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HR

Healthcare Realty Trust Inc (HR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered stable top-line and operational upside: revenue of $297.8M grew sequentially and beat S&P Global consensus by ~$7M, while GAAP EPS of $(0.17) missed; Normalized FFO/share held at $0.41 and same‑store cash NOI growth accelerated to 5.4% . Revenue est: $290.4M*, EPS est: $(0.015)*.
  • Operating momentum improved: same‑store occupancy rose 44 bps q/q to 91.1%, tenant retention reached 88.6% (six‑year high), and cash leasing spreads were +3.9%; normalized G&A fell to $9.7M as cost actions flowed through .
  • Balance sheet de‑risking continued: YTD sales reached $486M at a 6.5% blended cap; ~$700M under contract/LOI; run‑rate Net Debt/Adj. EBITDA fell to 5.8x with year‑end target 5.4–5.7x .
  • Guidance mix shift: Low end of Normalized FFO/share raised to $1.59–$1.61; same‑store cash NOI growth raised to 4.00–4.75%. GAAP EPS and NAREIT FFO ranges were lowered, reflecting non‑cash/transaction effects and portfolio pruning .
  • Potential stock catalysts: closing the ~$700M disposition pipeline (pricing and timing), continued occupancy gains and leasing spreads, and execution on redevelopment (9–12% cash yields) and G&A trajectory to ~$45M in 2026 .

What Went Well and What Went Wrong

  • What Went Well

    • “We are quickly shifting from a company that fell short of expectations to a company that is exceeding them… Normalized FFO was $0.41 per share. We raised both our FFO and same‑store guidance.” – CEO Pete Scott .
    • Strong leasing: 1.6M sq ft executed; 441k new leases; tenant retention 88.6%; average escalator 3.1%; same‑store occupancy to 91.1% .
    • Balance sheet and market tailwinds: run‑rate Net Debt/Adj. EBITDA at 5.8x; lending environment improving with bank loan rates in the “high 4s,” supporting asset demand and cap rate compression .

  • What Went Wrong

    • GAAP EPS missed S&P Global consensus (actual $(0.17) vs $(0.015)), driven by non‑cash impairments and portfolio actions; GAAP EPS guidance range lowered . EPS est: $(0.015).
    • NAREIT FFO/share full‑year range reduced (1.39–1.41 from 1.42–1.46), reflecting disposition mix and portfolio repositioning timing .
    • Continued non‑cash impairments and transaction noise (e.g., impairments and gains/losses around dispositions) pressured GAAP results despite operating strength .

Financial Results

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus
Revenues ($M)$315.4 $297.5 $297.8 $290.4*
GAAP Diluted EPS ($)$(0.26) $(0.45) $(0.17) $(0.015)*
NAREIT FFO/share (diluted) ($)$0.21 $0.34 $0.34 —
Normalized FFO/share (diluted) ($)$0.39 $0.41 $0.41 —
Same‑Store Cash NOI Margin (%)63.1% 64.8% 63.9% —
Same‑Store Occupancy (%)90.2% 90.7% 91.1% —
FAD ($M)$106.9 $115.4 $116.9 —
  • S&P Global estimates marked with *. Values retrieved from S&P Global.

Leasing & Portfolio KPIs

KPIQ2 2025Q3 2025
Total lease executions (sq ft)1.5M 1.6M
New lease executions (sq ft)452k 441k
Tenant retention (%)83% 88.6%
Cash leasing spreads (%)+3.3% +3.9%
Avg annual escalator (%)3.2% 3.1%
WALT (years)5.3 5.8

Balance Sheet & Capital

  • Run‑rate Net Debt/Adj. EBITDA: 6.0x (Q2) → 5.8x (Q3); year‑end target 5.4–5.7x .
  • YTD dispositions: $486M at a blended 6.5% cap; ~$700M under contract/LOI .
  • Liquidity: ~$1.3B through October; $151M 2027 term loan repaid in October .
  • Dividend: $0.24/share payable Nov 21, 2025 (record Nov 11) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPS ($)FY2025$(0.78) – $(0.73) $(0.86) – $(0.81) Lowered
NAREIT FFO/share ($)FY2025$1.42 – $1.46 $1.39 – $1.41 Lowered
Normalized FFO/share ($)FY2025$1.57 – $1.61 $1.59 – $1.61 Raised low end
Same‑Store Cash NOI growth (%)FY20253.25% – 4.00% 4.00% – 4.75% Raised
Normalized G&A ($M)FY202548 – 52 46 – 49 Lowered
Dispositions cash yield (%)FY20256.8% – 7.3% 6.5% – 7.0% Improved pricing
Asset sales & JV contributions ($M)FY2025800 – 1,000 800 – 1,000 Maintained
Dividend ($/share)Q4 2025 pay date—$0.24 (Nov 21) Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑2 and Q‑1)Current Period (Q3 2025)Trend
Dispositions & cap ratesQ2: YTD sales $210.5M; $700M under LOI . Q1: $28M sales; portfolio pruning beginning .YTD $486M @ 6.5% blended cap; ~$700M under contract/LOI; midpoint disposition cap rate lowered by 25 bps as market tightens .Accelerating, pricing firmer
LeverageRun‑rate Net Debt/Adj. EBITDA: 6.4x (Q1) → 6.0x (Q2) .5.8x with YE target 5.4–5.7x .Improving
Health system leasing mixQ2 health system leasing ~33% .~48–50% of leasing; pipeline 1.1M sq ft; fundamentals favorable .Increasing
G&A and platformQ2 restructuring; normalized G&A $13.2M; new asset mgmt hires .Normalized G&A $9.7M; targeting ~$45M in 2026 .Downward trajectory
RedevelopmentLimited detail in Q1/Q2.5 new redevelopments (~$60M budget), 9–12% cash yields; two developments ~60% leased; ~$8M stabilized NOI from developments .Building pipeline
Capital markets—Bank liquidity “way up”; bank loan rates in “high 4s” aiding buyer appetite .Supportive

Management Commentary

  • Strategy and momentum: “We followed up a win in the second quarter with a win in the third quarter… We are quickly shifting… to a company that is exceeding [expectations].” – Pete Scott, CEO .
  • Market/pricing: “The transaction market for outpatient medical is heating up… driving cap rate compression. We reduced the midpoint of the expected cap rate on our dispositions by 25 bps.” – Pete Scott .
  • Portfolio optimization: “Two‑thirds of our dispositions… are non‑core assets… blended cap 7.25%. The other one‑third… core dispositions… blended cap 5.75%.” – Pete Scott .
  • Operating execution: “Normalized FFO/share up 5% y/y to $0.41 and same‑store cash NOI growth of 5.4%… normalized G&A of $9.7M… clear line of sight to $45M G&A in 2026.” – Austen Helfrich, CFO .

Q&A Highlights

  • Disposition mix and pricing: Remaining deals skew more to value‑add and some legacy office; cap rates may be higher versus earlier closings, but private bid and health‑system demand remain strong .
  • Redevelopment impact: ~$50M incremental NOI opportunity over 3+ years; roughly half from redevelopments; adding 5–10 assets per next few quarters; redevelopments deliver over a multi‑year earn‑in .
  • Capital allocation: Authorized $1B ATM and up to $500M buybacks as normal‑course tools; no intent to issue equity at current levels; modest capacity for accretive tuck‑ins/JV growth as leverage moves mid‑5x .
  • Margins/occupancy path: Margins ~64–65%; aiming to improve over multiple years via organic leasing and expense control as absorption continues .
  • Debt markets and maturities: Monitoring strong unsecured window ahead of $600M Aug‑2026 maturity; will be opportunistic given time and spreads near lows .

Estimates Context

  • Q3 2025 vs S&P Global consensus: Revenue beat ($297.8M vs $290.4M*), GAAP EPS missed ($(0.17) vs $(0.015)), EBITDA slight beat ($174.3M vs $173.1M*). Number of estimates: EPS (6*), Revenue (8*). Target price consensus: $19.3 (10*) . Values marked with * retrieved from S&P Global.
  • Implications: Stronger operating trends and asset pricing could lift same‑store and FFO expectations; GAAP EPS likely remains noisy from impairments/transaction effects. Focus for models: same‑store growth range raised to 4.00–4.75% and normalized G&A run‑rate trajectory .

Key Takeaways for Investors

  • Operating inflection is evident: same‑store NOI growth 5.4%, rising occupancy, better leasing spreads/retention; this supports a multi‑quarter improvement narrative .
  • Portfolio pruning nearing completion: ~$700M under contract/LOI with firmer cap rates; closing these will crystallize mix/quality and ease leverage into mid‑5x .
  • Guidance quality improved where it matters for operations: Normalized FFO low end and same‑store growth raised; monitor GAAP/NAREIT FFO drag from non‑cash/transaction items .
  • Redevelopment is a visible value lever (9–12% cash yields) with ~$8M near‑term stabilized NOI from two developments and additional ~$8M from five new projects over time .
  • Cost discipline gaining traction: normalized G&A fell to $9.7M; credible line‑of‑sight to ~$45M in 2026 supports margin and FAD durability .
  • Watch external growth optionality: modest balance sheet capacity plus JV pathways; no equity issuance anticipated at current valuation; execution discipline emphasized .
  • Near‑term catalysts: disposition closings (pricing/timing), continued occupancy gains, 2026 refinancing approach in a benign spread backdrop, and incremental guidance updates.

References:

  • Q3 2025 press release and supplemental (Form 8‑K): .
  • Q3 2025 earnings call transcript: .
  • Q2 2025 press release (trend): .
  • Q1 2025 press release (trend): .

Notes: S&P Global consensus values marked with * and “Values retrieved from S&P Global.”