Earnings call transcript Q1 2023

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Operator

Hello, everyone, and welcome to Healthcare Realty Trust First Quarter Earnings Release and Conference Call. My name is Charlie and I'll be coordinating the call today.

You will have the opportunity to ask questions at the end of the presentation. [Operator Instructions]

I will now hand over to our host, Ron Hubbard, VP of Investor Relations to begin. ahead. go please Ron,

Ron Hubbard

Thanks, quarter joining XXXX Charlie. Healthcare today Realty's first earnings everyone, you, us for for Thank conference call.

year the the Form for ended XX, Hull. and filed risks discussed March update with of except for forward-looking XX-K statements of on call. filed Douglas uncertainties. discussed represent in contained These SEC SEC the me call the involve and may Todd the matters the XX, are statements this in Joining contain to XX-K this as call The the December Meredith, forward-looking within, and the Form company's forward-looking Rob specifically the estimates, the A are for XXXX, that that ended more judgment this reminder company material. company's the date historical obligation information today XXXX. disclaims with These Kris assumptions, quarter any risks

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

to Todd. now I'll the call over turn

Todd Meredith

quarter. XXXX everyone, a Realty earnings for and this first Ron, really quarter morning had you, thank us Healthcare joining you, Thank solid first for call. our

with portfolio results. durable building We're on foundation our to growth. expected, of foundation operating initiatives the As is strategic FFO performance accelerate our this robust from two steady

momentum. XXXX a momentum moving First internal Converting leasing occupancy elevate later this tremendous and will over multiyear generating is to period. into year gains this our team that's our growth

to a external on focused growth. return we're Second,

that initiatives of several accretive We and capital drive growth. are will formation external capital cost lower working on our

combined the sustain line with foundation investors expect portfolio, and initiatives from growth two sector. our expect the from bottom MOB these We well beyond pace to of boost reliable low-risk the performance our

We see rising to reporting services bolstered of services for are a is health growth in outpatient per X% is X% FFO potential and to by health share XXXX. This for path demand that clear generating long-term accelerating. care demand systems

Healthcare initiatives. near-term months in and We that inflation rates could outlook our market interest tailwinds lower also tailwinds strengthen ahead. growth the including expectations strategic for Realty's short-term post-merger well with These see align softening

of much HTA. of year, the outlined last benefits we've For the powerful the with combination

First, through we've increased and elevating And our diversification internal growth expanded safety that market we're scale, growth scale, portfolio second, relationships amplify efficiency. and and external concentrated clusters drivers. through

realize combination takes to value significant the a this. to X note of important that years like to It's X it full

We significant than in well a and our year. less are on results way, we have seen

And gains. In we've leverage Within full the to We gains deal our first sales time in we in leasing internal and This increase our our occupancy external Rob will network through in our a we've lead portfolio. organized you drive will occupancy to walk the team significant to few broker how minutes, flow. G&A fully of asset we team of market. mobilized over synergies half billion expected. $X merger, challenging a successfully months JVs realized completed X and the our leasing the

X% in to This basis XXXX to we points X% We And basis beyond. multi-tenant range same-store be XXXX even of to NOI absorption points. to this absorption to to stronger double XXXX. growth a XXX XXX expect and could in looking expect accelerate at

basis In financing rates a witnessed for short move by XX much we're MOBs. in trends debt market seeing Rob as cap lower months, as will also share of the couple favorable the we points.

Xs. the are We into increasingly rates cap seeing move

retention will Kris revenue our cash well. occupancy you through drivers, spreads, with performance embedded including also He company's our as the tenant I'll walk Kris baseline circle that the share steady escalators, how remarks our our for XXXX solid leasing tracking portfolio will is you a and guidance XXXX. spend minutes outlook. and highlight in Rob, capital extremely initiatives Kris After gains. Next, that our from FFO back few growth a serves external will will formation reignite XXXX on to

With Kris. that, turn it over to I'll

Kris Douglas

revenue strong and a return Operating expenses X.X% in by Quarterly operating fundamentals X.X%, margin grew NOI the quarterly were to expansion first Todd. Thanks, quarter. increased same-store X.X%, marking by year-over-year.

Annual the occupancy X.X at that growth. in-place We and feet gains million contractual of increases to on X.X% are X.X%. accelerate quarter growth by had commenced averaged of the future square in maximizing increases revenue led multi-tenant contractual focused rent And X.X%. leases

properties over this leasing just spreads escalators. the multi-tenant or next. into for again see portfolio a later a absorption greater. once in quarter Year-over-year and leases notably, growth opportunity X.X% meaningful XX% Cash occupancy above averaged occupancy with XX over XX%. in-place total same-store spread NOI And year had for X% of points XX% basis to the accelerating We of and increased

Rob discuss for absorption. indicators in future in more increases As significant will detail, we're seeing leading

X%, benefit Operating X.X% property the next Trailing is from the year-over-year X.X% quarters. XX-month expense net of These for fourth of full from quarter expenses, quarter. growth appeals at appeals grew in down year expense successful which the several comparisons recoveries, tax benefited in operating will for XXXX.

show power to pressure growth of accelerate easing, the growth. will inflationary of signs and allow forward, Looking absorption rent further NOI future which

the and quarter lower the trended or XX% payout $XX.X of FAD Maintenance for CapEx XX% for the in months. to was XX The NOI. million first trailing XX.X% quarter ratio

XXXX payout we FAD absorption. to as the in ratio positive in be in XXs high invest the expect We

as benefit underlying moving the and of growth steady lower rates well ratio potential the We as portfolio fundamentals XXXX. into expect payout to for interest the

almost X% variable ratio. a in points in basis For rates interest payout in reduction improvement our example, results XXX

expense primarily rate debt. rate share quarter. the FFO per was Normalized share of from for on $X.XX interest fourth quarter variable run per in the This $X.XX the higher to first down $X.XX was due

we facilities to expect of million fully quarter addition, sell for year. HCA two later to first this items. we reserved million related $X.X that revenue $X.X skilled three legacy In nursing

legacy Another $XXX,XXX projects. quarter in range two impact reserves first on interest Houston contribution assumes revenue remobilized $X.XXX $X.XX share The the from share. ACA The of The reflects of was mezzanine project the per in construction normalized annual to guidance is income paused but May. per no revenue loan. in $X.XX FFO these XXXX a

this We asset ultimate and end sales placed repayment, impact expect run of and Houston skilled less from to the service construction by facilities $XXX later the million annual to With estimated loan and the be nursing of be the the proceeds $X.XX per completed share. construction sold expected more into to year. or be rate XXXX three project than is

reinvestment time back not range proceeds our moving lower. guidance Above included will the from from this times help when The NOI within X.X expected to 'XX are EBITDA also is in XXXX target of benefit range. to quarter leverage drive into to the received X.X reduce times. growth proceeds to The X same-store debt average

As same-store basis a in points. thumb, EBITDA rule over of to every X% by debt NOI growth X reduces

reduce X/X growth NOI For example, of year X% would a leverage over turn. by next

few for suggest interest gains curve the tailwind external and in a second decline our year. of to rates, forward into lower months share growth. next half the We 'XX. interest a may improving path X% see and SOFR from also rates modestly This rise even then expected growth 'XX and The rates. see without occupancy we X% expanded would But expected augment next over per

our and turn color more investment activities. it over on now I'll leasing to Rob for

Rob Hull

Thanks, Kris.

technology that Healthcare time first the marked set XXXX full and common a under Realty's incentive of plans, quarter practices, First team coverage. operated brokerage leasing of

merger the HTA's the last incentive on platform team HTA first top the the talent year, model. from our year, the leasing placed closing to busy portfolio was our onboarded From legacy our at them team into end We leasing through and program. of the our of integrating

on now we called footage transitioning over same maximize are best on XX square as the and of speed HTA Realty's the teams lease existing the brokerage third-party with To platform balance we CRM our relationships. will of teams using brokerage to execution, all process. half VTS, documentation lease and brought also new our the that efficiency These have legacy markets. streamlined properties to their Healthcare lease we approximately in We identified

our in XX% the XXX is tenant properties. the first increase early to to tours quarter. for quarter began Prospective leasing up significant during a HR in an A same integration model to that work quarter, during up increased of tours, XX% this of XX% over year. our beginning the were over legacy flow of more activity, first result from through. through indicator versus are time come our properties benefits The fourth The point over of leasing HTA the legacy

resulting and on absorption becoming tours, for expectations better of visibility timing clear. the leases new are With

time. to takes Our to the leasing a lease. tour XX% shows data And The convert new about months to an it X also that XX% to indicate executed analytics leases average a converted once tours of a a us new late and pickup for occupancy the first in translate X it months take to tells tours This this is quarter signed, occupancy. tenant into higher to our takes approximately lease year XXXX. should of

are X.X% annual XXX expect X% two portfolio. add growth absorption our net to activity to XX.X comes quarters, year. next gains multi-tenant X to of XXX maintaining consistent baseline million the these annual NOI The effect basis By This points our projections. square past generate basis to approximately foot we with from to points is expected

We slides on XX. Pages new have these in our XX presentation on and illustrated points investor

XXXX. slower continued improving with of further systems. experiencing demand shows outpatient from visits remain positive drivers and our of tour times that clinic-based to increased On buildings. are there along supportive profit surgical outpatient economic delivery a some to settings. stabilizing the resilient been tenant core activity we and even reported They read-throughs demand margins correlate were labor history costs plans the have with HTA outpatient range X% These during in year-over-year X% to growth. the X% Recently, with up in that medical also moderation procedures picture, slowing, broader hospital reported invest economy trends in compared in

equity safety both to MOB looking MOBs. of the market stability to We debt is strong. investors the Shifting reallocate and for investment. Demand see and

shifted XX institutional the cap as financing MOB shifted XX lower has fresh we down the debt market into appears One, Wells points rates to debt months. Capital by the equity allocations. couple On have last in, such to to Fifth of larger the side, All in growing basis in with lenders seeing and This, space, the mid-Xs. are interest Third with returned coupled Fargo

now leverage Xs. joint expanded opportunities are increasing accelerate growth low our MOBs in to to see volume. tier the venture interest, Upper external we mid-Xs trading With to relationships this

recent plans capital with continues redevelopment increasing Our new year. examples, the market a reached our growth This a These are out relationships Dallas. map relationships. and system acquisition like increased to need Phoenix, health building for services. rich for the opportunities. markets for accelerate next the will greater of road are outpatient that few facilities deeper development meet opportunities Raleigh year, occupancy hospital pipeline a Health outpatient In we to systems and clustered growing formulating and are discuss for grow to new scale gains -- NOI source Houston, demand in

Additionally, accelerated for for well along The share. scale strong system these with us of and greater our expanding per demand will increases in combination MOBs external drive health FFO meaningful growth. two relationships, positions

Now I'll turn over to it back Todd.

Todd Meredith

partners. strength of note industry the deep the Healthcare merger platform Rob. the among interest recognize scale of of sparked institutional Thank the to our and expertise, relationships. value capital premium important operating you, our strong Realty's It's They

are blue-chip and who've We their rapidly capital earmarked scale meeting exposure. to MOBs want for with investors

the million X $XXX between one see to to and with $X joint or Over intend asset gross X billion. we ventures months, values next more

for investment commitments We also sizable expect go-forward secure capital. to

from use seed of robust proceeds commitments fund opportunities. portfolios these to will We investment our alongside capital pipeline

see will ventures outpatient our a to in volume and burgeoning to diversify gross exceed potential broad in sources investment expand new and We for range capital our XXXX billion the ability These from invest there. $X of expand our trends.

Realty. for As we look ahead, Healthcare critical point inflection as we a view XXXX

per clear X%. a to sustain In to higher FFO above We to norms. necessary MOB growth FFO well are sector X% of share XXXX, the we investing growth path resources see annual carefully

tailwinds see growth our near-term could that also and lower short-term We interest outlook, including softening strengthen rates. inflation

our working XXXX. part are pull over potential to growth We many execute the eager with as the We're of weeks, we'll Day look in including strategy. an forward to latter engage next NAREIT. hosting everyone We dates, on few of we and you Investor at further

to ready now we're Charlie, operator, period. that, question-and-answer With to the shift

Operator

comes [Operator you. from ahead. Thank question Michael, first is open. Instructions] your Michael of Griffin Our Please line Citi. go

Nick Joseph

you funding external Obviously, kind It's shareholders actually earnings here the How deals, do and But cost accretive that can Todd, Nick thinking fluctuate. for of share per seeding equity HR from the of are about given where JVs investments. Michael. just is actually think you today? about how those getting Joseph robust driving accretion with mentioned you pipeline of the growth? from

Todd Meredith

Sure.

how we're thinking would as cap with being said, clearly, from think about one. I of that portfolio about. the really that basis view come our equity the it, thinking number seed basis that's rates the not today, you that, we cost formation really We're

we that so moving that an I as see as And in direction Rob cap lower. attractive rates described and shifting obviously, both been both

and structures And then a structures, JV side creating format, their return returns, is between therefore, partners' your spread levels. I two promote expertise flip a would earn fee leveraging using those think obviously through the enhancing to the capital, investing enhance that

Nick Joseph

of opportunities? think you buybacks about balance versus pipeline investment that do how And then share or

Todd Meredith

I have -- to redevelopment, work just JV do ongoing proceeds balance a on return the share hand. process, are expect would And or of what buyback year, even assets, new putting for whether investments, higher-yielding balance at this time what's you naturally, I of capital certainly you're selling look if we which those return at they're year, a in look next Sure. year-to-year the we of whether opportunities certainly, us certainly the that sheet sell in at think acquisitions. mean, would front versus that's when development, in to we acquisitions, we an

lot opportunities of think would focused we we're to But those. growth look than that's there's opportunity certainly, on a more we at with all table external times. think be certainly certainly But So share on buyback. up the lining at the we all

Operator

is ahead. Sanabria Please question line BMO comes open. next Our from of Juan Markets. Capital go your Juan,

Juan Sanabria

or unpack joint feel interest target potential investing ventures? venture you the to versus investments range mentioned. joint the And on hoping those sheet? balance would stake your Just potential with of How in think opportunities you ventures about in we growing how the joint [Indiscernible] do

Todd Meredith

Sure.

the Teachers. express I structure case, Investment look think you XX-XX, we're with And that frame obviously at we I to But we XX-XX In in where JV have as Nuveen two some the it's to think CBRE then would what XX. Management, a exactly early or in. have today maybe look an like. place we're goalposts one can with

potential subject we're lot partners, potential in how So that those we range, of folks. are probably it groups. about, think but Obviously, good talking a it's obviously structure goalpost something to with to to including those

Sorry, what second your question there? was

Juan Sanabria

-- the Just have conflicts, going Yes. you're I to mean, -- you had two

Todd Meredith

been like cost that grand in isn't I Yes. We've two I think, to the our very small looking grow create in JVs conflict, We're point mean diversify that, now where a obviously, here out. where of fairly are obviously, have the today of for tangled scheme lean you into that, to of web be. things. capital careful as always we JVs us a we'd to quite that's balance. not it

REITs ways have or leverage of historic than that to norms, for lower multiples external to certainly a NAV seen discounts capital. I looking lot think that through with

for think continue alongside evaluate would to at we balance all investing I of sheet look us, that. and

will all be So that. of function a balancing it

we'll of -- think that balance lean sheet And think and cost I lot should that. of view deliver for is JV appropriate our time, to we'll that external is sense, of have into that. a shareholders. we over runway leaning I capital a structure now, obviously, on value the And into can the makes lot

strategy interesting market as hospital-centric the years, different sheet we if that of continuing two we I complement imperatives of lots styles that our for heavily we've very of JVs. focused would expand balance there's our but around these on before, we've And always clusters upon each JVs would of and will, be themes. sort think investment other you with date other. that in The careful how theses to these we've and terms invest through done And would we scale focused current balance have. areas or done And I think already that in JVs directives, been described to the

that very So I we balance carefully. to continue will think

Juan Sanabria

on quarter took results portfolio quarter, and loan February. in and that two, write-downs just from what the and mezz -- those the And then I the fourth changed on guess, you the this the

Just the there. curious change on

Kris Douglas

Yes.

specifically -- assets looking on were those term. we the already long to SNFs, We're the looking those. weren't at On that own exiting

This over operator, new owner. quarter, to kind are terms of transfer change the the operations what new of a is needs currently to in operations the just where of and a happen

a And reserves we to so for accounting go was those go with result, they're kind felt prudent until cash it as sold. of to those

that mentioned mezz, the in did project remarks quarter. in did pause it the on first we a that prepared my have And --

that So no in done at work point being was time.

So has raised of is developer The that process additional was equity the the since change. remobilizing. in and

project look the of will So we circumstances was the here later cash be that year. the and finalized the again, there. like this it just going quarter, reserving amount appropriate completed does and in off once to But felt first that facts and plan based

conservative think but impact. did a in the I long-term X.X% these -- the mezz So only picture of is We quarter, strategy. the are our SNFs, keep have, about weren't has they part mind annual here the this and which to position that in take loans that only big we

and repayment be to mentioned, proceeds I of less. we expect recognized ultimate the are As the once the from sale the impact loan,

So overall, pretty minimal.

Operator

comes Nick, ahead. Yulico is question line from your go Scotiabank. Please of next Our Nick open.

Nick Yulico

of guidance. wanted together to the a just of tie couple pieces I

standpoint, for the a The throughout you in is the you're end basis, $X.XX. quarter. first normalized about occupancy yet growth the did low FFO $X.XX So talking year. on year And FFO for

base. of sequential the improve expected what little the sequentially, better? be. quarter first the just trying High-end off would bit growth occupancy what's preventing be much offset growth. But bit FFO not understand to to really If a little is modest has -- to have You a

Todd Meredith

Nick, this is Todd.

of on XX the occupancy build the I to that's to point been for really nicely emphasize think a is improvement year-over-year think there we really team to a We moving is remarks. I currently, put see But real basis in beginning have prepared we together that want key along Rob's been the really focusing motivate really, up beginning half. ramping at through little We're in second while. again, And pickup described, at and came last until what really the as months the a occupancy. about of lot building and together side. hard on year Rob into leasing, second and tours, the and A that's went that that work momentum of year. half XX the really tour mobilize see of you see that the in read

gains So year, we what occupancy modest this but year. to see compared next do see fairly steady we

Next year, points. basis to doubling, to XXX points we going that see XXX basis

So kind a we've But year, this into given next it's the the a SS on year year. side. X% guidance acceleration XXXX We're of of this NOI really same-store moving later occupancy but to higher X% again, building end of now, lower level to of X.X%. at X.X% NOI, story to

really, I that's think, part. the So important

Nick Yulico

follow-up, wasn't the well as I assumptions acquisitions growth, year FFO there's to -- drive built I for rate and you're potential some any variable that if if well? next X% year, impacting Just of there next to growth the going to curve a X% clear as that's view any to level back on going just SOFR taking be was into wanted

Todd Meredith

Yes.

in the throughout to we expect, certainly be you ramping as But year. expect build 'XX. On that's a front, up the acquisition would

far less in a 'XX of contribution in years. it's be than it So would subsequent

looking modest that or So at. guidance we're looking piece that that fairly it's range that we're at outlook a of

just that Most say would related same that I of talked about. it's higher the to store, less growth same-store X% than that. the So I far of is

do want on -- Kris, you the that? then on So curve, to SOFR talk and

Kris Douglas

would showing a plays lot of bit, depending out. kind benefit. that SOFR not really a on of the on it, really volatility. hit of Right that not X% where it's I prepared in be X%. Yes. remarks into But had That now, my top into a no, that we're a additive playing it's of ultimate little playing that's as know, curve we lot -- to on

is of we're potential strong what to predicting. do tailwinds forward and to rates point just curve the the is from kind is see So interest operations, trying we decline it's then some growth if core the

Operator

go Our next Steven, ahead. Steven of question open. Barclays. comes line is Please your from Valiquette

Steven Valiquette

just thinking to X was of the question to My semantics, really on that kind just color of potentially if maybe contribute some XXXX was vein but similar activity last be will new and now. bolus you're all leasing you're right the X% on how whether the FFO next a that and on in about I or just versus January targeting. of more you're could visualizing a multi-tenant 'XX? provide may I'm year on basis leases, more one. growth visualizing X% 'XX wondering Just of on of starting It's a kind maybe late you occupancy rolling much that gains picture how throughout

color Just be great. would more

Todd Meredith

Sure. That's the first bulge, one in a the fair question, will, Steven. you quarter. I would if say it's not

that definitely -- year, a really going you beginning think this the the in up shown first quarter fourth year. build, I from the more to starting build throughout of but quarter it's the materially rolling and fourth if will, in quarter

looking strong we're Obviously, number also a already history as material of And rates, increase. at seeing said, really So we're a the a on through we've seen tour conversion volume Rob spiking. April. lot

keeping continue we're building pace that seeing in over of So that the kind and up and and the course 'XX. watching of

Steven Valiquette

Xs, quick XX almost of just to on comments down And back question rates follow-up Okay. moving your kind down cap a bps. around the

that is be for small? that? any that there a would that everything Just of few it Or down whether large helpful. transactions or that, moving maybe context is driving color further of kind further kind are larger on Just on just it's are widespread

Rob Hull

say the in have terms or that Xs. across sort say and move well here would I'd a in small, deals significantly it seen of wall board longer down some or the on-campus generally say that credit that of number into I off some of has with I'd we've large Yes, recently product

mentioned. low MOBs kind the of that I trading typical some around Xs have You

gamut So that we've of trades it's pretty seen. wide a

I volume, we meaningful marks of indicative type think been but The and in we're to are are down, has in the say, starting generally we invest our having will see what that typically for I of some product portfolio. that

Todd Meredith

adding the rates hearing Rob, of just about a one was we've lowest I to And been asset. think cap recently that, single

or that was testing that X.X less million level. $XX So

some your point, it. not it's to that's just large of nature deal So some driving

I pretty board. think it's much across the

Operator

Our from Credit of your Please Tayo is next go question comes Suisse. Okusanya line Tayo, open. ahead.

Tayo Okusanya

along equity same low your questions, again, what be guess an a bit a deals on that rates I'm kind such JVs underwriter cost ones to to little cap potential those assuming today. type deal I assets surprised cost market again Just rates? work expect is any the lines could that some of sense, of in where those at and cap those of are you that just you coming generally And in Any of must debt also just of transactions. given would of for contribute

Todd Meredith

good Tayo. Yes, it's question, a

through of of people rates. what sort certainly at ahead toughest looking in and terms index quick times some we've -- of what's been underlying rise treasury rates, looking out think the I saying, is are in

all is things, think swaps, I start as the a spreads touched you're just little those come SOFR down. obviously, we bit all certainly. So out. all gap for to on had stabilize that And seeing, that plus we outlook, And

market expects. the described that the outlook people it's thinking Kris I the think right, what but directionally it's SOFR indicative exactly curve. Not are of for

more also this risk things as those are market, take mid-Xs. Hey, cap to as the rates even the and stable that equity people sizable the said, through pricing refi and mostly I in looking banks and get saying, a there's liquidity, Rob might But future. adding allocations think fresh into I little So do bit

think of Xs, So Xs out it's And the cap flush all rates take very to think I reasonable. to I where to it But is I low will back more combination a those mid things. continue think time these fall.

have work impact X.X% that we'll we're the and I not a We're that's investors for play an with thematic portfolio ideas seed tell you a here the our cap. to the kind tell us, are that what is exactly it's going whether of think that it's seed plus putting are. where with space obviously cap X% and certainly MOB think But and what right that's mind, that on -- to come really to now. may you. into portfolios, minus rates that the think direction taking I don't or in I

we we'll you think But that the continue progress as to range the further that So I that of throughout where still said right make on pricing. update indicative are range Rob year. of MOBs is

Operator

question go ahead. next line Wells your Our Please Fargo. open. Connor Siversky from of Instructions] [Operator is Connor, comes

Connor Siversky

looking some the in XXXX into with well can XXXX mean seen pickup in $X.X thinking a activity cadence? I So general that about guys presentation, external activity development as space REIT we've equipment, we and delays the handling at conjunction list from in in related the commentary to in billion in forth, of long-term the in mean, you I an opportunities acquisition development coming air HVAC consideration increase and expect so of

Rob Hull

Yes.

our that in spent at end those you of 'XX. a at the be if I the year. think really, in look starting that the that And bulk will -- of number projects of supplemental, have pipeline have we've got we this dollars we

So I would pickup. that say certainly a

what's off If of you $XXX and in look at projects, rolling new XXXX additional an on spend. today, about it's coming million as

last quarter. a That it $XX -- said $XX to million $XX that believe said year, up million We've million certainly take I we're call almost the spending quarter. a would this on I -- about

XX- lot on for out We pipeline. time in optimistic our to and development. a bullish certainly completed there and lay XX-month see frame to in are we that development of XXXX get we runway So those the started typically projects

an front. rising seeing that's where We meet certainly XXXX demand services on outpatient in labor that systems quarter, into opportunity for out outpatient the we the increases seeing we're what saw relief few the profits just on for and also in some where think I terms certainly that So these of past the as health there. to growth health is plans front they reported this continue to a are have of the surgeries system going

we down. see side the don't So really slowing development

and I think the to embarking on able the on. portfolio have adjusted more proper our that in we're about those developments we realize it's what return for returns, capitalizing being risk

Operator

from Our Mike Please Mueller of JPMorgan. comes Mike, next is go question your ahead. line open.

Mike Mueller

Yes.

next to ceding guess, large X% I doing I it year, talking surprisingly to that going later dilution to in X% you're else imply back of have use So X% work these that lined the seems acquisitions seems or JVs you're to to X%. where about would to mean, not to against growth kind year. that you're up it if assets a the behind you proceeds have of creating of the short-term lot lot right the a

can just arms on elaborate maybe And little sort So about? considerations And bit can of to just try that more X% just that so these does to contemplate any you're X%? timing around our we you get JVs talking it that. a

Todd Meredith

could But Sure. of setting. rising set in we We that And make as we're of the the watch more the lot and that develop a terms conceptually, view certainly happy certainly of a to in development, as timing we'll Rob our walk very and think ahead. I sort details quarters through in make acquisitions fair you that point opportunity JV a is see carefully. said, sense

some look will we time think you portfolio can of do at also structure, see you I -- that. if And

you're timing you gap. stage can working, that could of some that takedown If do a mitigate

good and But is we we moving investment into opportunity our say I roll structuring see that we'll But would the strong, certainly and we'll a raised we're very I can as very of mindful think that that you be about 'XX. certainly, into quickly point, as something that So JVs. that. pipeline think

Operator

ahead. Please next John, your open. Green from question is Our Instructions] comes line John Pawlowski of go [Operator Street.

John Pawlowski

wanted just to and compressing question where are. they cap believe, The rates of they back Joseph's I on capital. I your circle are cost are say you Nick to,

You're pretty at a NAV. trading big to discount

So I external can't that growth. the pounding just with table reconcile your on

curious shrinking stays where just So why cost aren't sheet? is, the your balance capital of aggressively you it

Todd Meredith

things. mean, I I Well, two think

one. assets, We are number selling some

turning we're those of commitments really assets capital JV raising external those that. from merger. the a of a structure that's combined of into the those growth mean You're using year seeing and and the to cost the terms proceeds that with about a do accretive function a us that, are that done growth. thinking in then We've JV this last last with or capital go-forward Clearly, over since of selling structure. year. And seed also I around create and portfolios lot obviously, that's

obviously, So an enhanced fees you within have that's -- and as that, various promotes return that and well. would give structures you would and

not dilutive valuation pour and at unfavorable we're a activity. at just as have out So this type equity looking

for to clearly price, stock drive be sensitive effective over that our capital. and of. clearly to better as lower into mindful to be to So that's cost we're that of JVs and that able But a leaning would a time, plan the something cost capital Obviously, well. use place of

John Pawlowski

call, But earlier this, if be? referenced share balance that you apologies in commitment the volumes I missed what HR's gross the investment could you will sheet

Todd Meredith

we at essentially would as from the it I think portfolios. being Well, look proceeds seed

proceeds with from or then significant about so outright assets to pair JV -- external structures would So either other that capital, counterparties of it after these to the leveraging we go we're really volumes obviously, amounts types seeding capital, talking of portfolios we're external use to here. is not selling

Operator

[Operator line Austin, question KeyBanc your comes Markets. go of Capital next Austin ahead. Instructions] is from Wurschmidt Please open. Our

Austin Wurschmidt

not much kind X% based, the assets? out had of metrics as same-store just growth environment specifically that's and that operating the is for playing broadly to versus merger different you previously HTA X% X% HTA across earnings you the highlighted, highlighted seeing growth of more to to something leasing you're broader improving tied the cash of How X% 'XX

Todd Meredith

I a within putting see that those to extended of both. what our that drive building Certainly, we the market of an together in the lot certainly additional on HTA about scale, ours. we lower Realty relationships strong also their the for our being multi-tenant the rationale with saw combination and our Healthcare But is extension through think power HTA. for the momentum. cluster we I HTA adding -- the portfolio, to to talked opportunity historically, markets, mean of it's occupancy had strength, combination it materially really than scale thesis, strength

services And of a rising of I what care the of about really top health specifically demand services. sentiment a Rob really talked and then on sort recovery seeing meeting think outpatient that, of of is

the play leverage would it's but also do additive occupancy I that combined all things It's the growth, have not it's driven, more all combination be the expense their metrics a place It's bigger in escalators, that in are say only it's HTA we combined to able portfolio. portfolio we're benefits the across always both scale portfolios. trying not also portfolio. across of So and purely to drive, to but whether an and leasing and containing cash those both HR spreads, just then that

Austin Wurschmidt

line early uncertainty the the kind I guys to relative did instead tour back from that part the letting provide of to you of you then year? occupancy. the extended guess, middle the guidance all for the the And occupancy line of time I historical from guess, given half faced form play from in to the what that underway recovery systems be But to periods? that tour confidence are leases just challenges pandemic, health related just highlighted gives time to forward in signed And out, through 'XX to this of the it world,

Rob Hull

Yes.

averages I out on of based at. are is think Certainly, at. there and historical looked time that line looked approximations that we the I laid we've the data data

growing seeing some ahead systems little is what that can growing that get and service go remaining of I something could So you active areas. share are and health could that. get that than their you But are go we're and right providers market now think a that, -- longer

our green by portfolio the activity kind and based out we in of into the so opportunity We what lay going health then HTA's on that that see seeing an systems. for the performance increased our and opportunity by expectations we've as occupancy today experienced of leasing XXXX. lay some model of shoots kind see the And and rolling know leasing that an to to to improved out based we as on

Operator

At session. Q&A concludes you. for the today's this back turn And therefore, CEO further questions. this we final no over to the have Thank call remarks. stage, to I would any like now

Todd Meredith

Charlie, Thank you, together growth be year. conferences, story, you we'll morning. for including and you, Investor you, our obviously, Day us upcoming later also to for this that We about but forward and NAREIT, Thank you engaging everybody. joining everybody, at with seeing thank put we're this look looking the

Operator

Thank Ladies this you concludes call. and joining. gentlemen, for today's

You may now disconnect your lines.

Healthcare Realty Trust (HR) 9 May 232023 Q1 Earnings call transcript