Healthcare Realty (HR) Q2 FFO In Line, Revenues Surpass
Healthcare Realty Trust Inc. HR – a real estate investment trust (“REIT”) – reported second-quarter 2016 normalized funds from operations (“FFO”) of 42 cents per share that came in line with the Zacks Consensus Estimate and increased 2 cents from a year ago.
Results reflect a growth in same store revenue though operating expenses increased.
Total revenue of $102.6 million in the quarter grew 6.1% from the prior-year period and exceeded the Zacks Consensus Estimate of $101.7 million.
Inside the Headlines
Same store revenue improved 4.0%, operating expenses increased 3.4% and finally same store net operating income (“NOI”) increased 4.3% for the trailing 12-month period ended Jun 30, 2016. Further, same store revenue per average occupied square foot grew 3.3% over the prior year while average same store occupancy advanced 60 basis points (bps) from the year-ago quarter to 89.9%.
Healthcare Realty’s leasing activity included 137 leases and aggregated 418,000 square feet of space. This comprised 260,000 square feet renewals and 158,000 square feet new and expansion leases.
For second-quarter 2016, in the company’s same-store multi-tenant portfolio, contractual rent increases averaged 2.9%; while cash leasing spreads were 6.3% on 228,000 square feet renewed. Moreover, tenant retention was 81.2% and the average yield on renewed leases climbed 90 bps.
During the second quarter, the company sold 2.4 million shares through the at-the-market (ATM) program and scooped up $74.9 million in net proceeds. Finally, Healthcare Realty exited the quarter with cash and cash equivalents of $9.0 million, up from $4.1 million at prior-year end.
Dividend Update
On Aug 2, 2016, Healthcare Realty declared a quarterly dividend of 30 cents per share. This dividend is payable on Aug 31 to stockholders of record as of Aug 17 and is equivalent to 71.4% of normalized FFO per share.
Our Take
Rising national healthcare expenditure and an expected rise in demand for medical office buildings augurs well for Healthcare Realty. But strong competition and an anticipated rise in interest rates is projected to curtail its growth momentum in the near term.
Healthcare Realty currently has a Zacks Rank #4 (Sell).
Investors interested in the REIT industry may consider better-ranked stocks like CoreSite Realty Corporation COR, Mack-Cali Realty Corp. CLI and W. P. Carey Inc. WPC. Each of these stocks carries a Zacks Rank #2 (Buy).
HEALTHCARE RLTY Price, Consensus and EPS Surprise
HEALTHCARE RLTY Price, Consensus and EPS Surprise | HEALTHCARE RLTY Quote
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.
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