Exhibit 99.1
Healthcare Realty Trust
Investor Slide Presentation
(All Information as of 12/31/05, unless otherwise specified.)
April 2006
OVERVIEW
u One of the largest REITs focused exclusively on healthcare with $2.0 billion in investments and commitments.
u 249 owned or financed properties diversified by client, location and facility type.
u Relationships with leading publicly-traded and not-for-profit health systems.
u Property management of 7.3 million square feet nationwide.
OVERVIEW
u Conservative investment standards based upon industry research, historical performance and prudent underwriting.
u Maintenance of conservative financial policies.
— Capital structure.
— Target payout percentage.
— Investment return criteria.
— Portfolio diversification.
u Ranked 7th overall in financial flexibility among top 84 REITs:
— #10 Debt to Book Capitalization.
— #10 Fixed Charge Coverage.
— #16Interest Coverage.
u Management team with aligned ownership interest.
u Significant experience in managing, leasing and construction of healthcare facilities.
PORTFOLIO AND OPERATIONS
INVESTMENT BY FACILITY TYPE
| | | | | |
| u | | Medical Office/Outpatient | | 68% |
| u | | Skilled Nursing | | 9% |
| u | | Assisted Living | | 10% |
| u | | Inpatient Rehab | | 8% |
| u | | Other Inpatient | | 2% |
| u | | Independent Living | | 3% |
— Information as of 12/31/05
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PORTFOLIO AND OPERATIONS
MEDICAL OFFICE/OUTPATIENT OCCUPANTS* (68% Total Investments)
By Square Footage, as a % of 12.6 Million Total Square Feet
| | | | | | | | | |
u Entity Occupants of < 5.0% each | | | | | | | 73 | % |
| — HCA | | | 3.4 | % | | | | |
| — HLSH | | | 0.8 | % | | | | |
| — THC | | | 0.8 | % | | | | |
| |
u Total Inpatient | | | | | | | 27 | % |
| * | | The Medical Office/Outpatient Portfolio consists of approximately 2,500 occupants with an average square footage of approximately 3,700 feet each. |
— Information as of 12/31/05
PORTFOLIO AND OPERATIONS
INPATIENT OCCUPANTS* (32% Total Investments)
By Square Footage, as a % of 13.2 Million Total Square Feet
| | | | | | | |
| u | | Entity Occupants of < 5.0% each | | | 22 | % |
| |
| u | | HealthSouth | | | 5 | % |
| |
| u | | Total Outpatient | | | 73 | % |
| * | | The Inpatient Portfolio consists of approximately 18 occupants with an average square footage of approximately 191,000 feet per each. |
— Information as of 12/31/05
HEALTHCARE ENVIRONMENT
u Growing demand for healthcare services.
— 16% GDP, projected at 20% in 2015.
— Aging demographics.
u Healthcare industry fundamentals remain stable.
— Positive commercial pricing.
— Moderating cost pressures offsetting lower volume.
— Higher reimbursement in 2006.
u Improved operating environment for senior living facilities.
u Continued emphasis on outpatient and lower-cost settings.
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u Capital needs heighten use of alternative sources of capital.
HEALTHCARE ENVIRONMENT
u Graphic Omitted: Inpatient Admissions per Thousand from 1955 to 2004
—Source: American Hospital Association, Hospital Statistics 2006.
u Graphic Omitted: Inpatient Days vs. Outpatient Visits from 1983 to 2004
—Source: American Hospital Association, Hospital Statistics 2006.
u Graphic Omitted: National Healthcare Spending
—Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, 2005.
HEALTHCARE ENVIRONMENT
LEGISLATIVE OUTLOOK
u Hospitals Set To Receive Full Market Basket Update Through 2007.
—Congressional budget included full update to acute care, skilled nursing and inpatient rehab providers in 2006; similar update expected in 2007.
—Budget bill lowered surgery/imaging payments to hospital level; extended flat payments to physicians; extended implementation of stricter rehab admission criteria.
—Even a reversion to historical trends would yield substantial acute care, SNF and rehab Medicare savings, approximately $10-$15 billion over five years, and provide adequate funding growth.
u SNF PPS refinement to keep aggregate payments flat in 2006.
—$1.1B in temporary funding expired on January 1, 2006, and the 3% permanent add-on was implemented on all RUG rates, better than expected.
—Full market basket update of 3.1% on October 1, 2005, offsetting refinements.
u Medicaid Outlook.
—State revenues improving; average 5.5% rate increase in 2006.
—Reforms on state and federal level to improve long-term viability of Medicaid as payor.
—Reforms focused on lowering Rx costs, restricting asset transfers for eligibility, and increasing state flexibility for co-pays and tiered benefits; minimal impact to hospital revenues.
HEALTHCARE ENVIRONMENT
u Graphic Omitted: % Change in Medicare YTY vs. $ Total Federal Surplus/(Deficit)
—Source: Congressional Budget Office, Centers for Medicare and Medicaid Services and Bank of America Securities LLC, Gary Taylor “Hospital Industry,” February 14, 2003.
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HEALTHCARE ENVIRONMENT
u Graphic Omitted: Medicare % of GDP vs. Total Federal Surplus/(Deficit) % of GDP
—Source: Congressional Budget Office, Centers for Medicare and Medicaid Services and Bank of America Securities LLC, Gary Taylor “Hospital Industry,” February 14, 2003.
STRATEGY
INVESTMENT CRITERIA
u Conservative growth profile.
u Long-term client relationship with aligned interests paramount.
u Properties integral to long-term growth strategy of hospital.
u Operator strength, history, market position and strategy.
u Maintain portfolio diversity (type of property, tenant, geographic).
u Location, construction quality, condition and design.
u HR’s Internal Rate of Return exceeds its Weighted Average Cost of Capital.
STRATEGY
GROWTH PLANS
u Selective acquisitions to build core relationships.
u Large investment volume limited by rate environment.
u Emphasize existing portfolio performance.
u Property management and services opportunities.
u Construction/Development activity.
STRATEGY
DIVIDENDS PER SHARE*
| | | | | | | | | | | | |
| 4Q97 | | $ | 0.510 | | | | | | | |
| 1Q98 | | $ | 0.515 | | | | | | | |
| 2Q98 | | $ | 0.520 | | | | | | | |
| 3Q98 | | $ | 0.525 | | | | | | | |
| 4Q98 | | $ | 0.530 | | | | | | | |
| 1Q99 | | $ | 0.535 | | | | | | | |
| 2Q99 | | $ | 0.540 | | | | | | | |
| 3Q99 | | $ | 0.545 | | | | | | | |
| 4Q99 | | $ | 0.550 | | | | | | | |
| 1Q00 | | $ | 0.555 | | | | | | | |
| 2Q00 | | $ | 0.560 | | | | | | | |
| 3Q00 | | $ | 0.565 | | | | | | | |
| 4Q00 | | $ | 0.570 | | | | | | | |
| 1Q01 | | $ | 0.575 | | | | | | | |
| 2Q01 | | $ | 0.580 | | | | | | | |
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| | | | | | | | | | | | |
| 3Q01 | | $ | 0.585 | | | | | | | |
| 4Q01 | | $ | 0.590 | | | | | | | |
| 1Q02 | | $ | 0.595 | | | | | | | |
| 2Q02 | | $ | 0.600 | | | | | | | |
| 3Q02 | | $ | 0.605 | | | | | | | |
| 4Q02 | | $ | 0.610 | | | | | | | |
| 1Q03 | | $ | 0.615 | | | | | | | |
| 2Q03 | | $ | 0.620 | | | | | | | |
| 3Q03 | | $ | 0.625 | | | | | | | |
| 4Q03 | | $ | 0.630 | | | | | | | |
| 1Q04 | | $ | 0.635 | | | | | | | |
| 2Q04 | | $ | 0.640 | | | | | | | |
| 3Q04 | | $ | 0.645 | | | | | | | |
| 4Q04 | | $ | 0.650 | | | | | | | |
| 1Q05 | | $ | 0.655 | | | | | | | |
| 2Q05 | | $ | 0.660 | | | | | | | |
| 3Q05 | | $ | 0.660 | | | | | | | |
| 4Q05 | | $ | 0.660 | | | $ | 2.64 | | | Annualized |
STRATEGY
FINANCIAL OBJECTIVES
u Debt-to-book capital leverage.
— Currently 46%.
— 40-50% target.
u IRR > WACC
— Terminal value = initial investment.
— Dividend discount model.
u Financial flexibility.
— Substantial use of equity.
— Utilize targeted debt-to-book ratio.
— Minimal use of secured debt.
u Target dividend payout ratio 85%-95%.
u Improve investment-grade debt ratings.
FINANCIAL POSITION
DEBT MATURITIES
| | | | |
| 2006 | | $35.6 million |
| 2007 | | $6.7 million |
| 2008 | | $7.2 million |
| 2009 | | $7.8 million |
| 2010 | | $8.4 million |
| 2011 | | $299.0 million |
| 2012 | | $1.4 million |
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| | | | |
| 2013 | | $1.5 million |
| 2014 | | $301.8 million |
| 2015 & After | | $35.9 million |
| | | |
| Total | | $719.3 million |
—Information as of 12/31/05
FINANCIAL POSITION
PEER COMPARISON
— Key Indicators
| | | | | | | | | | | | | | | | | |
| | | HR | | | HCP | | | HCN | | | NHP | |
Total Debt / Recurring EBITDA (x) | | | 4.95 | | | | 5.19 | | | | 5.72 | | | | 5.24 | |
Recurring EBITDA / Fixed Charges (x) | | | 3.12 | | | | 2.94 | | | | 2.57 | | | | 2.38 | |
Secured Debt % Gross Assets | | | 3.4 | % | | | 5.6 | % | | | 3.3 | % | | | 10.7 | % |
Total Debt + Pref. Equity % Gross Assets | | | 37.7 | % | | | 53.2 | % | | | 54.7 | % | | | 55.5 | % |
| | | | | | | | | | | | | |
| | Information as of 12/31/05 |
| |
Fitch Ratings | | BBB | | BBB+ | | BBB- | | BBB- |
Moody’s Investors Service | | Baa3 | | Baa2 | | Baa3 | | Baa3 |
Standard & Poor’s | | BBB- | | BBB+ | | BBB- | | BBB- |
Source: Company Reports.
SUMMARY
CREDIT STRENGTHS
u One of the largest REITs focused exclusively on healthcare.
u Strongly positioned in most stable healthcare sectors.
u Established, creditworthy lessees/tenants and subtenants.
u Geographically diverse portfolio with real estate assets owned in 27 states.
u Facilities essential to each healthcare provider or local community.
u Construction and management services that enhance investment returns and same-store growth.
u Predictable cash flow from lessees.
u Full access to capital markets (Form S-11, S-3 pro supp beginning December 1, 2006).
u Minimal secured debt.
u Conservative financial and investment policies.
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HEALTHCARE REALTY TRUST
Healthcare’s Real Estate Company
The matters discussed within may contain forward-looking statements that involve risks and
uncertainties. These forward-looking statements are subject to completion of the development of
transactions that may materially differ from the projections and may be affected by other risks and
uncertainties discussed in a 10-K filed with the SEC by Healthcare Realty Trust for the year ended
December 31, 2005. Forward-looking statements represent the Company’s judgment as of the date of
this presentation and the Company’s actual results could differ materially from such
forward-looking statements. The Company disclaims any obligation to update forward-looking
material.
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