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The call conveyed strong operational execution and tangible early progress under the new strategy: record leasing, materially improved same-store NOI (6.9%), higher occupancy and retention, accretive redevelopments, disciplined buybacks, and proactive balance sheet actions (delayed draw facility, swaps extension). Management raised guidance modestly but remained conservative. Key near-term challenges include total occupancy still below target (90.5%), some negative lease roll-downs, and an upcoming bond maturity that is being addressed. On balance, the positives — record leasing, robust NOI growth, improved lease economics and capital allocation discipline — materially outweigh the manageable lowlights.
Healthcare Realty raised 2026 guidance modestly, increasing full‑year normalized FFO per share by $0.01 to $1.59–$1.65 (midpoint $1.62) and nudging same‑store cash NOI growth up 25 bps to 3.75%–4.75%; Q1 normalized FFO was $0.41 (Q/Q $0.40), same‑store cash NOI grew 6.9%, same‑store occupancy was 92.3% (total occupancy 90.5%), same‑store margins expanded 60 bps, and 95% of NOI is in the same‑store pool. Management highlighted operating drivers behind the guidance — cash leasing spreads ~4.2% (same‑store re‑leasing >4%), retention 93.5%, >2.0M sq ft leased (290 leases), a 1.4M sq ft leasing pipeline and ~490k sq ft SNO — and reiterated core earnings tracking above 5% excluding prior portfolio optimization. On capital, Q1 repurchases totaled $100M (5.7M shares at $17.38 avg) with $400M buyback capacity remaining, closed a pro rata JV acquisition ~$18M, commenced $31M of new redevelopments (invested $25M), plan to deploy $50M–$100M into the KKR JV, increased uses and funding by $75M, are targeting year‑end leverage in the mid‑5x range, and expect to close a $400M delayed‑draw term loan (SOFR+90bps, all‑in ~4.8%) to refinance a $600M bond (leaving ~ $1B liquidity pro forma and ~$250M commercial paper outstanding).
Signed over 2.0 million square feet across ~290 leases in Q1 (all-time high), with a leasing pipeline of ~1.4 million square feet and a Signed Not Occupied (SNO) pipeline of ~490,000 sq ft (including ~90,000 sq ft in redevelopment lease-up).
Reported same-store cash NOI growth of 6.9% in Q1 (nearly 7%), a sequential/outperformance result that led to management raising same-store NOI guidance by 25 basis points to a revised range of 3.75%–4.75% for 2026.
Same-store occupancy increased to 92.3% (up 110 basis points year-over-year); total portfolio occupancy improved to 90.5%. Tenant retention (renewal rate) was 93.5% in Q1.
Average cash leasing spread in Q1 was 4.2% (1 in 4 leases had a spread >5%); annual escalators averaged ~3.1%; weighted average lease term was nearly 8 years, strengthening long-term cash flow profile.
Normalized FFO per share for Q1 was $0.41 (up from $0.40 sequentially). Management raised full-year normalized FFO guidance by $0.01 to $1.59–$1.65 (midpoint $1.62). FAD per share was $0.32 with a quarterly dividend payout ratio of 75%.
Repurchased $100 million of stock year-to-date (5.7 million shares at a weighted average price of $17.38) with $400 million remaining buyback capacity. Completed JV acquisition (company pro rata share ~$18 million) and invested >$25 million in redevelopments in Q1.
Redevelopment portfolio comprises 23 properties that are ~64% pre-leased; Q1 activity included a $25M redevelopment (155k sq ft, 100% pre-leased) and completion of a $35M 2-MOB project (98% leased). Average cash-on-cash yield for redevelopments ~10% and targeted stabilized yields of 9%–12%.
Secured a fully committed $400 million unsecured delayed draw term loan (all-in ~4.8%, SOFR+90bps when drawn) to be used in part to refinance a $600 million bond maturity; commercial paper program with ~ $250 million outstanding (backstopped by credit line); $400 million of swaps extended locking SOFR at 3.3% through 2029. Management expects year-end leverage target in mid-5x range.
Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Healthcare Realty First Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Ron Hubbard, Vice President of Investor Relations. You may begin.
Thank you for joining us today for Healthcare Realty's first quarter 2026 earnings conference call. A reminder that except for the historical information contained within, the matters discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. These forward-looking statements represent the company's judgment as of the date of this call. This company disclaims any obligation to update this forward-looking material. A discussion of risks and risk factors are included in our press release and detailed in our filings with the SEC. Certain non-GAAP financial measures will be discussed on this call. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the quarter ended March 31, 2026. The company's earnings press release and earnings supplemental information are available on the company's website.
I'd now like to turn the call over to our President and CEO, Pete Scott.
Thanks, Ron. Joining me on the call today are Rob Hull, our COO; and Dan Gabbay, our CFO. Also available for the Q&A portion of the call is Ryan Crowley, our CIO. It has been just over a year since I assumed the CEO role, and we ha...