 3.6 | % | ||||||||||||
Des Moines, IA | 87 | 140,878 | 7 | 197,994 | 181,961 | 152,655 | 532,610 | 3.5 | % | |||||||||||
Indianapolis, IN | 33 | 121,185 | 4 | 526,194 | 526,194 | 3.4 | % | |||||||||||||
Memphis, TN | 43 | 96,786 | 7 | 515,876 | 515,876 | 3.4 | % | |||||||||||||
Washington, DC | 6 | 152,293 | 6 | 507,336 | 507,336 | 3.3 | % | |||||||||||||
San Antonio, TX | 24 | 96,532 | 7 | 483,811 | 483,811 | 3.2 | % | |||||||||||||
Austin, TX | 30 | 106,592 | 5 | 375,333 | 375,333 | 2.4 | % | |||||||||||||
Chicago, IL | 3 | 92,389 | 3 | 352,800 | 352,800 | 2.3 | % | |||||||||||||
Oklahoma City, OK | 41 | 121,435 | 3 | 151,507 | 200,000 | 351,507 | 2.3 | % | ||||||||||||
Honolulu, HI | 56 | 142,873 | 3 | 298,427 | 298,427 | 2.0 | % | |||||||||||||
San Francisco, CA | 12 | 120,015 | 3 | 286,270 | 286,270 | 1.9 | % | |||||||||||||
Miami, FL | 7 | 58,098 | 4 | 241,980 | 241,980 | 1.6 | % | |||||||||||||
Colorado Springs, CO | 79 | 53,948 | 3 | 241,224 | 241,224 | 1.6 | % | |||||||||||||
Other (17 markets) | 552,306 | 31 | 1,573,118 | 322,482 | 75,000 | 186,000 | — | 2,156,600 | 14.1 | % | ||||||||||
Total | $4,098,622 | 201 | 13,436,962 | 791,685 | 138,000 | 342,245 | 557,750 | 15,266,642 | 100.0 | % | ||||||||||
Number of properties | 181 | 11 | 2 | 2 | 5 | 201 | ||||||||||||||
% of square feet | 88.0 | % | 5.2 | % | 0.9 | % | 2.2 | % | 3.7 | % | 100.0 | % | ||||||||
Investment 1 | $3,493,893 | $238,912 | $20,839 | $208,733 | $136,245 | $4,098,622 | ||||||||||||||
Quarterly cash NOI | $59,459 | $4,961 | $851 | $4,768 | $1,684 | $71,723 | ||||||||||||||
% of cash NOI | 82.9 | % | 6.9 | % | 1.2 | % | 6.7 | % | 2.3 | % | 100.0 | % | ||||||||
BY BUILDING TYPE | |||||||||
MOB TOTAL | MULTI-TENANT | SINGLE-TENANT | TOTAL | ||||||
Number of properties | 192 | 186 | 15 | 201 | |||||
Square feet | 14,228,647 | 13,994,712 | 1,271,930 | 15,266,642 | |||||
% of square feet | 93.2 | % | 91.7 | % | 8.3 | % | 100.0 | % | |
Occupancy % | 87.0 | % | 86.3 | % | 100.0 | % | 87.4 | % | |
Investment 1 | $3,732,805 | $3,630,138 | $468,484 | $4,098,622 | |||||
Quarterly cash NOI | $64,420 | $61,143 | $10,580 | $71,723 | |||||
% of cash NOI | 89.8 | % | 85.2 | % | 14.8 | % | 100.0 | % |
1 | Excludes assets held for sale, land held for development, construction in progress and corporate property. |
2 | Includes one inpatient rehab facility and one skilled nursing facility. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 15 |
Associated Health Systems 1 |
MOB PORTFOLIO (BY SQUARE FEET) | ||||||||||||||||
ASSOCIATED 94.9% 2 | ||||||||||||||||
HEALTH SYSTEM | SYSTEM RANK 3 | CREDIT RATING | ON | ADJACENT 4 | ANCHORED 5 | OFF CAMPUS | TOTAL MOB | % OF TOTAL MOB | ||||||||
Baylor Scott & White Health | 20 | AA-/Aa3 | 1,834,256 | 232,749 | 163,188 | — | 2,230,193 | 15.7 | % | |||||||
Ascension Health | 4 | AA+/Aa2 | 1,080,681 | 156,328 | — | — | 1,237,009 | 8.7 | % | |||||||
CommonSpirit Health 6 | 3 | BBB+/Baa1 | 807,182 | 291,201 | 95,486 | — | 1,193,869 | 8.4 | % | |||||||
Atrium Health | 29 | AA-/Aa3 | 393,815 | 98,066 | 313,513 | — | 805,394 | 5.7 | % | |||||||
Tenet Healthcare Corporation | 7 | B/B2 | 570,264 | 67,790 | — | — | 638,054 | 4.5 | % | |||||||
Bon Secours Health System | 78 | A+/-- | 548,801 | — | — | — | 548,801 | 3.9 | % | |||||||
Indiana University Health | 26 | AA/Aa2 | 423,628 | 102,566 | — | — | 526,194 | 3.7 | % | |||||||
Baptist Memorial Health Care | 95 | BBB+/-- | 424,306 | — | 39,345 | 52,225 | 515,876 | 3.6 | % | |||||||
Wellstar Health System | 84 | A/A2 | 476,054 | — | — | — | 476,054 | 3.3 | % | |||||||
HCA | 2 | BB+/Ba2 | 177,340 | 177,155 | 78,305 | — | 432,800 | 3.0 | % | |||||||
UW Medicine (Seattle) | 49 | AA+/Aaa | 194,536 | 102,540 | — | 125,543 | 422,619 | 3.0 | % | |||||||
University of Colorado Health | 68 | AA-/Aa3 | 150,291 | 161,099 | 33,850 | — | 345,240 | 2.4 | % | |||||||
Trinity Health | 6 | AA-/Aa3 | 267,952 | 73,331 | — | — | 341,283 | 2.4 | % | |||||||
Providence St. Joseph Health | 5 | AA-/Aa3 | 176,854 | 129,181 | — | — | 306,035 | 2.2 | % | |||||||
Hawaii Pacific Health | 195 | --/A1 | 173,502 | — | — | 124,925 | 298,427 | 2.1 | % | |||||||
Inova Health System | 76 | AA+/Aa2 | 262,121 | — | — | — | 262,121 | 1.8 | % | |||||||
Medstar Health | 39 | A/A2 | 241,739 | — | — | — | 241,739 | 1.7 | % | |||||||
Advocate Aurora Health Care | 14 | AA/Aa3 | 142,955 | 95,436 | — | — | 238,391 | 1.7 | % | |||||||
Overlake Health System | 339 | A/A2 | 191,051 | 39,659 | — | — | 230,710 | 1.6 | % | |||||||
MultiCare Health System | 110 | AA-/Aa3 | 154,452 | 63,039 | — | — | 217,491 | 1.5 | % | |||||||
Memorial Hermann Health | 43 | A+/A1 | — | 206,090 | — | — | 206,090 | 1.4 | % | |||||||
Mercy (St. Louis) | 37 | AA-/Aa3 | — | — | 200,000 | — | 200,000 | 1.4 | % | |||||||
Other (18 credit rated systems) | 877,418 | 657,940 | 110,339 | — | 1,645,697 | 11.6 | % | |||||||||
Subtotal - credit rated 7 | 9,569,198 | 2,654,170 | 1,034,026 | 302,693 | 13,560,087 | 95.3 | % | |||||||||
Non-credit rated | 238,710 | — | — | 429,850 | 668,560 | 4.7 | % | |||||||||
Total | 9,807,908 | 2,654,170 | 1,034,026 | 732,543 | 14,228,647 | 100.0 | % | |||||||||
% of total | 68.9 | % | 18.7 | % | 7.3 | % | 5.1 | % |
1 | Excludes construction in progress and assets classified as held for sale. |
2 | Includes total square feet of buildings located on-campus, adjacent and off-campus/anchored by healthcare systems. |
3 | Ranked by revenue based on Modern Healthcare's Healthcare Systems Financials Database. |
4 | The Company defines an adjacent property as being no more than 0.25 miles from a hospital campus. |
5 | Includes buildings where health systems lease 40% or more of the property. |
6 | Previously Catholic Health Initiatives. |
7 | Based on square footage, 86.9% is associated with an investment-grade rated healthcare provider. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 16 |
Top Tenants 1 |
LEASED SQUARE FEET | ||||||||||||||||||
TENANT | SYSTEM RANK 2 | CREDIT RATING | # OF PROPERTIES | # OF LEASES | MOB | INPATIENT | TOTAL | % OF TOTAL LEASED | % OF TTM REVENUE | |||||||||
Baylor Scott & White Health | 20 | AA-/Aa3 | 23 | 155 | 940,904 | 156,245 | 1,097,149 | 8.2 | % | 9.0 | % | |||||||
Atrium Health | 29 | AA-/Aa3 | 16 | 84 | 653,228 | — | 653,228 | 4.9 | % | 4.3 | % | |||||||
Mercy (St. Louis) | 37 | AA-/Aa3 | 2 | 2 | 200,000 | 186,000 | 386,000 | 2.9 | % | 4.0 | % | |||||||
CommonSpirit Health 3 | 3 | BBB+/Baa1 | 16 | 73 | 570,478 | — | 570,478 | 4.3 | % | 3.9 | % | |||||||
Ascension Health | 4 | AA+/Aa2 | 11 | 71 | 424,015 | — | 424,015 | 3.2 | % | 3.0 | % | |||||||
WellStar Health System | 84 | A/A2 | 7 | 48 | 322,697 | — | 322,697 | 2.4 | % | 2.3 | % | |||||||
Indiana University Health | 26 | AA/Aa2 | 4 | 60 | 433,706 | — | 433,706 | 3.2 | % | 2.2 | % | |||||||
Bon Secours Health System | 78 | A+/-- | 7 | 64 | 298,485 | — | 298,485 | 2.2 | % | 2.2 | % | |||||||
University of Colorado Health | 68 | AA-/Aa3 | 5 | 17 | 254,581 | — | 254,581 | 1.9 | % | 2.0 | % | |||||||
UW Medicine (Seattle) | 49 | AA+/Aaa | 7 | 22 | 176,470 | — | 176,470 | 1.3 | % | 1.8 | % | |||||||
Tenet Healthcare Corporation | 7 | B/B2 | 10 | 36 | 130,193 | 63,000 | 193,193 | 1.4 | % | 1.7 | % | |||||||
Proliance Surgeons | - | - | 5 | 16 | 126,109 | — | 126,109 | 0.9 | % | 1.5 | % | |||||||
Baptist Memorial Health Care | 95 | BBB+/-- | 6 | 23 | 181,318 | — | 181,318 | 1.4 | % | 1.4 | % | |||||||
Medstar Health | 39 | A/A2 | 3 | 53 | 151,463 | — | 151,463 | 1.1 | % | 1.1 | % | |||||||
Trinity Health | 6 | AA-/Aa3 | 3 | 31 | 158,209 | — | 158,209 | 1.2 | % | 1.1 | % | |||||||
Eating Recovery Center | - | B-/B3 | 4 | 7 | 104,193 | — | 104,193 | 0.8 | % | 1.1 | % | |||||||
Providence St. Joseph Health | 5 | AA-/Aa3 | 6 | 21 | 98,968 | — | 98,968 | 0.7 | % | 1.1 | % | |||||||
MultiCare Health System | 110 | AA-/Aa3 | 4 | 16 | 128,978 | — | 128,978 | 1.0 | % | 1.0 | % | |||||||
Hawaii Pacific Health | 195 | --/A1 | 3 | 32 | 85,513 | — | 85,513 | 0.6 | % | 0.9 | % | |||||||
Inova Health | 76 | AA+/Aa2 | 3 | 10 | 90,533 | — | 90,533 | 0.7 | % | 0.8 | % | |||||||
Labcorp of America | - | BBB/Baa2 | 20 | 23 | 174,661 | — | 174,661 | 1.3 | % | 0.8 | % | |||||||
Davita Kidney Care | - | BB/Ba2 | 13 | 16 | 143,845 | — | 143,845 | 1.1 | % | 0.7 | % | |||||||
Overlake Health System | 339 | A/A2 | 3 | 6 | 61,218 | — | 61,218 | 0.5 | % | 0.6 | % | |||||||
Memorial Herman | 43 | A+/A1 | 4 | 2 | 82,686 | — | 82,686 | 0.6 | % | 0.6 | % | |||||||
Advocate Aurora Health Care | 14 | AA/Aa3 | 2 | 11 | 63,797 | — | 63,797 | 0.5 | % | 0.6 | % | |||||||
Total | 899 | 6,056,248 | 405,245 | 6,461,493 | 48.3 | % | 49.7 | % |
1 | Excludes construction in progress and assets classified as held for sale. |
2 | Ranked by revenue based on Modern Healthcare's Healthcare Systems Financials Database. |
3 | Previously Catholic Health Initiatives. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 17 |
MOB Proximity to Hospital 1, 2 |
MEDICAL OFFICE BUILDINGS BY LOCATION | |||||||||||||
2Q2019 | 1Q2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | ||||||||
On campus | 68.9 | % | 70.0 | % | 69.3 | % | 69.6 | % | 69.3 | % | 69.1 | % | |
Adjacent to campus 3 | 18.7 | % | 17.9 | % | 18.3 | % | 18.1 | % | 17.9 | % | 17.6 | % | |
Total on/adjacent | 87.6 | % | 87.9 | % | 87.6 | % | 87.7 | % | 87.2 | % | 86.7 | % | |
Off campus - anchored by health system 4 | 7.3 | % | 7.6 | % | 7.8 | % | 7.7 | % | 7.7 | % | 7.7 | % | |
Off campus | 5.1 | % | 4.5 | % | 4.6 | % | 4.6 | % | 5.1 | % | 5.6 | % | |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||
DISTANCE TO HOSPITAL CAMPUS | |||||||||||||
GROUND LEASE PROPERTIES | |||||||||||||
GREATER THAN | LESS THAN OR EQUAL TO | # OF PROPERTIES | SQUARE FEET | % OF TOTAL | CUMULATIVE % | CAMPUS PROXIMITY | SQUARE FEET | % OF TOTAL | |||||
0.00 | 123 | 9,807,908 | 68.9 | % | 68.9 | % | On campus | 7,842,391 | 90.1 | % | |||
0.00 | 250 yards | 25 | 1,500,212 | 10.6 | % | 79.5 | % | Adjacent 3 | 80,525 | 0.9 | % | ||
250 yards | 0.25 miles | 20 | 1,153,958 | 8.1 | % | 87.6 | % | 120,036 | 1.4 | % | |||
0.25 miles | 0.50 | 3 | 250,468 | 1.8 | % | 89.4 | % | Off campus | 124,925 | 1.4 | % | ||
0.50 | 1.00 | 2 | 280,873 | 2.0 | % | 91.4 | % | — | — | % | |||
1.00 | 2.00 | 5 | 519,446 | 3.6 | % | 95.0 | % | 319,446 | 3.7 | % | |||
2.00 | 5.00 | 6 | 308,150 | 2.2 | % | 97.2 | % | 13,818 | 0.2 | % | |||
5.00 | 10.00 | 5 | 275,189 | 1.9 | % | 99.1 | % | 205,631 | 2.3 | % | |||
10.00 | 3 | 132,443 | 0.9 | % | 100.0 | % | — | — | % | ||||
Total | 192 | 14,228,647 | 100.0 | % | 8,706,772 | 100.0 | % |
1 | Excludes construction in progress and assets classified as held for sale. |
2 | Proximity to hospital campus includes acute care hospitals with inpatient beds. The Company does not consider inpatient rehab hospitals (IRFs), skilled nursing facilities (SNFs) or long-term acute care hospitals (LTACHs) to be hospital campuses for distance calculations. |
3 | The Company defines an adjacent property as being no more than 0.25 miles from a hospital campus. |
4 | Includes buildings where health systems lease 40% or more of the property. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 18 |
Lease Maturity, Lease & Building Size 1 |
LEASE MATURITY SCHEDULE | ||||||||||||||||
MULTI-TENANT | SINGLE-TENANT | TOTAL | ||||||||||||||
# OF LEASES | SQUARE FEET | % OF SQUARE FEET | # OF LEASES | SQUARE FEET | % OF SQUARE FEET | # OF LEASES | SQUARE FEET | % OF TOTAL SQUARE FEET | % OF BASE REVENUE 2 | |||||||
2019 | 433 | 1,628,116 | 13.5 | % | 1 | 63,000 | 4.9 | % | 434 | 1,691,116 | 12.7 | % | 12.1 | % | ||
2020 | 567 | 2,039,739 | 16.9 | % | 1 | 83,318 | 6.6 | % | 568 | 2,123,057 | 15.9 | % | 15.7 | % | ||
2021 | 452 | 1,630,358 | 13.5 | % | — | — | — | % | 452 | 1,630,358 | 12.2 | % | 11.7 | % | ||
2022 | 400 | 1,568,529 | 13.0 | % | 1 | 58,285 | 4.6 | % | 401 | 1,626,814 | 12.2 | % | 12.1 | % | ||
2023 | 320 | 1,413,451 | 11.7 | % | — | — | — | % | 320 | 1,413,451 | 10.6 | % | 11.0 | % | ||
2024 | 300 | 1,414,555 | 11.7 | % | — | — | — | % | 300 | 1,414,555 | 10.6 | % | 10.2 | % | ||
2025 | 117 | 704,427 | 5.8 | % | 2 | 91,561 | 7.2 | % | 119 | 795,988 | 6.0 | % | 5.6 | % | ||
2026 | 94 | 319,905 | 2.6 | % | — | — | — | % | 94 | 319,905 | 2.4 | % | 2.3 | % | ||
2027 | 67 | 319,221 | 2.7 | % | 2 | 342,245 | 26.9 | % | 69 | 661,466 | 4.9 | % | 7.5 | % | ||
2028 | 93 | 517,071 | 4.3 | % | 2 | 235,419 | 18.5 | % | 95 | 752,490 | 5.6 | % | 5.9 | % | ||
Thereafter | 97 | 522,301 | 4.3 | % | 6 | 398,102 | 31.3 | % | 103 | 920,403 | 6.9 | % | 5.9 | % | ||
Total leased | 2,940 | 12,077,673 | 86.3 | % | 15 | 1,271,930 | 100.0 | % | 2,955 | 13,349,603 | 87.4 | % | 100.0 | % | ||
Total building | 13,994,712 | 100.0 | % | 1,271,930 | 100.0 | % | 15,266,642 | 100.0 | % | |||||||
WALTR (months) 3 | 41.2 | 96.8 | 46.5 | |||||||||||||
WALT (months) 3 | 86.8 | 169.9 | 94.7 | |||||||||||||
# OF LEASES BY SIZE | BY BUILDING SIZE | ||||||||||
LEASED SQUARE FEET | MULTI-TENANT 4 | SINGLE-TENANT | BUILDING SQUARE FEET | % OF TOTAL | TOTAL SQUARE FOOTAGE | AVERAGE SQUARE FEET | # OF PROPERTIES | ||||
0 - 2,500 | 1,571 | — | >100,000 | 42.3 | % | 6,451,077 | 146,615 | 44 | |||
2,501 - 5,000 | 721 | — | <100,000 and >75,000 | 27.1 | % | 4,137,794 | 86,204 | 48 | |||
5,001 - 7,500 | 232 | — | <75,000 and >50,000 | 16.2 | % | 2,469,882 | 63,330 | 39 | |||
7,501 - 10,000 | 140 | — | <50,000 and >25,000 | 12.2 | % | 1,869,883 | 38,161 | 49 | |||
10,001 + | 276 | 15 | <25,000 | 2.2 | % | 338,006 | 16,096 | 21 | |||
Total Leases | 2,940 | 15 | Total | 100.0 | % | 15,266,642 | 75,953 | 201 |
1 | Excludes land held for development, construction in progress, corporate property and assets classified as held for sale. |
2 | Represents the current annualized minimum rents on in-place leases, excluding the impact of potential lease renewals and sponsor support payments under financial support arrangements and straight-line rent. |
3 | WALTR = weighted average lease term remaining; WALT = weighted average lease term. |
4 | The average lease size in the multi-tenant properties is 4,108 square feet. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 19 |
Historical Occupancy 1 |
DOLLARS IN THOUSANDS |
SAME STORE PROPERTIES | |||||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | ||||||||
Multi-tenant | |||||||||||||
Investment | $2,946,524 | $2,894,291 | $2,897,873 | $2,833,607 | $2,738,045 | $2,708,228 | |||||||
Number of properties | 147 | 150 | 151 | 145 | 144 | 143 | |||||||
Total building square feet | 11,533,207 | 11,432,246 | 11,490,212 | 11,341,527 | 11,221,175 | 11,236,857 | |||||||
Period end % occupied | 88.3 | % | 88.1 | % | 88.6 | % | 88.5 | % | 88.3 | % | 87.9 | % | |
Single-tenant | |||||||||||||
Investment | $461,794 | $463,261 | $471,319 | $482,727 | $481,727 | $473,636 | |||||||
Number of properties | 14 | 14 | 14 | 15 | 15 | 14 | |||||||
Total building square feet | 1,252,198 | 1,252,198 | 1,307,713 | 1,341,781 | 1,341,781 | 1,306,362 | |||||||
Period end % occupied | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |
Total same store properties | |||||||||||||
Investment | $3,408,318 | $3,357,552 | $3,369,192 | $3,316,334 | $3,219,772 | $3,181,864 | |||||||
Number of properties | 161 | 164 | 165 | 160 | 159 | 157 | |||||||
Total building square feet | 12,785,405 | 12,684,444 | 12,797,925 | 12,683,308 | 12,562,956 | 12,543,219 | |||||||
Period end % occupied | 89.5 | % | 89.3 | % | 89.8 | % | 89.7 | % | 89.6 | % | 89.2 | % | |
PROPERTIES NOT IN SAME STORE | |||||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | ||||||||
Acquisitions 2 | |||||||||||||
Investment | $574,793 | $520,418 | $437,835 | $464,185 | $557,434 | $526,129 | |||||||
Number of properties | 27 | 24 | 22 | 26 | 27 | 24 | |||||||
Total building square feet | 1,803,890 | 1,648,552 | 1,381,323 | 1,470,154 | 1,644,315 | 1,383,200 | |||||||
Period end % occupied | 91.1 | % | 91.0 | % | 92.5 | % | 91.9 | % | 92.7 | % | 92.7 | % | |
Development completions | |||||||||||||
Investment | $29,798 | $29,388 | $29,375 | $29,122 | $28,970 | $31,929 | |||||||
Number of properties | 1 | 1 | 1 | 1 | 1 | 2 | |||||||
Total building square feet | 99,957 | 99,957 | 99,957 | 99,957 | 99,957 | 112,837 | |||||||
Period end % occupied | 41.8 | % | 41.8 | % | 38.4 | % | 38.4 | % | 29.9 | % | 34.9 | % | |
% leased | 44.9 | % | 41.8 | % | 41.8 | % | 41.8 | % | 41.8 | % | 48.4 | % | |
Reposition 3 | |||||||||||||
Investment | $85,713 | $85,342 | $74,415 | $82,354 | $82,251 | $66,538 | |||||||
Number of properties | 12 | 12 | 11 | 14 | 14 | 13 | |||||||
Total building square feet | 577,390 | 577,390 | 519,424 | 574,396 | 574,396 | 471,604 | |||||||
Period end % occupied | 38.7 | % | 39.1 | % | 35.7 | % | 47.0 | % | 48.5 | % | 47.6 | % | |
TOTAL PROPERTIES | |||||||||||||
2Q19 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | ||||||||
Investment | $4,098,622 | $3,992,700 | $3,910,817 | $3,891,995 | $3,888,427 | $3,806,460 | |||||||
Number of properties | 201 | 201 | 199 | 201 | 201 | 196 | |||||||
Total building square feet | 15,266,642 | 15,010,343 | 14,798,629 | 14,827,815 | 14,881,624 | 14,510,860 | |||||||
Period end % occupied | 87.4 | % | 87.2 | % | 87.8 | % | 87.9 | % | 87.9 | % | 87.7 | % |
1 | Excludes land held for development, construction in progress, corporate property and assets classified as held for sale. |
2 | Acquisition includes properties acquired within the last 8 quarters of the period presented and are excluded from same store. |
3 | Reposition includes properties that meet any of the Company-defined criteria: properties having less than 60% occupancy that is expected to last at least two quarters; properties that experience a loss of occupancy over 30% in a single quarter; or properties with negative net operating income that is expected to last at least two quarters. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 20 |
Occupancy Reconciliation |
SQUARE FEET |
SEQUENTIAL | |||||||||||||||||
PORTFOLIO | SAME STORE | ||||||||||||||||
COUNT | OCCUPIED | TOTAL | % | COUNT | OCCUPIED | TOTAL | % | ||||||||||
Beginning March 31, 2019 | 201 | 13,093,955 | 15,010,343 | 87.2 | % | 164 | 11,325,522 | 12,684,444 | 89.3 | % | |||||||
Portfolio activity | |||||||||||||||||
Acquisitions | 5 | 271,960 | 293,366 | 92.7 | % | NA | NA | NA | NA | ||||||||
Re/development completions | — | 32,002 | 40,278 | 79.5 | % | — | 32,002 | 40,278 | 79.5 | % | |||||||
Dispositions 1 | (5 | ) | (74,276 | ) | (77,345 | ) | 96.0 | % | (5 | ) | (74,276 | ) | (77,345 | ) | 96.0 | % | |
Same store reclassifications | |||||||||||||||||
Acquisitions | NA | NA | NA | NA | 2 | 138,028 | 138,028 | 100.0 | % | ||||||||
Development completions | NA | NA | NA | NA | — | — | — | — | % | ||||||||
Reposition to same store | NA | NA | NA | NA | — | — | — | — | % | ||||||||
Reposition from same store | NA | NA | NA | NA | — | — | — | — | % | ||||||||
201 | 13,323,641 | 15,266,642 | 87.3 | % | 161 | 11,421,276 | 12,785,405 | 89.3 | % | ||||||||
Leasing activity | |||||||||||||||||
New leases/expansions | NA | 134,613 | NA | NA | NA | 107,739 | NA | NA | |||||||||
Move-outs/contractions | NA | (108,651 | ) | NA | NA | NA | (88,524 | ) | NA | NA | |||||||
Net absorption | NA | 25,962 | NA | NA | NA | 19,215 | NA | NA | |||||||||
Ending June 30, 2019 | 201 | 13,349,603 | 15,266,642 | 87.4 | % | 161 | 11,440,491 | 12,785,405 | 89.5 | % | |||||||
YEAR-OVER-YEAR | |||||||||||||||||
PORTFOLIO | SAME STORE | ||||||||||||||||
COUNT | OCCUPIED | TOTAL | % | COUNT | OCCUPIED | TOTAL | % | ||||||||||
Beginning June 30, 2018 | 201 | 13,086,790 | 14,881,624 | 87.9 | % | 159 | 11,254,233 | 12,562,956 | 89.6 | % | |||||||
Portfolio activity | |||||||||||||||||
Acquisitions | 10 | 650,200 | 735,861 | 88.4 | % | NA | NA | NA | NA | ||||||||
Re/development completions | — | 32,002 | 40,278 | 79.5 | % | — | 32,002 | 40,278 | 79.5 | % | |||||||
Dispositions 1 | (10 | ) | (353,680 | ) | (391,121 | ) | 90.4 | % | (9 | ) | (321,368 | ) | (353,811 | ) | 90.8 | % | |
Same store reclassifications | |||||||||||||||||
Acquisitions | NA | NA | NA | NA | 10 | 540,443 | 576,286 | 93.8 | % | ||||||||
Development completions | NA | NA | NA | NA | — | — | — | — | % | ||||||||
Reposition to same store | NA | NA | NA | NA | 3 | 69,958 | 82,037 | 85.3 | % | ||||||||
Reposition from same store | NA | NA | NA | NA | (2 | ) | (85,969 | ) | (122,341 | ) | 70.3 | % | |||||
201 | 13,415,312 | 15,266,642 | 87.9 | % | 161 | 11,489,299 | 12,785,405 | 89.9 | % | ||||||||
Leasing activity | |||||||||||||||||
New leases/expansions | NA | 467,541 | NA | NA | NA | 365,411 | NA | NA | |||||||||
Move-outs/contractions | NA | (533,250 | ) | NA | NA | NA | (414,219 | ) | NA | NA | |||||||
Net absorption | NA | (65,709 | ) | NA | NA | NA | (48,808 | ) | NA | NA | |||||||
Ending June 30, 2019 | 201 | 13,349,603 | 15,266,642 | 87.4 | % | 161 | 11,440,491 | 12,785,405 | 89.5 | % |
1 | Includes properties reclassified as held for sale. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 21 |
Same Store Leasing Statistics 1 |
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | |||||||||||
Average in-place contractual increases | ||||||||||||||||||
Multi-tenant | 2.91 | % | 2.91 | % | 2.91 | % | 2.88 | % | 2.84 | % | 2.81 | % | 2.80 | % | 2.78 | % | ||
Single-tenant | 2.43 | % | 2.46 | % | 2.45 | % | 2.42 | % | 2.13 | % | 2.12 | % | 2.12 | % | 2.10 | % | ||
2.84 | % | 2.85 | % | 2.84 | % | 2.82 | % | 2.73 | % | 2.71 | % | 2.69 | % | 2.65 | % | |||
Multi-tenant renewals | ||||||||||||||||||
Cash leasing spreads | 5.0 | % | 3.3 | % | (0.5 | %) | 3.8 | % | 6.4 | % | 5.2 | % | 3.7 | % | 4.6 | % | ||
Tenant retention rate | 87.4 | % | 85.5 | % | 82.6 | % | 87.0 | % | 84.4 | % | 81.5 | % | 81.9 | % | 80.5 | % | ||
AVERAGE IN-PLACE CONTRACTUAL INCREASES 2 | ||||||||||||||
MULTI-TENANT | SINGLE-TENANT | TOTAL | ||||||||||||
% INCREASE | % OF BASE RENT | % INCREASE | % OF BASE RENT | % INCREASE | % OF BASE RENT | |||||||||
Annual increase | ||||||||||||||
CPI | 2.53 | % | 2.60 | % | 2.51 | % | 53.67 | % | 2.52 | % | 9.58 | % | ||
Fixed | 3.02 | % | 92.92 | % | 2.76 | % | 16.76 | % | 3.01 | % | 82.51 | % | ||
Non-annual increase (annualized) | ||||||||||||||
CPI | 1.07 | % | 0.36 | % | 0.50 | % | 2.61 | % | 0.77 | % | 0.67 | % | ||
Fixed | 1.28 | % | 2.83 | % | 2.25 | % | 26.96 | % | 1.87 | % | 6.13 | % | ||
No increase | ||||||||||||||
Term > 1 year | — | % | 1.29 | % | — | % | — | % | — | % | 1.11 | % | ||
Total 2 | 2.91 | % | 100.00 | % | 2.43 | % | 100.00 | % | 2.84 | % | 100.00 | % | ||
TYPE AND OWNERSHIP STRUCTURE (% OF SQUARE FEET) | |||||||
MULTI-TENANT | SINGLE-TENANT | TOTAL | |||||
Tenant type | |||||||
Hospital | 48.7 | % | 83.0 | % | 52.4 | % | |
Physician and other | 51.3 | % | 17.0 | % | 47.6 | % | |
Lease structure | |||||||
Gross | 13.3 | % | — | % | 11.9 | % | |
Modified gross | 27.6 | % | — | % | 24.6 | % | |
Net | 59.0 | % | — | % | 52.5 | % | |
Absolute net 3 | — | % | 100.0 | % | 11.0 | % | |
Ownership type | |||||||
Ground lease | 64.0 | % | 10.1 | % | 58.7 | % | |
Fee simple | 36.0 | % | 89.9 | % | 41.3 | % |
1 | Excludes recently acquired or disposed properties, construction in progress, land held for development, corporate property, reposition properties and assets classified as held for sale. |
2 | Excludes leases with terms of one year or less. |
3 | Tenant is typically responsible for operating expenses and capital obligations. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 22 |
Same Store Performance 1 |
DOLLARS IN THOUSANDS, EXCEPT PER SQUARE FOOT DATA |
2019 | 2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | ||||||||||||||
Multi-tenant | |||||||||||||||||||||||
Revenues | $358,262 | $90,249 | $89,106 | $89,331 | $89,576 | $348,066 | $87,731 | $86,834 | $86,281 | $87,220 | |||||||||||||
Expenses | 144,483 | 36,118 | 35,566 | 35,823 | 36,976 | 142,065 | 35,255 | 35,572 | 35,009 | 36,229 | |||||||||||||
Cash NOI | $213,779 | $54,131 | $53,540 | $53,508 | $52,600 | $206,001 | $52,476 | $51,262 | $51,272 | $50,991 | |||||||||||||
Revenue per occ SF 2 | $35.17 | $35.52 | $35.04 | $35.02 | $35.12 | $34.10 | $34.43 | $34.06 | $33.83 | $34.14 | |||||||||||||
Margin | 59.7 | % | 60.0 | % | 60.1 | % | 59.9 | % | 58.7 | % | 59.2 | % | 59.8 | % | 59.0 | % | 59.4 | % | 58.5 | % | |||
Average occupancy | 88.3 | % | 88.1 | % | 88.2 | % | 88.5 | % | 88.4 | % | 88.5 | % | 88.4 | % | 88.4 | % | 88.5 | % | 88.6 | % | |||
Number of properties | 147 | 147 | 147 | 147 | 147 | 147 | 147 | 147 | 147 | 147 | |||||||||||||
Single-tenant | |||||||||||||||||||||||
Revenues | $43,171 | $11,052 | $10,730 | $10,693 | $10,696 | $42,290 | $10,625 | $10,621 | $10,607 | $10,437 | |||||||||||||
Expenses | 1,635 | 585 | 352 | 329 | 369 | 1,730 | 378 | 439 | 427 | 486 | |||||||||||||
Cash NOI | $41,536 | $10,467 | $10,378 | $10,364 | $10,327 | $40,560 | $10,247 | $10,182 | $10,180 | $9,951 | |||||||||||||
Revenue per occ SF 2 | $34.48 | $35.31 | $34.28 | $34.16 | $34.17 | $34.02 | $34.08 | $34.23 | $34.19 | $33.64 | |||||||||||||
Average occupancy | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 99.3 | % | 99.6 | % | 99.1 | % | 99.1 | % | 99.1 | % | |||
Number of properties | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | |||||||||||||
Total | |||||||||||||||||||||||
Revenues | $401,433 | $101,301 | $99,836 | $100,024 | $100,272 | $390,356 | $98,356 | $97,455 | $96,888 | $97,657 | |||||||||||||
Expenses | 146,118 | 36,703 | 35,918 | 36,152 | 37,345 | 143,795 | 35,633 | 36,011 | 35,436 | 36,715 | |||||||||||||
Cash NOI | $255,315 | $64,598 | $63,918 | $63,872 | $62,927 | $246,561 | $62,723 | $61,444 | $61,452 | $60,942 | |||||||||||||
Revenue per occ SF 2 | $35.09 | $35.50 | $34.96 | $34.93 | $35.02 | $34.09 | $34.40 | $34.07 | $33.82 | $34.28 | |||||||||||||
Margin | 63.6 | % | 63.8 | % | 64.0 | % | 63.9 | % | 62.8 | % | 63.2 | % | 63.8 | % | 63.0 | % | 63.4 | % | 62.4 | % | |||
Average occupancy | 89.5 | % | 89.3 | % | 89.4 | % | 89.6 | % | 89.6 | % | 89.6 | % | 89.5 | % | 89.5 | % | 89.6 | % | 89.1 | % | |||
Number of properties | 161 | 161 | 161 | 161 | 161 | 161 | 161 | 161 | 161 | 161 | |||||||||||||
SAME STORE GROWTH | ||||||||||||
YEAR-OVER-YEAR | ||||||||||||
2019 | 2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | ||||||||
Multi-tenant | ||||||||||||
Revenue per occ SF 2 | 3.1 | % | 3.2 | % | 2.9 | % | 3.5 | % | 2.9 | % | ||
Avg occupancy (bps) | -20 | -30 | -20 | +10 | -20 | |||||||
Revenues | 2.9 | % | 2.9 | % | 2.6 | % | 3.5 | % | 2.7 | % | ||
Expenses | 1.7 | % | 2.4 | % | — | % | 2.3 | % | 2.1 | % | ||
Cash NOI | 3.8 | % | 3.2 | % | 4.4 | % | 4.4 | % | 3.2 | % | ||
Single-tenant | ||||||||||||
Cash NOI | 2.4 | % | 2.1 | % | 1.9 | % | 1.8 | % | 3.8 | % | ||
Total | ||||||||||||
Revenues | 2.8 | % | 3.0 | % | 2.4 | % | 3.2 | % | 2.7 | % | ||
Cash NOI | 3.6 | % | 3.0 | % | 4.0 | % | 3.9 | % | 3.3 | % |
1 | Excludes recently acquired or disposed properties, development completions, construction in progress, land held for development, corporate property, reposition properties and assets classified as held for sale. |
2 | Revenue per occ SF is calculated by dividing revenue by the average of the occupied SF for the period provided. Quarterly revenue per occ SF is annualized. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 23 |
Reconciliation of NOI |
DOLLARS IN THOUSANDS |
BOTTOM UP RECONCILIATION | |||||||||||||||||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | ||||||||||||||||||
Net income (loss) | $4,484 | $4,891 | $16,314 | $6,548 | $37,729 | $9,180 | ($37,151 | ) | $3,173 | ||||||||||||||||
Other income (expense) | 15,354 | 13,564 | 2,850 | 12,135 | (16,559 | ) | 12,175 | 58,429 | 18,819 | ||||||||||||||||
General and administrative expense | 7,845 | 8,510 | 8,534 | 8,504 | 8,373 | 9,101 | 8,272 | 8,021 | |||||||||||||||||
Depreciation and amortization expense | 43,926 | 42,662 | 42,437 | 42,061 | 40,130 | 39,573 | 37,324 | 35,873 | |||||||||||||||||
Other expenses 1 | 1,965 | 1,768 | 1,693 | 1,457 | 1,540 | 1,568 | 1,505 | 1,738 | |||||||||||||||||
Straight-line rent expense | 387 | 391 | 394 | 398 | 399 | 400 | 1,017 | 184 | |||||||||||||||||
Straight-line rent revenue | (395 | ) | (668 | ) | (682 | ) | (802 | ) | (1,074 | ) | (1,722 | ) | (1,205 | ) | (1,332 | ) | |||||||||
Other revenue 2 | (1,330 | ) | (1,350 | ) | (1,409 | ) | (1,173 | ) | (1,268 | ) | (1,438 | ) | (1,258 | ) | (1,327 | ) | |||||||||
Cash NOI | $72,236 | $69,768 | $70,131 | $69,128 | $69,270 | $68,837 | $66,933 | $65,149 | |||||||||||||||||
Acquisitions/development completions | (6,778 | ) | (4,876 | ) | (4,653 | ) | (4,528 | ) | (3,772 | ) | (3,357 | ) | (1,368 | ) | (61 | ) | |||||||||
Reposition | (347 | ) | (257 | ) | (217 | ) | (368 | ) | (525 | ) | (584 | ) | (661 | ) | (705 | ) | |||||||||
Dispositions/other | (513 | ) | (717 | ) | (1,389 | ) | (1,305 | ) | (2,250 | ) | (3,452 | ) | (3,452 | ) | (3,441 | ) | |||||||||
Same store cash NOI | $64,598 | $63,918 | $63,872 | $62,927 | $62,723 | $61,444 | $61,452 | $60,942 | |||||||||||||||||
TOP DOWN RECONCILIATION | |||||||||||||||||||||||||
2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | ||||||||||||||||||
Property operating before rent concessions | $103,245 | $99,607 | $99,877 | $99,976 | $97,185 | $96,347 | $92,209 | $91,590 | |||||||||||||||||
Rent concessions | (427 | ) | (625 | ) | (700 | ) | (609 | ) | (766 | ) | (1,053 | ) | (686 | ) | (655 | ) | |||||||||
Property operating | 102,818 | 98,982 | 99,177 | 99,367 | 96,419 | 95,294 | 91,523 | 90,935 | |||||||||||||||||
Single-tenant net lease | 11,138 | 11,046 | 11,290 | 11,283 | 12,073 | 13,213 | 13,078 | 12,811 | |||||||||||||||||
Straight-line rent revenue | 395 | 668 | 682 | 802 | 1,074 | 1,722 | 1,205 | 1,332 | |||||||||||||||||
Rental income | 114,351 | 110,696 | 111,149 | 111,452 | 109,566 | 110,229 | 105,806 | 105,078 | |||||||||||||||||
Property lease guaranty income | — | 128 | 187 | 168 | 146 | 175 | 182 | 168 | |||||||||||||||||
Parking income | 1,870 | 1,734 | 1,733 | 1,752 | 1,819 | 1,626 | 1,705 | 1,669 | |||||||||||||||||
Exclude straight-line rent revenue | (395 | ) | (668 | ) | (682 | ) | (802 | ) | (1,074 | ) | (1,722 | ) | (1,205 | ) | (1,332 | ) | |||||||||
Exclude other non-cash revenue 3 | (1,233 | ) | (1,251 | ) | (1,309 | ) | (1,083 | ) | (1,165 | ) | (1,345 | ) | (1,201 | ) | (1,218 | ) | |||||||||
Revenue | 114,593 | 110,639 | 111,078 | 111,487 | 109,292 | 108,963 | 105,287 | 104,365 | |||||||||||||||||
Property operating expense | (44,286 | ) | (42,725 | ) | (42,815 | ) | (44,135 | ) | (41,737 | ) | (41,818 | ) | (40,590 | ) | (40,628 | ) | |||||||||
Exclude non-cash expenses 4 | 1,929 | 1,854 | 1,868 | 1,776 | 1,715 | 1,692 | 2,236 | 1,412 | |||||||||||||||||
Cash NOI | $72,236 | $69,768 | $70,131 | $69,128 | $69,270 | $68,837 | $66,933 | $65,149 | |||||||||||||||||
Acquisitions/development completions | (6,778 | ) | (4,876 | ) | (4,653 | ) | (4,528 | ) | (3,772 | ) | (3,357 | ) | (1,368 | ) | (61 | ) | |||||||||
Reposition | (347 | ) | (257 | ) | (217 | ) | (368 | ) | (525 | ) | (584 | ) | (661 | ) | (705 | ) | |||||||||
Dispositions/other | (513 | ) | (717 | ) | (1,389 | ) | (1,305 | ) | (2,250 | ) | (3,452 | ) | (3,452 | ) | (3,441 | ) | |||||||||
Same store cash NOI | $64,598 | $63,918 | $63,872 | $62,927 | $62,723 | $61,444 | $61,452 | $60,942 |
1 | Includes acquisition and development expense, bad debt, above and below market ground lease intangible amortization, and leasing commission amortization. |
2 | Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease terminations and tenant improvement overage amortization. |
3 | Includes above and below market lease intangibles, lease inducements, lease terminations and TI amortization. |
4 | Includes above and below market ground lease intangible amortization, leasing commission amortization, and ground lease straight-line rent. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 24 |
Reconciliations of NOI & EBITDA |
DOLLARS IN THOUSANDS |
RECONCILIATION OF TTM ENDED 6/30/2019 - CASH NOI | ||||||||
2019 | 2018 | % CHANGE | ||||||
Same store cash NOI | $255,315 | $246,561 | 3.6 | % | ||||
Reposition | 1,189 | 2,475 | (52.0 | %) | ||||
$256,504 | $249,036 | 3.0 | % | |||||
Acquisitions/development completions | 20,835 | 8,558 | 143.5 | % | ||||
Dispositions/other | 3,924 | 12,595 | (68.8 | %) | ||||
Cash NOI | $281,263 | $270,189 | 4.1 | % |
RECONCILIATION OF EBITDA | ||||||||||||||||
TTM | 2Q 2019 | 1Q 2019 | 4Q 2018 | 3Q 2018 | ||||||||||||
Net income | $32,237 | $4,484 | $4,891 | $16,314 | $6,548 | |||||||||||
Interest expense | 54,504 | 13,850 | 13,588 | 13,602 | 13,464 | |||||||||||
Depreciation and amortization | 171,086 | 43,926 | 42,662 | 42,437 | 42,061 | |||||||||||
EBITDA | $257,827 | $62,260 | $61,141 | $72,353 | $62,073 | |||||||||||
Other amortization expense 1 | 8,789 | 2,339 | 2,191 | 2,170 | 2,089 | |||||||||||
Gain on sales of real estate properties | (16,939 | ) | (4,849 | ) | (15 | ) | (10,787 | ) | (1,288 | ) | ||||||
Impairments on real estate assets | 5,610 | 5,610 | — | — | — | |||||||||||
EBITDAre 2 | $255,287 | $65,360 | $63,317 | $63,736 | $62,874 | |||||||||||
EBITDA | $257,827 | $62,260 | $61,141 | $72,353 | $62,073 | |||||||||||
Acquisition and development expense | 1,068 | 422 | 305 | 200 | 141 | |||||||||||
Gain on sales of real estate properties | (16,939 | ) | (4,849 | ) | (15 | ) | (10,787 | ) | (1,288 | ) | ||||||
Impairments on real estate assets | 5,610 | 5,610 | — | — | — | |||||||||||
Debt Covenant EBITDA | $247,566 | $63,443 | $61,431 | $61,766 | $60,926 | |||||||||||
Other amortization expense | 8,789 | 2,339 | 2,191 | 2,170 | 2,089 | |||||||||||
Timing impact 3 | 1,761 | 1,024 | 1,136 | (349 | ) | (50 | ) | |||||||||
Stock based compensation | 10,217 | 2,372 | 2,639 | 2,601 | 2,605 | |||||||||||
Adjusted EBITDA | $268,333 | $69,178 | $67,397 | $66,188 | $65,570 |
1 | Includes leasing commission amortization, above and below market lease intangible amortization, deferred financing costs amortization and the amortization of discounts and premiums on debt. |
2 | Earnings before interest, taxes, depreciation and amortization for real estate ("EBITDAre") is an operating performance measure adopted by NAREIT. NAREIT defines EBITDAre equal to “net income (computed in accordance with GAAP) plus interest expense, income tax expense, depreciation and amortization, impairments and minus gains on the disposition of depreciated property.” |
3 | Adjusted to reflect quarterly EBITDA from properties acquired or disposed in the quarter. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 25 |
Components of Net Asset Value |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
CASH NOI BY PROPERTY TYPE | |||||||||||||||||||||
2Q 2019 | |||||||||||||||||||||
ASSET TYPE | SAME STORE 1 | ACQ./DEV. COMPLETIONS 2 | REPOSITION 3 | TIMING ADJUSTMENTS 4 | ADJUSTED CASH NOI | ANNUALIZED ADJUSTED NOI | % OF ADJUSTED NOI | ||||||||||||||
MOB/outpatient | $57,690 | $6,383 | $567 | $973 | $65,613 | $262,452 | 90.0 | % | |||||||||||||
Inpatient rehab | 851 | — | — | — | 851 | 3,404 | 1.2 | % | |||||||||||||
Inpatient surgical | 4,768 | — | — | — | 4,768 | 19,072 | 6.5 | % | |||||||||||||
Office | 1,289 | 395 | — | — | 1,684 | 6,736 | 2.3 | % | |||||||||||||
Total Cash NOI | $64,598 | $6,778 | $567 | $973 | $72,916 | $291,664 | 100.0 | % | |||||||||||||
DEVELOPMENT PROPERTIES | |||
Land held for development | $24,647 | ||
Construction in progress | 36,996 | ||
Unstabilized development 5 | 29,798 | ||
$91,441 | |||
OTHER ASSETS | |||
Assets held for sale 6 | $6,029 | ||
Reposition properties (net book value) 3 | 7,486 | ||
Cash and other assets 7 | 102,895 | ||
$116,410 | |||
DEBT | |||
Unsecured credit facility | $320,000 | ||
Unsecured term loan | 200,000 | ||
Senior notes | 800,000 | ||
Mortgage notes payable | 131,632 | ||
Other liabilities 8 | 68,795 | ||
$1,520,427 | |||
TOTAL SHARES OUTSTANDING | |||||
As of July 26, 2019 | 129,245,427 | ||||
IMPLIED CAP RATE | |||||
STOCK PRICE | IMPLIED CAP RATE | ||||
As of 7/26/19 | $32.00 | 5.35 | % | ||
2Q 2019 high | $33.17 | 5.21 | % | ||
2Q 2019 low | $29.96 | 5.63 | % | ||
1 | See Same Store Performance schedule on page 23 for details on same store NOI. |
2 | Adjusted to reflect quarterly NOI from properties acquired or stabilized developments completed during the full eight quarter period that are not included in same store NOI. Stabilized developments include developments completed during the full eight quarter period that are not included in same store, but are 90% occupied or greater. |
3 | Reposition properties includes 12 properties which comprise 577,390 square feet. The NOI table above includes 8 of these properties comprising 361,780 square feet that have generated positive NOI totaling approximately $0.6 million. The remaining 4 properties, comprising 215,610 square feet, have generated negative NOI of approximately $0.2 million and are reflected at a net book value of $7.5 million in the other assets table above. |
4 | Timing adjustments related to current quarter acquisitions and the difference between leased and occupied square feet on previous re/developments. |
5 | Unstabilized development includes the gross book value of one property that was completed on June 30, 2017. The building is 45% leased and occupied as of June 30, 2019. |
6 | Assets held for sale includes three real estate properties that are excluded from same store NOI and reflect net book value. |
7 | Includes cash of $7.6 million, prepaid assets of $49.8 million, accounts receivable of $9.2 million, and prepaid ground leases of $25.0 million. In addition, includes the Company's occupied portion of its corporate headquarters of $11.3 million. |
8 | Includes only liabilities that are expected to reduce future cash or NOI and that are currently producing non-cash benefits to NOI. Included are accounts payable and accrued liabilities of $60.6 million, security deposits of $7.5 million, and deferred operating expense reimbursements of $0.7 million. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 26 |
Components of Expected FFO |
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
SAME STORE RANGE OF EXPECTATIONS | |||||||
EXPECTED 2019 | ACTUAL | ||||||
LOW | HIGH | 2Q 2019 | |||||
TTM Average Occupancy | |||||||
Multi-tenant | 88.0 | % | 90.0 | % | 88.3 | % | |
Single-tenant | 99.0 | % | 100.0 | % | 100.0 | % | |
TTM revenue per occupied square foot | |||||||
Multi-tenant | $34.50 | $35.50 | $35.17 | ||||
Single-tenant | $34.00 | $34.50 | $34.48 | ||||
TTM Multi-tenant cash NOI margin | 59.0 | % | 60.0 | % | 59.7 | % | |
Multi-tenant cash leasing spreads | 3.0 | % | 4.0 | % | 5.0 | % | |
Multi-tenant lease retention rate | 75.0 | % | 90.0 | % | 87.4 | % | |
TTM cash NOI growth | |||||||
Multi-tenant | 2.8 | % | 3.3 | % | 3.8 | % | |
Single-tenant | 1.5 | % | 3.5 | % | 2.4 | % | |
Total | 2.5 | % | 3.3 | % | 3.6 | % | |
ANNUAL RANGE OF EXPECTATIONS | |||||||
LOW | HIGH | YTD | |||||
Normalized G&A | $33,000 | $34,000 | $16,355 | ||||
Straight-line rent, net 1 | 500 | 1,500 | 271 | ||||
Funding activity | |||||||
Acquisitions | 225,000 | 325,000 | 195,225 | ||||
Dispositions | (75,000) | (125,000) | (13,000) | ||||
Re/development | 30,000 | 50,000 | 14,196 | ||||
1st generation TI and acq. cap. ex. | 10,000 | 13,000 | 7,399 | ||||
2nd generation TI | 24,000 | 30,000 | 10,450 | ||||
Leasing commissions paid | 7,000 | 9,000 | 4,084 | ||||
Capital expenditures | 16,000 | 20,000 | 8,455 | ||||
Cash yield | |||||||
Acquisitions | 5.1 | % | 5.8 | % | 5.5 | % | |
Dispositions | 6.0 | % | 7.5 | % | 6.2 | % | |
Re/development (stabilized) | 6.0 | % | 7.5 | % | NA | ||
Leverage (debt/cap) | 30.0 | % | 35.0 | % | 33.8 | % | |
Net debt to adjusted EBITDA | 5.0x | 5.5x | 5.2x |
1 | This guidance range is based on current in-place leases. Straight-line rent, net was $2.7 million for the year ended December 31, 2018, with a quarterly range of $0.3 million to $1.3 million. |
HEALTHCARE REALTY | 2Q 2019 SUPPLEMENTAL INFORMATION 27 |