Healthcare Realty Beats Estimates

Zacks

Healthcare Realty Trust Inc. (HR), a real estate investment trust (:REIT), reported first quarter 2012 funds from operations (:FFO) of $27.3 million or 35 cents per share compared with $14.4 million or 21 cents per share in the year-earlier quarter. Funds from operations, a widely accepted and reported measure of REIT’s performance, is derived by adding depreciation, amortization and other non-cash expenses to net income.

Excluding the non-recurring items, FFO in the reported quarter stood at $25.9 million or 33 cents per share. The recurring FFO per share beat the Zacks Consensus Estimate by 4 cents.

For first quarter 2012, Healthcare Realty reported funds available for distribution (FAD) of $28.0 million or 36 cents per share. Funds available for distribution, a measure to ascertain a REIT’s ability to generate cash, is derived by subtracting straight-line rent and non-recurring real estate expenses from funds from operations. The recurring FAD stood at $26.6 million or 34 cents per share.

Total revenues during the reported quarter were $78.1 million compared with $72.0 million in the year-earlier quarter. Total revenues during the quarter marginally exceeded the Zacks Consensus Estimate of $77 million.

Total multi-tenant same facility net operating income (:NOI) increased 6.1% year over year in the quarter. For the total portfolio, same-facility NOI growth was 2.9% in the quarter compared to the year-ago period. The same facility portfolio recorded an occupancy level of 91% at quarter-end.

NOI for company’s stabilizing properties (“SIP”) improved by approximately $500,000 compared with the previous quarter. Occupancy level increased to 28% on year-over-year basis.

Healthcare Realty's SIP portfolio’s leased properties increased to 46% sequentially. The company’s overall development portfolio is now 60% leased, including the properties that the company is funding through construction loans.

The company's multi-tenant properties exhibited an uptrend in the first quarter, backed by strong weighted average increase in lease rates. While contractual rates for in-place leases inched up 3.3%, average increase in the rate on newly executed leases hovered around 1.8%.

During the reported quarter, the company invested $37.4 million for acquiring two properties worth $21.3 million and $16.1 million for other construction activities. The company completed the construction of one on-campus building during the quarter and shifted it to the SIP portfolio.

At the end of the quarter, the company had cash and cash equivalents of $6.6 million and long-term debt of $1.4 billion. Healthcare Realty declared a dividend of 30 cents per share in the reported quarter. The dividend is equivalent to 88% of normalized FAD.

Healthcare Realty expects its SIP properties to be leased more than 50% by the second half of the year.

Healthcare Realty currently has a Zacks #2 Rank, which translates into a short-term Buy rating. We maintain our long-term Neutral recommendation on the stock. One of its competitors, HCP Inc. (HCP) carries a Zacks #3 Rank, signifying short-term Hold rating.

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