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Healthcare Trust of America, Inc. Reports First Quarter 2019 Earnings

SCOTTSDALE, Ariz., April 25, 2019 /PRNewswire/ -- Healthcare Trust of America, Inc. (HTA) ("HTA") announced results for the three months ended March 31, 2019.

Healthcare Trust of America, Inc. Logo. (PRNewsFoto/Healthcare Trust of America, Inc.) (PRNewsfoto/Healthcare Trust of America, In)

First Quarter 2019 Highlights

  • Net Income Attributable to Common Stockholders increased $3.6 million, to $13.4 million, compared to Q1 2018. Earnings per diluted share increased $0.01, to $0.06 per diluted share, compared to Q1 2018.
  • Funds From Operations ("FFO"), as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), was $82.9 million, or $0.40 per diluted share, for Q1 2019. Due to the adoption of Topic 842, initial direct costs are now reported in general and administrative expenses. For Q1 2018, we capitalized approximately $1.3 million of initial direct costs.
  • Normalized FFO was $83.1 million, or $0.40 per diluted share, for Q1 2019.
  • Normalized Funds Available for Distribution ("FAD") was $73.2 million for Q1 2019.
  • Same-Property Cash Net Operating Income ("NOI") increased $3.0 million, or 2.7%, to $112.4 million, compared to Q1 2018.
  • Leasing: HTA's portfolio had a leased rate of 91.8% by gross leasable area ("GLA") and an occupancy rate of 90.6% by GLA for Q1 2019. During Q1 2019, HTA executed 1.1 million square feet of GLA of new and renewal leases. Re-leasing spreads increased to 5.9% and tenant retention for the Same-Property portfolio was 86% by GLA for Q1 2019.

Balance Sheet and Capital Markets

  • Balance Sheet: HTA ended Q1 2019 with total liquidity of $1.1 billion, inclusive of $61.1 million of cash and cash equivalents, resulting in total leverage of (i) 29.3%, measured as debt less cash and cash equivalents to total capitalization, and (ii) 5.6x, measured as debt less cash and cash equivalents to Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for real estate ("Adjusted EBITDAre").
  • Stock Repurchase Plan: During Q1 2019, HTA repurchased 345,786 shares of its common stock totaling approximately $8.5 million, at an average price of $24.65 per share.

Noteworthy Q1 2019 Activities

  • Investments: In Q1 2019, HTA invested approximately $18.8 million to acquire a medical office building ("MOB") in Westport, Connecticut. In addition, as of April 25, 2019, HTA has an additional $70 million of investments that have closed or are under exclusive contract. These MOBs are located in HTA's existing key markets and will be operated by our asset management and leasing platform. Altogether, these MOBs have a year one capitalization rate of over 5.7%, excluding potential synergies from our full-service operating platform. These investments remain subject to customary closing conditions.
  • Forest Park Update: In February 2019, it was announced that HCA - Medical City Dallas will open Medical City Heart Hospital and Medical City Spine Hospital this fall on HTA's Forest Park Dallas campus. These hospitals are destination hospitals for highly specialized advanced cardiovascular and spine care consisting of the only dedicated cardiac emergency room in Dallas. In addition, HTA ended Q1 2019 with a total leased rate of approximately 93% for its Forest Park portfolio.
  • Dividends: On April 25, 2019, HTA's Board of Directors announced a quarterly cash dividend of $0.310 per share of common stock and per OP Unit. The quarterly dividend is to be paid on July 11, 2019 to stockholders of record of its common stock and holders of its OP Units on July 3, 2019.

Impact of Topic 842 Leases

  • The Financial Accounting Standards Board issued Topic 842, which was effective for HTA as of January 1, 2019. Topic 842 modifies the treatment of initial direct costs, which historically under Topic 840 have been capitalized upon meeting criteria provided for in the applicable guidance. Topic 842 also eliminates the accounting recognition of expenses paid directly by tenants and moves certain bad debt costs from expense to revenue. In Q1 2018, HTA capitalized $1.3 million of initial direct leasing costs that would now be expensed. In addition, HTA recognized $3.6 million of tenant paid property taxes in both revenues and expenses and a nominal amount of bad debt costs recognized in expenses.

2019 Guidance
For 2019, HTA reaffirms the following guidance ranges (in millions, except per share data):



Annual Expectations



Low

to

High

Net income attributable to common stockholders per share


$0.33


$0.36






Same-Property Cash NOI


2.0%


3.0%






FFO per share, as defined by NAREIT


$1.61


$1.66






Normalized FFO per share


$1.62


$1.67

About Healthcare Trust of America, Inc.
Healthcare Trust of America, Inc. (HTA) is the largest dedicated owner and operator of MOBs in the United States, comprising approximately 23.2 million square feet of GLA, with $6.8 billion invested primarily in MOBs.  HTA provides real estate infrastructure for the integrated delivery of healthcare services in highly-desirable locations.  Investments are targeted to build critical mass in 20 to 25 leading gateway markets that generally have leading university and medical institutions, which translates to superior demographics, high-quality graduates, intellectual talent and job growth.  The strategic markets HTA invests in support a strong, long-term demand for quality medical office space.  HTA utilizes an integrated asset management platform consisting of on-site leasing, property management, engineering and building services, and development capabilities to create complete, state of the art facilities in each market.  This drives efficiencies, strong tenant and health system relationships, and strategic partnerships that result in high levels of tenant retention, rental growth and long-term value creation.  Headquartered in Scottsdale, Arizona, HTA has developed a national brand with dedicated relationships at the local level.

Founded in 2006 and listed on the New York Stock Exchange in 2012, HTA has produced attractive returns for its stockholders that have outperformed the S&P 500 and US REIT indices.  More information about HTA can be found on the Company's Website (www.htareit.com), Facebook, LinkedIn and Twitter.

Forward-Looking Language
This press release contains certain forward-looking statements with respect to HTA.  Forward-looking statements are statements that are not descriptions of historical facts and include statements regarding management's intentions, beliefs, expectations, plans or predictions of the future, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Because such statements include risks, uncertainties and contingencies, actual results may differ materially and in adverse ways from those expressed or implied by such forward-looking statements.  These risks, uncertainties and contingencies include, without limitation, the following: changes in economic conditions generally and the real estate market specifically; legislative and regulatory changes, including changes to laws governing the taxation of REITs and changes to laws governing the healthcare industry; the availability of capital; changes in interest rates; competition in the real estate industry; the supply and demand for operating properties in our proposed market areas; changes in accounting principles generally accepted in the United States of America; policies and guidelines applicable to REITs; the availability of properties to acquire; and the availability of financing.  Additional information concerning us and our business, including additional factors that could materially and adversely affect our financial results, include, without limitation, the risks described under Part I, Item 1A - Risk Factors, in our 2018 Annual Report on Form 10-K and in our filings with the SEC.

Conference Call
HTA will host a conference call and webcast on Friday, April 26, 2019 at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time) to review its financial performance and operating results for the three months ended March 31, 2019.

Conference Call and Webcast Details:
Domestic Dial-In Number: (877) 507-6265
International Dial-In Number: (412) 902-6633
Canada Dial-In Number: (855) 669-9657
Webcast: www.htareit.com under the Investor Relations tab

Replay Conference Call Details:
Domestic Dial-In Number: (877) 344-7529
International Dial-In Number: (412) 317-0088
Canada Dial-In Number: (855) 669-9658
Conference ID: 10130087
Available April 26, 2019 (one hour after the end of the conference call) to May 26, 2019 at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time)

Financial Contact:
Robert A. Milligan
Chief Financial Officer
480.998.3478

HEALTHCARE TRUST OF AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data)

(Unaudited)



March 31, 2019


December 31, 2018

ASSETS




Real estate investments:




Land

$

483,848



$

481,871


Building and improvements

5,807,582



5,787,152


Lease intangibles

596,568



599,864


Construction in progress

6,541



4,903



6,894,539



6,873,790


Accumulated depreciation and amortization

(1,264,637)



(1,208,169)


Real estate investments, net

5,629,902



5,665,621


Investment in unconsolidated joint venture

67,072



67,172


Cash and cash equivalents

61,073



126,221


Restricted cash

7,402



7,309


Receivables and other assets, net

221,202



223,415


Right-of-use assets, net

243,446




Other intangibles, net

12,457



98,738


Total assets

$

6,242,554



$

6,188,476


LIABILITIES AND EQUITY




Liabilities:




Debt

$

2,541,619



$

2,541,232


Accounts payable and accrued liabilities

139,462



185,073


Security deposits, prepaid rent and other liabilities

42,044



59,567


Lease liabilities

197,313




Intangible liabilities, net

40,820



61,146


Total liabilities

2,961,258



2,847,018


Commitments and contingencies




Redeemable noncontrolling interests

6,520



6,544


Equity:




Preferred stock, $0.01 par value; 200,000,000 shares authorized; none issued and outstanding




Class A common stock, $0.01 par value; 1,000,000,000 shares authorized; 205,099,708 and 205,267,349 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

2,051



2,053


Additional paid-in capital

4,517,961



4,525,969


Accumulated other comprehensive (loss) income

(75)



307


Cumulative dividends in excess of earnings

(1,322,443)



(1,272,305)


Total stockholders' equity

3,197,494



3,256,024


Noncontrolling interests

77,282



78,890


Total equity

3,274,776



3,334,914


Total liabilities and equity

$

6,242,554



$

6,188,476


 

HEALTHCARE TRUST OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



Three Months Ended March 31,


2019


2018

Revenues:




Rental income

$

168,875



$

175,567


Interest and other operating income

91



94


Total revenues

168,966



175,661


Expenses:




Rental

51,468



56,022


General and administrative

11,290



8,786


Transaction

40



191


Depreciation and amortization

69,481



70,392


Interest expense

23,970



26,253


Impairment



4,606


Total expenses

156,249



166,250


Loss on sale of real estate, net

(37)




Income from unconsolidated joint venture

486



570


Other income

535



35


Net income

$

13,701



$

10,016


Net income attributable to noncontrolling interests

(261)



(214)


Net income attributable to common stockholders

$

13,440



$

9,802


Earnings per common share - basic:




Net income attributable to common stockholders

$

0.07



$

0.05


Earnings per common share - diluted:




Net income attributable to common stockholders

$

0.06



$

0.05


Weighted average common shares outstanding:




Basic

205,080



205,069


Diluted

208,999



209,177


Dividends declared per common share

$

0.310



$

0.305


 

HEALTHCARE TRUST OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Three Months Ended March 31,


2019


2018

Cash flows from operating activities:




Net income

$

13,701



$

10,016


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

66,528



68,303


Share-based compensation expense

3,389



3,507


Impairment



4,606


Income from unconsolidated joint venture

(486)



(570)


Distributions from unconsolidated joint venture

750




Loss on sale of real estate, net

37




Changes in operating assets and liabilities:




Receivables and other assets, net

2,546



9,277


Accounts payable and accrued liabilities

(40,402)



(30,780)


Prepaid rent and other liabilities

2,492



(3,479)


Net cash provided by operating activities

48,555



60,880


Cash flows from investing activities:




Investments in real estate

(18,592)



(11,887)


Development of real estate

(2,014)



(13,235)


Proceeds from the sale of real estate

1,193




Capital expenditures

(16,815)



(17,417)


Collection of real estate notes receivable

181



172


Net cash used in investing activities

(36,047)



(42,367)


Cash flows from financing activities:




Payments on secured mortgage loans

(587)



(1,598)


Security deposits



52


Repurchase and cancellation of common stock

(11,926)



(2,709)


Dividends paid

(63,686)



(62,546)


Distributions paid to noncontrolling interest of limited partners

(1,364)



(1,334)


Net cash used in financing activities

(77,563)



(68,135)


Net change in cash, cash equivalents and restricted cash

(65,055)



(49,622)


Cash, cash equivalents and restricted cash - beginning of period

133,530



118,560


Cash, cash equivalents and restricted cash - end of period

$

68,475



$

68,938


 

HEALTHCARE TRUST OF AMERICA, INC.

NOI, CASH NOI AND SAME-PROPERTY CASH NOI

(In thousands)

(Unaudited)



Three Months Ended March 31,


2019


2018

Net income

$

13,701



$

10,016


General and administrative expenses

11,290



8,786


Transaction expenses

40



191


Depreciation and amortization expense

69,481



70,392


Impairment



4,606


Interest expense

23,970



26,253


Loss on sale of real estate, net

37




Income from unconsolidated joint venture

(486)



(570)


Other income

(535)



(35)


NOI

$

117,498



$

119,639


NOI percentage growth

(1.8)

%







NOI

$

117,498



$

119,639


Straight-line rent adjustments, net

(3,258)



(3,166)


Amortization of (below) and above market leases/leasehold interests, net and other GAAP adjustments

234



99


Notes receivable interest income

(27)



(36)


Cash NOI

$

114,447



$

116,536


Acquisitions not owned/operated for all periods presented and disposed properties Cash NOI

(783)



(5,000)


Redevelopment Cash NOI

(269)



(820)


Intended for sale Cash NOI

(946)



(1,251)


Same-Property Cash NOI (1)

$

112,449



$

109,465


Same-Property Cash NOI percentage growth

2.7

%




(1) Same-Property includes 412 buildings for the three months ended March 31, 2019 and 2018.

NOI is a non-GAAP financial measure that is defined as net income or loss (computed in accordance with GAAP) before: (i) general and administrative expenses; (ii) transaction expenses; (iii) depreciation and amortization expense; (iv) impairment; (v) interest expense and net change in fair value of derivative financial instruments; (vi) gain or loss on sales of real estate; (vii) gain or loss on extinguishment of debt; (viii) income or loss from unconsolidated joint venture; and (ix) other income or expense.  HTA believes that NOI provides an accurate measure of the operating performance of its operating assets because NOI excludes certain items that are not associated with the management of its properties.  Additionally, HTA believes that NOI is a widely accepted measure of comparative operating performance of real estate investment trusts ("REITs").  However, HTA's use of the term NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount.  NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of its financial performance.  NOI should be reviewed in connection with other GAAP measurements.

Cash NOI is a non-GAAP financial measure which excludes from NOI: (i) straight-line rent adjustments; (ii) amortization of below and above market leases/leasehold interests and other GAAP adjustments; and (iii) notes receivable interest income.  Contractual base rent, contractual rent increases, contractual rent concessions and changes in occupancy or lease rates upon commencement and expiration of leases are a primary driver of HTA's revenue performance.  HTA believes that Cash NOI, which removes the impact of straight-line rent adjustments, provides another measurement of the operating performance of its operating assets.  Additionally, HTA believes that Cash NOI is a widely accepted measure of comparative operating performance of REITs.  However, HTA's use of the term Cash NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount.  Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of its financial performance.  Cash NOI should be reviewed in connection with other GAAP measurements.

To facilitate the comparison of Cash NOI between periods, HTA calculates comparable amounts for a subset of its owned and operational properties referred to as "Same-Property".  Same-Property Cash NOI excludes (i) properties which have not been owned and operated by HTA during the entire span of all periods presented and disposed properties, (ii) HTA's share of unconsolidated joint ventures, (iii) development, redevelopment and land parcels, (iv) properties intended for disposition in the near term which have (a) been approved by the Board of Directors, (b) is actively marketed for sale, and (c) an offer has been received at prices HTA would transact and the sales process is ongoing, and (v) certain non-routine items.  Same-Property Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of its financial performance.  Same-Property Cash NOI should be reviewed in connection with other GAAP measurements.

HEALTHCARE TRUST OF AMERICA, INC.

FFO, NORMALIZED FFO AND NORMALIZED FAD

(In thousands, except per share data)

(Unaudited)



Three Months Ended March 31,


2019


2018

Net income attributable to common stockholders

$

13,440



$

9,802


Depreciation and amortization expense related to investments in real estate

68,926



69,856


Loss on sale of real estate, net

37




Impairment



4,606


Proportionate share of joint venture depreciation and amortization

472



351


FFO attributable to common stockholders

$

82,875



$

84,615


Transaction expenses

40



191


Noncontrolling income from OP units included in diluted shares

233



181


Normalized FFO attributable to common stockholders

$

83,148



$

84,987


Non-cash compensation expense

3,389



3,479


Straight-line rent adjustments, net

(3,258)



(3,166)


Amortization of (below) and above market leases/leasehold interests and corporate assets, net

332



751


Deferred revenue - tenant improvement related and other income

(1)



(66)


Amortization of deferred financing costs and debt discount/premium, net

1,405



1,289


Recurring capital expenditures, tenant improvements and leasing commissions

(11,862)



(11,350)


Normalized FAD attributable to common stockholders

$

73,153



$

75,924






Net income attributable to common stockholders per diluted share

$

0.06



$

0.05


FFO adjustments per diluted share, net

0.34



0.35


FFO attributable to common stockholders per diluted share

$

0.40



$

0.40


Normalized FFO adjustments per diluted share, net

0.00



0.01


Normalized FFO attributable to common stockholders per diluted share

$

0.40



$

0.41






Weighted average diluted common shares outstanding

208,999



209,177


HTA computes FFO in accordance with the current standards established by NAREIT.  NAREIT defines FFO as net income or loss attributable to common stockholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property and impairment write-downs of depreciable assets, plus depreciation and amortization related to investments in real estate, and after adjustments for unconsolidated partnerships and joint ventures.  Because FFO excludes depreciation and amortization unique to real estate, among other items, it provides a perspective not immediately apparent from net income or loss attributable to common stockholders.

HTA computes Normalized FFO, which excludes from FFO: (i) transaction expenses; (ii) gain or loss on extinguishment of debt; (iii) noncontrolling income or loss from OP Units included in diluted shares; and (iv) other normalizing items, which include items that are unusual and infrequent in nature.  HTA's methodology for calculating Normalized FFO may be different from the methods utilized by other REITs and, accordingly, may not be comparable to other REITs.

HTA also computes Normalized FAD, which excludes from Normalized FFO: (i) non-cash compensation expense; (ii) straight-line rent adjustments; (iii) amortization of below and above market leases/leasehold interests and corporate assets; (iv) deferred revenue - tenant improvement related and other income; (v) amortization of deferred financing costs and debt premium/discount; and (vi) recurring capital expenditures, tenant improvements and leasing commissions.  HTA believes this non-GAAP financial measure provides a meaningful supplemental measure of its operating performance.  Normalized FAD should not be considered as an alternative to net income or loss attributable to common stockholders (computed in accordance with GAAP) as an indicator of its financial performance, nor is it indicative of cash available to fund cash needs.  Normalized FAD should be reviewed in connection with other GAAP measurements.

HTA presents these non-GAAP financial measures because it considers them important supplemental measures of its operating performance and believes they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.  Historical cost accounting assumes that the value of real estate assets diminishes ratably over time.  Since real estate values have historically risen or fallen based on market conditions, many industry investors have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.  These non-GAAP financial measures should not be considered as alternatives to net income or loss attributable to common stockholders (computed in accordance with GAAP) as indicators of its financial performance.  FFO and Normalized FFO is not indicative of cash available to fund cash needs.  These non-GAAP financial measures should be reviewed in connection with other GAAP measurements.

HEALTHCARE TRUST OF AMERICA, INC.

NET DEBT TO ADJUSTED EBITDAre

(Unaudited and in thousands)



Three Months Ended


March 31, 2019

Net income

$

13,701


Interest expense

23,970


Depreciation and amortization expense

69,481


Loss on sale of real estate, net

(37)


Proportionate share of joint venture depreciation and amortization

472


EBITDAre

$

107,661


Transaction expenses

40


Non-cash compensation expense

3,389


Pro forma impact of acquisitions/dispositions

83


Adjusted EBITDAre

$

111,173




Adjusted EBITDAre, annualized

$

444,692




As of March 31, 2019:


Debt

$

2,541,619


Less: cash and cash equivalents

61,073


Net Debt

$

2,480,546




Net Debt to Adjusted EBITDAre

5.6x


As defined by NAREIT, EBITDAre is computed as net income or loss (computed in accordance with GAAP) plus: (i) interest expense; (ii) income tax expense (not applicable to HTA); (iii) depreciation and amortization; (iv) impairment; (v) gain or loss on the sale of real estate; and (vi) and the proportionate share of joint venture depreciation and amortization.

Adjusted EBITDAre is presented on an assumed annualized basis.  HTA defines Adjusted EBITDAre as EBITDAre (computed in accordance with NAREIT as defined above) plus: (i) transaction expenses; (ii) gain or loss on extinguishment of debt; (iii) non-cash compensation expense; (iv) pro forma impact of its acquisitions/dispositions; and (v) other normalizing items.  HTA considers Adjusted EBITDAre an important measure because it provides additional information to allow management, investors, and its current and potential creditors to evaluate and compare its core operating results and its ability to service debt.

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