Earnings call transcript Q4 2022

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Operator

Thank you for joining. I would like to welcome you all to the Healthcare Realty Trust Fourth Quarter Earnings Conference Call. My name is Brika, and I'll be your event specialist operating today's call. [Operator Instructions]

Thank you. to of call Investor like host, to now Hubbard Ron Relations. would hand over the our I Sir, you may begin your conference call.

Ron Hubbard

Thank joining us quarter you, everyone, Healthcare Thank call. fourth conference XXXX you, Realty's earnings today Brika. for for

Joining and Hull. Douglas me Meredith, Rob on are call Todd the Kris today

XX-K the XX, in involve June are XXXX, A that, obligation Form estimates, to ended and The for the and SEC XXXX. the Form These for forward-looking September risks the discussed assumptions, specifically this and update SEC historical may discussed as contain company's within, quarters the information XX-Ks risks These with reminder XX, call. call filed date contained March forward-looking more judgment disclaims statements this the in represent for with company's company ended December any matters except the XX, this filed material. forward-looking statements the XX of that uncertainties. of year

company's comparable these information non-GAAP also per share; and The matters for company's Form XX-Q normalized EBITDA; operating GAAP FFO of NOI; per normalized the discussed for earnings certain or share; operations funds available FFO; in EBITDA. supplemental in release, website. December measures the company's may press and income, FFO quarter FFO; measures funds this contain as measures reconciliation XX, found to from ended adjusted earnings may be A such or the financial release most measures, the net press XXXX. on The FAD; distribution call available financial are

call now Todd. the turn I'll over to

Todd Meredith

pointing our key I'll fourth you, successfully everyone, thank call. joining objectives. out quarter by merger integration that earnings XXXX two we've Ron. for us achieved start you, And Thank for

targeted cash of It's our we January, final these First, rates. special noting to sales in the fund sales worth that the at merger-related cap executed our planned we dividend. portion asset completed

full brokerage originally time in for expected. building would was reaching dedication quarter. leasing Rob to Healthcare annualized Most we portfolio. incredible our savings Later, Second, my Realty the The fourth these levels. to the transitioned projected realized in driver colleagues expand G&A half leasing effort this with fully the staffing we I Realty model That's our full we our primary accomplishing like and on coverage to is Healthcare how their across commend already momentum. will milestones. importantly,

to to return a recycling steady capital Looking mode. we expect XXXX, state to

the is for the of Given current markets primarily portfolio the XXXX. we priority and state Proceeds be into edges. our completed optimize top expect This the pipeline. redevelopment capital dispositions, reinvested will to at our

selected We be acquisitions our on expect position to modest cluster these the market properties and to strategy. protect

because With nearly important ramp rates improved are and are up spreads better. the deep financing now X% since rates when is secured lenders improved fall basis MOB has from relationships, since financing than capital picture last we buying notably improved. Both X/X improve. November. have to more prepared This and well MOB of markets The market improved acquisitions All-in accretive has drives power. scale but secured lower quality November breadth the Rates getting This are remains Xs. rates last XXX the properties tight and trending bit a financing The about peak are XX points towards basis level. of financed. cap now in high points pulled underlying

nearly most every to in the employees fastest-growing one employment demand work the grew of X% MOB is in year-over-year recent employment fundamentals report, ambulatory with coming growing even outpatient Healthcare Healthcare robust most of are remain our buildings. day favorable one sectors. with facilities. faster. and largest, services for These stable

near more especially who systems rapid are health talking and planning for the to also to actively health costs future. We that that and pressure groups, We're see physician in today more inflation labor green committing for easing, are shoots space outpatient systems. growth are

gains. expect For and we same-store by propelled we moderating leasing to get key moment. In higher NOI healthy and strong growth reported escalations, in steady rent expense and XXXX, occupancy trend assuming above more a the metrics. cash will quarter, revenue occupancy X%, spreads well Same-store fourth X%, above Kris operating results gains. into grew detail growth

XX momentum with signed aim of absorption. over feet absorption. points Leasing is of take 'XX, the to half XXX,XXX leases this basis of boosting capture occupancy. of basis of first to roughly net gross trend most the square This equates current in solid We yet XXX of points to

are leasing Healthcare the Realty sector. starts in sign most has pipeline largest another Development demand. positive MOB visible clear the of and

pipeline $XXX million, is is pipeline we this, significant relationships embedded pipeline billion. prospective expanding long-term the benefit Realty This a $XXX Our million. larger the and near-term $X.X roughly deeper pipeline platform, and our over is Healthcare of active scale. market have And behind of

in are projects more systems. position We major health a to secure leadership development with

Realty's is outlook Healthcare ahead, Looking long-term bright.

we Our absorption to primary outsized a expect platform, focus to same-store rent growth. is post-merger capture operational With NOI and well-scaled accelerate growth. execution

expect our moderates projects development We growth we'll inflation growth accretive to interest stabilize, term. acquisitions as our bolster near higher-yielding profile. And drive in add external the rates to and

to Now review turn and provide results. I'll it our financial operating over a of to Kris

Kris Douglas

We Todd. made the Thanks, fourth progress tremendous quarter. in integration on

quarter by as sequential $X.X FFO quarter annualized line and G&A both to in encouraged higher from normalize cash debt $XX average Asset include rates million interest realized. debt analysts by on was floating for in per $X.XX merger-related G&A. quarter. expense FFO with in million offset in $X.X as was partially were well This impacted was completed, reduction in the results for share, value item merger The balance. increase to sequential sales for of fourth to higher fair adjustments. a third more normalization in our peers. rate to noncash special the results this savings dividend investors a comparable the fund interest FFO by and make Normalized third XQ was and were million We Normalized expense targeted

marginal be realized two G&A annualized $XX offset compared next G&A. are the of million increases. realized synergies now still combined to cost premerger quarters, these but to have be to yet reductions by over we expect We some normal There

quarter the funding of run or since the FFO any is share. of completed to billion $X.XX were Page the shown special of full additional supplemental third and sales asset merger FAD cash include changes sales X per of timing end including rate FFO flow. the The rates impact of impact not million rate the cash on asset $X.X the of finalize portfolio Run dividend. in the interest growth in do $XXX

by X.X%. were the JVs company's increased same-store higher by quarterly improved XX offset quarterly XX-basis-point square X.X%. X.X% strong The and Operating expenses. contribution increase share average growth the potential again quarterly foot annual in growth year NOI revenue highlight points. quarterly a NOI The the operating revenue both X.X% X.X% for from occupancy. fundamentals of our Year-over-year was was comprised growth in NOI even and once basis at The per driven increase in by year-over-year a increase Same-store improvement and properties. of occupied of was a revenue growth a in growth

meaningful in our square Total are X.XX%, X% improvement for from quarter. continued We occupancy portfolio spreads from focus XX on increases quarter. maximizing basis or last The contractual the opportunity or the for cash was NOI of Annual spreads, in leases absorption with for escalators up commenced higher providing which XX,XXX had having on the and now points up lower spread average leases below occupancy X.XX% that of is leases to of bolstered with increases the and to XX.X%, third Cash a by the contractual increases X.X%. sale quarter, annual escalators the averaged continue properties, growth. leasing was XX.X% X.X%, also XX% feet greater. X.X% Sequential result The of increased the leasing quarter in-place same-store improvement growth CPI-based in occupancy properties. future the X.X% and increases.

quarter. substantially Operating in of appeals. the several benefited the growth from from tax quarter third down successful X.X% property We in expense X.X% was the

Excluding absorption our their X%. to will but improving to elevated norms, growth approximately show of is NOI impact, signs drive growth the expense historical pressures through power remains easing. XXXX. revenue expense of drivers allow help inflationary compared This and occupancy Operating growth running

which better combined Maintenance a CapEx experience. provided seasonality the To expenditure we of trends, typically fourth over is three spend. with maintenance XX-month in capital the company X the quarters, trailing supplemental the previous of give Page consistent we picture on increased the quarter CapEx

of share pro Based per ratio Realty the dividend annual $X.XX XXXX FAD payout on was the Healthcare forma XX%.

average We interest expected high rates expect spending the higher the XXs as be FAD in in payout capital to year-over-year. ratio as occupancy well absorption giving 'XX for

the increases moderate, the will portfolio and interest drive payout ratio rate underlying the growth of As lower. fundamentals

low sales pro to January rate was at forma of impact year-end, mid-Xs. in to X.Xx. including the be Run the asset Target leverage continues debt-to-EBITDA

sales underlying in from we to portfolio look funding With trend to acquisitions will the towards additional steady expect to XXXX. and of leverage end fund minimal funding lower development range this asset limited near-term needs, growth. We

we of we is end January. for interest million XX%, pro the which term. approximately fixed entered in of new net million $XXX the the that late rate result in forma debt where The of $XXX remain of anticipation Since swaps the near swaps rate quarter, at is third expect into expired have to

the to to merger benefits and pleased schedule. our as In medical portfolio. scaled funding ahead unlock of as synergies we operational office are the achieved completed our we're the targeted XXXX, poised have special up wrap XXXX, dividend we As of of well recession-resistant

leasing and Rob it over activity. turn updates investment on for I'll Now to further

Rob Hull

Kris. Thanks,

of pipeline growth fourth our further completed acquisitions of the These the will will completion a from expect dispositions $XXX and sales, fund sales in and our the merger-related minimal million portfolio's $XXX optimize expectations. redevelopment Proceeds million those amount With this additional of dispositions our we quarter. like development year. we active to long-term

investing development for right is redevelopment. focus primary and now Our

points the basis to cap we returns produce to acquisition XXX richer is points X% expected of above to returns development, target in basis For stabilized rates. XX% Redevelopment XXX range.

perspective This leased to year, quarter, is of pipeline. active across a This fourth development MOB our we project our Orlando. expect million fund the in to advanced new from million the $XX million active approximately pipeline, X-phase $XX $XX million first one per In $XXX to development XXX% quarter.

a opportunities now places where at buildings scale a health This center square are X.X presence We increased newly relationships. leasing system flow. market through market and transaction example of us in million for to feet. and the seeing we An Phoenix, filling start inherited activity developments XX fresh deal is greater own

begins. our this the prospective quarter. a XX% with in developer foot square growth. a venture explosive a solicited an on The million $XX reputable working sizable our a The before clear this to opportunity XXX-bed market our is for XX% given area our are path added project pipeline over adjacent presence MOB. to XXX,XXX systems. a project construction development The relationships is in health development developer and with project multiple the We joint of undergoing participation pre-leased in with We hospital to

Our is portfolio much redevelopment source for a larger rich opportunities.

an relationship senior to in of bed us to the the As plans we on-campus on count recently of are XX% the occupied meet redevelopment two from working new with leadership addition almost came increase renew HTA. with the to XX% example, by bed that traveled acute MOBs hospital. to with tower. hospital a the They shared Houston care I

team that to million collaborating shared campus. will services. a projects on these and buildings. The physicians agree $XX plan all hospital We a our to house attract the Our great redevelop location new fresh reinvigorate create start will

later We expect to this project pipeline redevelopment to active year. move this our

Turning to leasing.

XXX% HTA third-party onboarding quarter, the to brokers. of we completed of portfolio the the legacy During

with Our partners, relationships improving our system health brokers, new momentum. combined drive will with leasing

signs used that is exciting is conduct XX% to example, seven XXXX. a a strong of the our tours. Such early great one in their in broad improved prospective a in team. jumped Phoenix Across three testament the the really day. is XX leasing brokers example And value brokerage compared efficient last brokerage portfolio, coverage is a activity. are we January tenant to months already seeing recently team local and tours of of A tours What of to in

been to pass HTA's under parties go contrast, would in-house a week, and to it model, elsewhere. time to complete in have difficult In interested allowing these tours

more couple of ahead, this new Phoenix our next occupied that can will in confident than not space is but months yet team double leases our leased execute they Looking market. the in

the Dallas-based on monthly Similarly, assets. adding I campus from to brokers talking created the legacy our tours who since was HTA them. Leasing, rate the Director mentioned recently added to that we was He of has one energized our of doubled by momentum

More sizable a lease provider through established their importantly, our brokers sourced quickly network.

expect we almost momentum to and this in this points in XXX With leases build-out, basis market currently in near gross the term. absorption increase

success accelerating As growth. development we both and look as foundation for will the to XXXX, leasing on the fronts serve

open to for ready now the are we questions. Operator, line

Operator

from comes have first Wurschmidt question The Instructions] [Operator Austin of we KeyBanc.

Austin Wurschmidt

implied growth consistent Just about. from some thoughts to mean that XXXX on NOI first X% I getting and I'm you a latest has some the the you guidance see forward. hitting question, you've to you strategic kind continue merger. little what reasonable time X% of quarter, with same-store accelerate? X% following that that looking same-store talked the of it's of X% bit curious of fourth of objectives kind line that your into a But could that talked on timeframe growth high to what are have opportunity guys of end think XXXX about Is acceleration to NOI the

Todd Meredith

And mind, bit we're having volume. don't of a Austin. Brika, if little Thanks, you quiet a

But same-store on some X.X%. mentioned growth here, in question, That that can for on just Austin, I remarks, if place, So to the volume X.X% through and I be in equation audience? your of is rent add side, seeing guidance that think revenue clarify, for directionally, strong think to you the 'XX Austin, our trends that would obviously, I pushing But NOI for occupancy we're growth higher. are my lot really it point great. gains, revenue a

lower in translating of higher from that kind range through throughout year finished we 'XX that the range see to sort balance where the of of 'XX the the end we so of And of 'XX. end the

heading our trend later of building north is that I we're into that year. well So certainly for in view 'XX, bodes the think off And going the momentum. X%

but year. X.X% build that for So year, sort think, in the again, I X.X% throughout a range of to the

Austin Wurschmidt

looking I about cash was at Sorry leasing the spreads. that.

Todd Meredith

Yes, important a rather that's certainly driver contributor. an big

Austin Wurschmidt

talked about along upside you've lines, the driving And similar from occupancy.

pipeline portion of with the that HTA. [SNO] a of today some noted You got you've opportunity significant that across

of are some these offsetting some I those -- to today those we as embed takes, you within should of NOI some Any What that that near-term that guidance? about? same-store upside -- and some time? upside that -- of and of did guess, that how the starts some puts So over think that's are drivers of headwinds build benefits

Kris Douglas

what get think I components of see No, through we're same Yes. trying you the store. of different kind can with the to

we bring improvement as get companies expecting versus of We absorption are as well leasing what saw our spreads the we to combination XXXX together. and cash some the two in some as

but we've an bit in XXXX, historical that improving piece a a it's our One is picture of from where headwind expenses. to compared been experience, operating

get X% us our right about, that seeing typical which think operating talked I of As components we'll all for right to the could we start will XXXX. start the to allow shine X% to X%. and in of but around that bottom That's expenses through that X.X%. from the to in still are line we the elevated will direction, norm to now we revenue But don't in way moving different running But are those anticipate the direction, growth. X.X% NOI drop drivers back that, on it some moving signs

Operator

from Nick of comes question Yulico next Your Scotiabank.

Nick Yulico

Great.

terms but on I wanted way First I just you without see -- I expense, specifically, know the debt a get there's guidance if roughly question can if for it interest any cash year. on is expense of didn't just we this you could mark-to-market the like guess, look give to interest feel how, in

Kris Douglas

in overall amount with a rate annual floating the right up debt bit it really ends move so per a Yes. of growth of interest much of is of on share a speak, about X% give heuristic, for year. rates to you how the being to To million overall kind interest depends about kind year. $XXX $X.XXX across exactly now, It rate of change the on on kind that

of through of we'll continue the watch but kind magnitude to of So of 'XX. the impact, you balance gives a that have the bit that to little

Nick Yulico

doing just facing. guys Okay. that remove on aren't -- I a you're same were that little to merger That's normalized helpful. it's don't But other because that to time, about to having. that considering that rationale noncash expense. you my And it's remove the REITs doing excluding interest decision was issue adjustment hear I the that, your calculation. I guess normalized from of mean, know big at But from you just question and REITs because FFO, follow-up know you're fair I that an large want from I value impact are your other FFO bit as granted more have a the your

Todd Meredith

Kris?

Kris Douglas

what's has it Yes. We look at that. and on to different. did peers you're right. right going consider that change look on I in impact interest that and rates, compared And it now, you think the is rapid the at When us

over mark-to-market, ended income up adjustment. to statement being So related which sheet being this half of our of noncash expense in resulted value with balance XX% our interest fair we almost

analysts to we lot nature issues. well the analysts of that to the had unusual So really, size was as was create all we consensus of some of the comparability of a that, this our a of lot going on as investors. our And it spoke our given and

normalizing And a make will item. that is pointed adjustment that FFO we being so an recommendation It's item. remind is this FAD this And the we I out. noncash, not you,

So that that was decision. the into thought process went that

Todd Meredith

And sheet. Kris the said. the yes, add were of more -- and or balance buying it That's a material sheet that because and, clearly, larger therefore, fact a HTA of that the huge would XX% I just merger huge, combined we balance amount, was portion just as

real until maturity, so don't maturities, 'XX. any And we significant have

but really like future, on in So there's we'll change like everyone real position as everyone, with in that. -- deal we're a time, good the we cash the refinance in

about good it feel Kris very as balance helps said. So comparability, and sheet, the

Operator

now Anderson Rich have We with SMBC.

Rich Anderson

FAD payout. of said Hear the dividend, high on type me XXs So you okay?

Todd Meredith

Yes.

Rich Anderson

Okay.

line. the interest rates what and feedback. Kris, I does that. bottom had some you sensitivity about higher mentioned to the that then And to Sorry

visibility XXs, for cut is and dividend what Let's XXXX triple parts? in reason. say based And moving willing to the at least this you being you not thought where all you but on what at digits with for whatever in it's like degree you of high live amount Do time? point feel it's are To today a stand have or enough about that?

Todd Meredith

We're operational Sure. go just that great will manage everybody think might read is interest curves, offset we're answer heuristics hopefully, like be the Thanks, through seeing think I to rates. is but to down. come Nick's we're going. where But are those Rich. confident forward like can And seeing that But are to question we wanting to rising the rate what then deal Fair and be, appropriately. using if, very all trying near a And in everyone, term. strong we to improvements able about answer short-term looking short interest not when rates the start question. at

we just as said, feel And very at momentum. ourselves if, we about good found So digits. even you right triple that

near very in in I that think are term 'XX. operational in but comfortable we're real 'XX, improvements the also

So drive quickly operational we that should through down feel comfortable very fairly just that, improvement.

cut. do at anticipate not, So the watching this. all markets of at this any we're and Obviously, extent of any the looking we point, notion

a as with as we feel Board team every now, something re-evaluate at. that's year. that's is management we a comfortable that where So for it's and quarter, But outlook our every very

Kris Douglas

things I of pressure that the is add has One that do that seeing we're to portfolio. Rich, for across putting thing absorption is the the to capital there some the would with that, one

that value. a short and And problem enhance to to that that's we point that look that capital growth issue. But dealing have. flow that with as that's if dividend the doesn't something you're in long-term long-term cash good term, at a So will

Rich Anderson

-- I swaps maybe at if million bothered if this have point? the of that but Or know would the in swaps was today's you that tail in there was -- payout it's was -- you're obvious terms $XXX don't wagging XX% question, dog at the an of in this level Okay. And doing recently market?

Kris Douglas

look had and Yes. a XX%. And we've changes neutral million rate expiring. way No. the tried that's about up that we we've we take the $XXX million $XXX ended you view on handled with at, swapping is pretty our the that's that I rates really by to the if exposure mean new where of floating with historically,

we're So rates take still on right balanced view to now. a where trying are

Rich Anderson

is World Is Todd you taking I very in had anything then was And there I merger to? the weren't season? Okay. question. what just so What's that? that to Or to specific point to your moment reporting is live it What can last kind dangerously Disney you had his caused mind obviously reason the in get related, done be late reporting. kids weird just so available. you but guys for of

Todd Meredith

out post-merger that we not fair No, us, have it mean more full time I think, was anticipated post-merger. said, point. made XX-K a put a of trying to let's was hey, That's little We're And -- kind in lift We ahead. frenzy. Rich, the and maximum I really ourselves that normalized recently. that give change for the a this audit of well really post-merger audit, amount the was given that just first and the plan

timeframe, So certainly the an of but to schedule trying just ourselves give you'll say, easy us earlier kind more we a were for I see year. normal doubt. managed the And return throughout I benefit me to think to of the we could think but have

trend So expect this that I wouldn't continues.

Operator

Michael Griffin We of have now Citi.

Michael Griffin

impact side to the burn-offs heading perspective? shares the run rate the what from And I know potentially clarify, that of you much of scenario. harp include of to see does January? the the But Maybe $X.XX want just interest from on interest effects gave that rate just sensitivity I an off not that swap equation. interest from But expense expense about into the swap too could XXXX. that burning you number, talked

Kris Douglas

occurred No, in a rate where that January. Yes. because doesn't late expiration was it XX/XX run number that swap

converting under related share expiration. $X.XXX swap little expiring of about our impact ends what So quarter rate that that per it new is, to being and per up kind to swap a

Michael Griffin

the just related dispositions or they initially of sense merger? buyer markets any -- around did probably pricing any muted the Got And then the expectations? curious, are And pool of helpful? environment. that million tougher but obviously, any lower expectation there had the $XXX on want clarity Is with But a would that clarify, for of I performing capital to be these helpful to just assets, is I'm assets? dispositions they're you targeted a of legacy you. clarification. to the incremental more That's targeted year beginning maybe guidance. Or lease, are and

Rob Hull

Yes.

think They $XXX I way out growth continued properties we they're and we maybe are at for dispositions, that an if cluster the look where think that you taking million -- a to merger-related to are now see ahead. looking a I up lower we the for. portfolio, build build and is the time $XXX get we really at that finished that And not think opportunity we of expectations -- million -- we what them. we looking can market the or think about or over don't time than in up a pruning of the we're the we can look think

really smaller to in think what we in looking want what's there getting the terms forward of at portfolio trying we're be of some and it's the don't possibly term. long to and to markets I that in optimize So expecting sell, out going

I swings in some As pricing, far over think the we've quarters. couple past of right now, rates I seen as interest mean,

now Xs you and swing XX on about fall, we've And down; seen XXX of to seen kind points probably, the to go I point MOBs. driving is then think if back high pricing probably were up. debt from back and the mid the basis costs really basis we've gone to there, another about debt a market up

now, are that's around that of X%. think we we're at So the cap moving rates. towards sort And rates looking driving that right cap

looking trying the the us is properties sell, could at It be what sale that's just So we're to for we're baseline. Certainly, I and on and that as asset targeting think that. appetite the depends you sort out below we're gave that that what of there. for above

Operator

of Steven now We Barclays. have

Steven Valiquette

Valiquette Barclays. of from questions, this kind covered think, the acquisitions Steve were at I both and All point. market around divestitures for It's the

little bit. trends et worth be a I costs, topics little as was there hear control better shift more expenses, -- to you're the seeing cetera? would just to calling just I on maybe where just of to as The Anything about out some a think kind operating So far areas helpful. the improvement same-store want just ability there, there bit.

Kris Douglas

Yes, I mentioned prepared third of successful the about in fourth property tax improvement good a portion that and see some the that my to a remarks related little quarter, the quarter did bit to in appeals. we compared

those into our property operating Excluding expenses. in at that some which signs X%, the A also seeing utility could appeals, where trending That's continued tax The expenses we earlier as we our still we is from we're side. the what news, good seeing see from year. around down were some move that we of comes 'XX, of see improvement. lot one right largest

the digit rate utilities. over And -- utility on over double up in side, 'XX. expenses of Kind are we're those to XX% of our just related were operating expenses 'XX

if the 'XX, gives to that I'm that into at look you you you seen moderating. As latch some not moving ready show to saw 'XX, a 'XX. onto throughout much feel start lot but from sight that where to come it a about see to forecasts just better bit see forecast can declining. down of overall line in even what expenses we trend We've that, of that operating

Operator

have James. Hughes now Jonathan of We Raymond

Jonathan Hughes

it's year that much about run wanted of the embedded talked operational back FAD the in and gone not last rather bit that $X.XX summer rate just upside annualized was we talk like achievable? this in higher about $X.XX decline than much and of interest just figure FAD? I'm I is the maybe this kind how time. those backdrop? longer guess How of a go rate from just we had where decline the some of the projections simply delayed of has trying no understand to to can little I between

Todd Meredith

in number Jonathan, were to, the one, referring a very clearly, different environment. I think, you're projections

think is been to the picture decline no There's there's dealing think delay in the with everybody material and I don't or operational change any in interest the whatsoever. I rates different degrees. opportunity.

strong store. very seeing some about specific same signs, through I seeing Rob think as fact, I what come examples. on we're we're talked walked through In

seeing So we're negative. that is not anything really operationally

this environment folks big I of impacts. think has for a two lot

managing demand? How C-level interest the You've just the prescient, a maybe prescient, perfectly your doing? rates. you is lucky, operating were How then is from interest side are what a we're got change shape through What in is is what see all dealing it think fundamental but And business. that well. certainly can. everybody coming with rebound in a Unless trends? is large as And side dramatic I we very ways it impact there, as the rate see is. but We're moderate good things it

that's position what of those swap fixing again, So rates. informs our kind

I optimistic where think we're we're and bullish headed. So operationally, very about

So of unless I majority would impact add, you the there. Kris, the I think, be environment is the something that interest to rate think have

Kris Douglas

Yes. good 'XX. we've start hitting operational execute we say main on and move pieces on, three are we were able to the synergies. through And into we're dividend as enter set need the pointing as -- foundation, of funding of space able that the what have what be and -- of kind upside. as kind kind seeing that knew on that's set And cash to the be I that's well kind achieve third to the Those of of do would to 'XX we're we're that being still to Rob we're now, the two special dividend, upside. was that to to we operational main is what And we of achieved able achieving indications

Jonathan Hughes

higher? expected absorption midpoint maybe side on I bps. then. the is vacancy Is from XX I that's Okay. preventing the in That's helpful. operational the a some there running little what, maybe portfolio think guess

year. it last of I absorption bps XX was think

-- is it square business outpatient some what I mentioned just the improving. comments thought strength I'm just that have that to of maybe I'm upside. the for trying the with of absorption trying earlier bullish to more you just would was So

Todd Meredith

Yes. on that that, there guidance same-store. overall One is comment the is

multi-tenant So single that's and tenant.

diluted closer you tends run of somewhat your you're to -- XXX% lot by fact are changes. single the We and expect don't to tenant occupancy, that a

the where multi-tenant, sentiment you just it's at So the it lies. diluted is a if little opportunity that by gets ratio, more bullish a really look on so which

to to is points. behind think little I a the guide basis XX multi-tenant, as I than there's call to point, So XX what for the would XX more our total your XXX-plus more

to underway. is We've only early -- We're though, getting bullish. occupied leased very a process time, -- yet building not it then little pent-up leasing but months We might not momentum convert of would that square plus it that a or me, and comment, yet the that it of it The build But up a time we're but add take plus the signs. feet, And there's off excuse for over occupancy. six other this takes build-out. -- space, takes lot I occupied. see got

certainly trends So second place take it, and half the to it time really to does in see we're deliver but right a seeing in moving 'XX. coming the into obviously, little that through

Jonathan Hughes

right. for And All then just me. more one

remind just year, target we think you high then can -- -- expect payout Kris, Just most with of back dividend the it kind hit it and on can but don't the rate this you coverage, where XXs prior run you of that I But FAD said of kind us longer can over of and answered term? the the ratio? what's questions.

Kris Douglas

say it years And was were in some drive actually improvement talked and lower. the but that over expectation and would That that history. to interest I there about. was the that down continue to able going growth, were have And through our XXX%. we before XXs. drive we've our in to into in seen Yes. expense at the a mid- things And of to point to -- pressures we back these drive from high time continue eight, portfolio We you ago, that lower. we will were XX

at our drive So that provide goal to to lower is able continue same time, being some the with dividend. -- to the long in term, growth underlying

Todd Meredith

Yes.

I see simple into future. below is want think and in to certainly not-too-distant the certainly want go to to. current back the directionally the we're navigating obviously terms, in environment we where But XX get it XXs

Operator

We have now of Mueller Mike JPM.

Mike Mueller

about the talked being rate. swaps not you think some I run in $X.XX of Kris, the

then rate now? So acquisitions, do swaps layer think year full a with higher looking into end at the of what to lower you expecting that's that or for run you're everything it, similar, when and $X.XX impact dispositions, you'll the you

Kris Douglas

Yes.

interest in growth is the of have But 'XX, changes does looking rates. underlying as it any again which have start expectation the to we of I we it at a back bit interest As come once rates, $X.XX also end portfolio, any the doesn't but -- doesn't mentioned, in meaningful.

So run ending our be a us the position the and 'XX expectation of higher, on we're have is year. get end able to would the pressures rates interest rate to we better than the that year should outpace entering that we

Mike Mueller

Even with dispositions? net it. Got

Kris Douglas

to development. as at looking we're acquisitions our some fund because as Yes, marginal dispositions those well

Mike Mueller

then starts second into mean on move in annual -- for how Got like looks have think 'XX of million development, starts of and it $XXX as we you terms should half year. about of And I about 'XX the you it. the starts? slated the

Rob Hull

Yes.

it's half look $XXX that expect our think I you're right, year. There's of to of about start this that, slated you if about -- million at pipeline, prospective second $XXX we've million. to

existing be that million, will but going if those that some So the you the could combine of of into of are new we towards six that think year. rolling $XXX pipeline have XXXX, this we with there end starts off,

to year, million $XX And funding million. First would per from run year, $XXX to that this year. of per moving quarter a to $XX rate quarter $XX of million up roughly next about million equate next

those with system having and So the partners. projects optimistic prospective dialogue them a health of we're forward tenants great on and and all pushing

Operator

Credit have now We Okusanya Tayo from Suisse.

Tayo Okusanya

up kind were you the asset should logic how going helpful response dividend some a apply of Kris, of a above at dilutive kind point There's to year run to how full at I given of FFO that at from especially But There's that you imply do of you 'XX, still not probably of build XXX%, kind end in just sales. forward. was I pressure rate coverage when meaningfully a XXX% impact in through Michael to 'XX. rate kind same build mean FAD up -- it does will your Yes. up in talk XQ?

amount You kind up commissions recurring of CapEx, portfolio. have of forecasted as TI leasing lease a you decent the

to Richard's question think just of context I'm dividend about that So through well policy. the as in earlier trying

Kris Douglas

Yes.

I it, that FAD overall growth and at will drive we're to looking think the well. as talking about same to that of able fundamentals improvement seeing, flow the we're operations through we're being As that

is prepared earnings as the that are. quarter expectation As we'll in does in the in not CapEx for spend ratio. be the is because I've particular And my the said payout smooth Rich in on year, probably as remarks, the as any that high XXs said,

Could really if capital variation to that in be capital. you But of possible. as absorption, quarter. for XXX% being spend is pointed don't concerning, which driven especially kind that And going so time? is some some you additional Todd are to, any of over have by Yes, that's period for as see growth we

payout And lower quarter future. be that be one surprising, well terms balance long depending on we're so how year growth, this any or ratio that internal plus in in as of minus running feel that able would models, not you're with the seeing but directionally we what term as drive like your still out to we'll

Tayo Okusanya

target? for just number for the XXs high an or that And 'XX that's year-end that average is clarification,

Todd Meredith

average. That really is an

it's looking really spend. the that Page in our I one piece put at and is worth on information X I it's the look, we release, earnings of think think capital of supplemental, a key seasonality helpful

pattern is we fourth so high. a always that And see clearly, quarter year-to-year

post-merger. average ratio and to second the But we you That expect if a throughout tend if in quarter, builds the be was then it half. first little it lower you half, So fourth might true in be it -- high. true payout premerger, your look and the be to we you year, at the

look ratio. of and the And you fourth purely so balance to really at quarter payout off a have year, you really so the can't extrapolate on a

full provide to additional disclosure. which that is the look why year, at You really have we

Tayo Okusanya

more And if you. one indulge you me. would then Got

to starting now. their bottom from systems a right pressure. also health You're line lot under information is Again, more get care

Could, to what about them, even bottom little kind regular that kind improve consolidate on potentially consolidate MOBs, they about what admin going impact their them are And demand a just We have of hearing potential not ability hearing pricing space to forward? again, from drive line. of talk to but as try you're just the well? starting as could you

Todd Meredith

Sure. Yes.

a month think on know you the is world saw but look But as the half And better with trends rate I it 'XX in to year, and the the -- half. particularly to was into a as be was spot there's starting COVID monthly going labor all dramatically. second that's interest challenging we I moderating I bright everybody impacts costs. of 'XX, front, I think that the and health think a improved, 'XX as care, the first of year dramatic end labor over obviously pretty for side by changed the much think difference in throughout well challenging if

that's much environment. a think better I

interest think of expense I they're like everyone, the grappling world. with the side

seeing some just which earlier like encouraging. on about easing there, is So really we're we talked inflation,

a lower continued the going more that seeing a usage. by is is really seeing focus health I setting, effective. everything the you're cost, That trend But that takeaway there's we're on is of overwhelming And that the outpatient always our to drive systems that, that. the real to the just shift sort where energy margins renewed we there's their on think I revenue on our continue on more it do everything is think underscores space rationalization I leasing better. would we But picture side lower, structure how say of models, side, of the say cost to our development how

of to I a they But I really outpatient to be It of be doesn't continues they're put optimized. lot care incremental that trying So going it part solution. where their think really to we're and demand. get rationalize capture not poised think the to always mean

Operator

have now John Green Pawlowski Street. We of

John Pawlowski

you'll follow-up upside able sense the be multi-tenant a when get us the give I think you XX%? footage you Could on on just have XX. occupancy square you question Page to a outlined and do guys

Todd Meredith

XX% the The outlined we We've in something and about -- NOI talked so investor context. just for XX%, merger, -- certainly through some getting presentation. for we've this dollars upside to through is

absorption talked I I -- of trend throughout like? for year. XXX does And the upside? look early the Hughes upside, basis, about basis basis stages. in XXX as occupancy really points that part 'XX. asked, of gross 'XX now about we're of right towards at we XX a about we of talked level us, just And the building optimistic Jonathan On that Where early what that is think but net it's see points sort

average of kind for is the guidance for the Our year.

you're is obviously, that mean that So We would -- building short and to XX% stages -- -- think oh, it's answer multi-tenant it's momentum. early the XX it's don't no. XX%. implication Does years sort the or XXX% that of be, going to that side, We it's of the the long. of going in think were

say here a we as we'll what So time but put is, building can't got But -- I sort to it under it belt frame, some of exactly we've year-to-year. keep sort successes that point think execution it's really frame. X-, of to to We but specific process. obviously multiyear a X-year time our a of it's more think

John Pawlowski

are left costs merger-related the are Okay. incur? Understood. quarter, And still risks then, there looming the additional in $XX.X just minds? million are in any And Kris, other your costs that what to integration

Kris Douglas

have some that to systems, work question, working done. our -- of still see. risk system. We To big we your be accounting no do our our some We're no, combining integration second through still

were Fortunately, the we same but system versions. on on different

that through So us helping process. have we're some bringing are those together. We do consultants that

and still So of that the quarter. there the into lot will you But still some is be second there in that's finalized. is one that be yes, probably done. moving quarter, the see of some still merger-related to first costs a will work But

John Pawlowski

that Okay. Can incurred in be the quantify you will 'XX? cost

Kris Douglas

it from I at right I be don't quarter. will fingertips, think, in but down $XX million, have my certainly it coming the

So be to it's than million. less $XX going

John Pawlowski

Can down in for quarter drove on decline the context the XX%? the in XX%, some tenant what me. give question to retention just Last the Okay. you

Kris Douglas

around bounces quarter-to-quarter. from It Yes.

that a legacy HR, result just difference look I at between see, you we're just If HTA did portfolio. is seeing a the kind XX%. of, are legacy the as annual, we of There think, under We was lower some years with of that playing and over things kind the we the HTA was sale going through. frankly, some saw scores last that of few distraction through their customer the service that, team

about team that impacting customer showing very experience service sees I that lower that that's the But used positive that's going that an providing. some retention. and opportunity of also and of kind that they're to So think in excited of our we're

from retention would I improving look we XX%, as -- end XX% forward, the see ratio. XX% closer that terms that low of to or that say So up to in of that we XX%-plus

Operator

Thank you.

no We the on questions have line. further

like I'd any So CEO, to to back final remarks. hand Meredith, it the Todd for

Todd Meredith

some see everybody, for Thank Thanks, you. day. great us you We'll a next of you. Thank everybody, And some today. joining at week. conferences have

Operator

call. does This you. conclude Thank today's

disconnect have lines, now lovely may You your and a day.

Healthcare Realty Trust (HR) 1 Mar 232022 Q4 Earnings call transcript