NASHVILLE, Tenn., Oct. 29, 2026 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the third quarter ended September 30, 2026. In addition, the Company announced an increased 2026 Normalized FFO guidance range of $1.65 to $1.67 per share (diluted), a $0.02 increase at the midpoint from July guidance, and an increased Same Store Cash NOI growth guidance range of 5.00% to 5.25% (+75bps increase at the low end and +25bps at the high end from July guidance).
THIRD QUARTER 2026 HIGHLIGHTS
- GAAP Net loss of $(0.05) per share, NAREIT FFO of $0.38 per share, Normalized FFO of $0.42 per share, and FAD of $110 million (payout ratio of 76%)
- Same store cash NOI growth of 5.1%, tenant retention of 88.0% and cash leasing spreads averaging 8.6%
- Third quarter lease executions totaled 1.5 million square feet, including 430,000 square feet of new lease executions
- Since last quarter, the Company acquired $211 million of assets (approximately $42 million at share) in its strategic joint venture with KKR
- Since last quarter, the Company sold $68 million of assets, bringing year-to-date disposition activity to $136 million ($187 million including loan receivable repayments)
- Net Debt to Adjusted EBITDA of 5.5x
- Repurchased 4.2 million shares of common stock through early October at an average share price of $17.74
THIRD QUARTER 2026 RESULTS
| | THIRD QUARTER ENDED |
| | | 2026 | | | 2025 | |
| (in thousands, except per share amounts) | AMOUNT | PER SHARE | AMOUNT | PER SHARE |
| GAAP Net loss | $ | (15,755 | ) | $ | (0.05 | ) | $ | (57,738 | ) | $ | (0.17 | ) |
| NAREIT FFO, diluted | $ | 131,666 | | $ | 0.38 | | $ | 118,922 | | $ | 0.34 | |
| Normalized FFO, diluted | $ | 145,928 | | $ | 0.42 | | $ | 145,340 | | $ | 0.41 | |
| | | | | | | | | | | | | |
LEASING ACTIVITY
During the third quarter, the Company executed 329 new and renewal leases for 1.5 million square feet with a weighted average lease term of 5.9 years and average annual escalators of 3.1%. Key highlights include:
- Ascension Health. 203,000 square feet of new and renewal leases in Nashville across five on campus properties
- Cedars Sinai Medical Center. 59,000 square feet of renewal leases in Los Angeles at a 95% occupied building
- Mount Carmel Health System. 59,000 square feet of renewal leases across four properties in Columbus, OH
- Indiana University Health. 38,000 square feet of renewal leases in Indianapolis, maintaining occupancy of more than 97% across two properties
CAPITAL ALLOCATION
Acquisition Activity
Since last quarter, the Company acquired $211 million of assets (approximately $42 million at share) in its strategic joint venture with KKR. Selected transactions include:
- Charleston, SC. Acquired two health system anchored, Class A MOBs for $56 million ($11 million investment at share). The Company now owns 10 properties totaling 436,000 square feet in the market
- Seattle, WA. Acquired a 33,000 square foot health system anchored MOB for $17 million ($3 million investment at share), further strengthening the Company's footprint in the Seattle market
Disposition Activity
Since last quarter, the Company has disposed of $68 million of assets, bringing year-to-date disposition activity to $136 million. Selected transactions include:
- Atlanta, GA. The Company completed a previously announced $36 million direct sale of a 59,000 square foot MOB to the affiliated hospital
- Chicago, IL. During the quarter, the Company sold two properties for aggregate proceeds of $23 million and entered into a contract to sell the remaining property in the Chicago MSA. Upon completion of the sale, the Company will have fully exited the Chicago market
Development and Redevelopment
During the third quarter, the Company leased approximately 112,000 square feet and invested approximately $25 million across its redevelopment portfolio. Also during the quarter, the Company completed the redevelopment of a 40,400 square foot MOB in Raleigh, NC and commenced the redevelopment of a 60,500 square foot MOB in Austin, TX.
Balance Sheet
As of September 30, 2026, the Company had approximately $1.6 billion of liquidity across the revolving facility (net of commercial paper issuance), delayed draw term loan, and cash on hand.
In the third quarter and early October, the Company repurchased 4.2 million shares of common stock at an average price of $17.74 per share for a total of $75 million.
On October 26, 2026, the Company renewed its share repurchase program for the next 12 months with total authorization up to $500 million, replacing the expiring authorization from October 2025.
DIVIDEND
The Board unanimously approved a common stock dividend in the amount of $0.24 per share to be paid on November 20, 2026, to Class A common stockholders of record on November 10, 2026. Additionally, the eligible holders of operating partnership units will receive a distribution of $0.24 per unit, equivalent to the Company's Class A common stock dividend.
GUIDANCE
The Company further increased full year 2026 guidance ranges as follows:
| | | 2026 GUIDANCE |
| | ACTUAL | PRIOR (JULY) | CURRENT |
| | Q3 2026 | LOW | HIGH | LOW | HIGH |
| Earnings per share | $ | (0.05 | ) | $ | (0.15 | ) | $ | (0.11 | ) | $ | (0.15 | ) | $ | (0.11 | ) |
| NAREIT FFO per share | $ | 0.38 | | $ | 1.45 | | $ | 1.51 | | $ | 1.48 | | $ | 1.52 | |
| Normalized FFO per share | $ | 0.42 | | $ | 1.62 | | $ | 1.66 | | $ | 1.65 | | $ | 1.67 | |
| Same Store Cash NOI growth | | 5.1 | % | | 4.25 | % | | 5.00 | % | | 5.00 | % | | 5.25 | % |
| | | | | | | | | | | | | | | | |
The 2026 annual guidance range reflects the Company's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, interest rates, and operating and general and administrative expenses. The Company's guidance does not contemplate impacts from gains or losses from dispositions, potential impairments, or debt extinguishment costs, if any. The Company's guidance also does not include any future acquisitions, developments or share issuances or repurchases, other than as discussed in the detailed guidance assumptions on Page 10 of the Q3 2026 Supplemental. There can be no assurance that the Company's actual results will not be materially higher or lower than these expectations. If actual results or timing vary from these assumptions, the Company's expectations may change. See Page 10 of the Q3 2026 Supplemental for additional details and assumptions.
EARNINGS CALL
On Friday, October 30, 2026, at 9:00 a.m. Eastern Time, Healthcare Realty Trust has scheduled a conference call to discuss earnings results, quarterly activities, general operations of the Company and industry trends.
Simultaneously, a webcast of the conference call will be available to interested parties at https://investors.healthcarerealty.com/corporate-profile/webcasts under the Investor Relations section. A webcast replay will be available following the call at the same address.
Live Conference Call Access Details:
- Domestic Dial-In Number: +1 833-461-5787
- All Other Locations: +1 585-542-9983
- Conference ID Number: 162 480 934
ABOUT HEALTHCARE REALTY
Healthcare Realty Trust Incorporated (NYSE: HR) is the largest public, pure-play owner, operator and developer of medical outpatient buildings in the United States.
For additional information contact InvestorRelations@healthcarerealty.com.
Additional information regarding the Company, including this quarter's operations, can be found at www.healthcarerealty.com. In addition to the historical information contained within, this press release contains certain forward-looking statements with respect to the Company. Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could," "budget" and other comparable terms. These forward-looking statements are based on the Company's current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Such risks and uncertainties include, among other things, the following: the Company’s expected results may not be achieved; risks related to future opportunities and plans for the Company, including the uncertainty of expected future financial performance and results of the Company; pandemics or other health crises; increases in interest rates; the availability and cost of capital at expected rates; competition for quality assets; negative developments in the operating results or financial condition of the Company's tenants, including, but not limited to, their ability to pay rent; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to release space at similar rates as vacancies occur; the Company's ability to renew expiring leases; government regulations affecting tenants' Medicare and Medicaid reimbursement rates and operational requirements; unanticipated difficulties and/or expenditures relating to future acquisitions and developments; changes in rules or practices governing the Company's financial reporting; the Company may be required under purchase options to sell properties and may not be able to reinvest the proceeds from such sales at rates of return equal to the return received on the properties sold; uninsured or underinsured losses related to casualty or liability; the incurrence of impairment charges on its real estate properties or other assets; other legal and operational matters; and other risks and uncertainties affecting the Company, including those described from time to time under the caption “Risk Factors” and elsewhere in the Company’s filings and reports with the SEC, including the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Moreover, other risks and uncertainties of which the Company is not currently aware may also affect the Company's forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated. The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing. For a detailed discussion of the Company’s risk factors, please refer to the Company's filings with the SEC, including this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
| |
| Balance Sheet |
| AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA |
| |
| ASSETS | | | | | |
| | Q3 2026
| | | Q4 2025
| |
| Real estate properties | | | | | | | |
| Land | $ | 1,040,660 | | | $ | 1,060,254 | |
| Buildings and improvements | | 8,673,665 | | | | 8,514,165 | |
| Lease intangibles | | 378,664 | | | | 455,254 | |
| Personal property | | 7,624 | | | | 7,056 | |
| Investment in financing receivables, net | | 6,017 | | | | 123,249 | |
| Financing lease right-of-use assets | | 73,894 | | | | 75,083 | |
| Land held for development | | 35,564 | | | | 57,535 | |
| Total real estate investments | | 10,216,088 | | | | 10,292,596 | |
| Less accumulated depreciation and amortization | | (2,602,921 | ) | | | (2,397,795 | ) |
| Total real estate investments, net | | 7,613,167 | | | | 7,894,801 | |
| Cash and cash equivalents | | 17,499 | | | | 26,172 | |
| Assets held for sale, net | | 150,085 | | | | 143,580 | |
| Operating lease right-of-use assets | | 202,383 | | | | 204,906 | |
| Investments in unconsolidated joint ventures | | 481,521 | | | | 453,607 | |
| Other assets, net | | 495,108 | | | | 487,795 | |
| Total assets | $ | 8,959,763 | | | $ | 9,210,861 | |
| | | | |
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, AND STOCKHOLDERS' EQUITY |
| Liabilities | | | |
| Notes and bonds payable | $ | 4,249,159 | | | $ | 3,911,423 | |
| Accounts payable and accrued liabilities | | 176,630 | | | | 211,071 | |
| Liabilities of properties held for sale | | 13,510 | | | | 15,160 | |
| Operating lease liabilities | | 163,793 | | | | 162,922 | |
| Financing lease liabilities | | 74,475 | | | | 73,130 | |
| Other liabilities | | 147,567 | | | | 160,530 | |
| Total liabilities | | 4,825,134 | | | | 4,534,236 | |
| | | | |
| Redeemable non-controlling interests | | 3,748 | | | | 3,252 | |
| | | | |
| Stockholders' equity | | | |
| Preferred stock, $0.01 par value; 200,000 shares authorized | | — | | | | — | |
| Common stock, $0.01 par value; 1,000,000 shares authorized | | 3,400 | | | | 3,516 | |
| Additional paid-in capital | | 8,895,212 | | | | 9,137,257 | |
| Accumulated other comprehensive income (loss) | | 8,316 | | | | (5,174 | ) |
| Cumulative net income attributable to common stockholders | | 68,913 | | | | 128,238 | |
| Cumulative dividends | | (4,895,426 | ) | | | (4,646,944 | ) |
| Total stockholders' equity | | 4,080,415 | | | | 4,616,893 | |
| Non-controlling interest | | 50,466 | | | | 56,480 | |
| Total equity | | 4,130,881 | | | | 4,673,373 | |
| Total liabilities, redeemable non-controlling interests, and stockholders' equity | $ | 8,959,763 | | | $ | 9,210,861 | |
| | | | | | | | |
| Income Statements |
| AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA |
| |
| | | | | | | | | | |
| | THIRD QUARTER ENDED | | YEAR TO DATE | | FULL YEAR |
| | | 2026 | | | | 2025 | | | | 2026 | | | | 2025 | | | | 2025 | |
| Revenues | | | | | | | | | |
| Rental income | $ | 277,601 | | | $ | 287,399 | | | $ | 815,726 | | | $ | 863,326 | | | $ | 1,138,056 | |
| Interest income | | 1,125 | | | | 3,480 | | | | 8,103 | | | | 10,660 | | | | 14,275 | |
| Other operating | | 7,915 | | | | 6,886 | | | | 23,650 | | | | 20,257 | | | | 28,215 | |
| Total revenues | | 286,641 | | | | 297,765 | | | | 847,479 | | | | 894,243 | | | | 1,180,546 | |
| Expenses | | | | | | | | | |
| Property operating | | 102,446 | | | | 107,657 | | | | 301,485 | | | | 321,751 | | | | 424,855 | |
| General and administrative | | 12,435 | | | | 21,771 | | | | 44,139 | | | | 58,782 | | | | 72,569 | |
| Normalizing items 1 | | (991 | ) | | | (12,046 | ) | | | (10,453 | ) | | | (22,849 | ) | | | (26,318 | ) |
| Normalized general and administrative | | 11,444 | | | | 9,725 | | | | 33,686 | | | | 35,933 | | | | 46,251 | |
| Transaction costs | | 1,693 | | | | 125 | | | | 4,102 | | | | 1,729 | | | | 2,029 | |
| Depreciation and amortization | | 128,101 | | | | 143,640 | | | | 385,152 | | | | 453,150 | | | | 588,186 | |
| Total expenses | | 244,675 | | | | 273,193 | | | | 734,878 | | | | 835,412 | | | | 1,087,639 | |
| Other income (expense) | | | | | | | | | |
| Interest expense before merger-related fair value | | (35,742 | ) | | | (41,927 | ) | | | (103,634 | ) | | | (129,059 | ) | | | (166,396 | ) |
| Merger-related fair value adjustment | | (9,107 | ) | | | (10,715 | ) | | | (30,251 | ) | | | (31,741 | ) | | | (42,593 | ) |
| Interest expense | | (44,849 | ) | | | (52,642 | ) | | | (133,885 | ) | | | (160,800 | ) | | | (208,989 | ) |
| Gain on sales of real estate properties and other assets | | 2,476 | | | | 76,771 | | | | 16,966 | | | | 99,678 | | | | 235,389 | |
| Loss on extinguishment of debt | | — | | | | (286 | ) | | | (1,718 | ) | | | (286 | ) | | | (451 | ) |
| Impairment of real estate assets and credit loss recoveries (reserves) | | (16,152 | ) | | | (104,362 | ) | | | (57,909 | ) | | | (258,791 | ) | | | (364,598 | ) |
| Equity income (loss) from unconsolidated joint ventures | | 816 | | | | 287 | | | | 4,241 | | | | 446 | | | | (188 | ) |
| Interest and other income (expense), net | | (108 | ) | | | (2,884 | ) | | | (82 | ) | | | (3,154 | ) | | | (3,555 | ) |
| Total other income (expense) | | (57,817 | ) | | | (83,116 | ) | | | (172,387 | ) | | | (322,907 | ) | | | (342,392 | ) |
| Net loss | $ | (15,851 | ) | | $ | (58,544 | ) | | $ | (59,786 | ) | | $ | (264,076 | ) | | $ | (249,485 | ) |
| Net loss attributable to non-controlling interests | | 96 | | | | 806 | | | | 461 | | | | 3,614 | | | | 3,414 | |
| Net loss attributable to common stockholders | $ | (15,755 | ) | | $ | (57,738 | ) | | $ | (59,325 | ) | | $ | (260,462 | ) | | $ | (246,071 | ) |
| | | | | | | | | | |
| Basic earnings per common share | $ | (0.05 | ) | | $ | (0.17 | ) | | $ | (0.18 | ) | | $ | (0.75 | ) | | $ | (0.71 | ) |
| Diluted earnings per common share | $ | (0.05 | ) | | $ | (0.17 | ) | | $ | (0.18 | ) | | $ | (0.75 | ) | | $ | (0.71 | ) |
| | | | | | | | | | |
| Weighted average common shares outstanding - basic | | 340,616 | | | | 349,964 | | | | 343,427 | | | | 349,712 | | | | 349,798 | |
| Weighted average common shares outstanding - diluted2 | | 340,616 | | | | 349,964 | | | | 343,427 | | | | 349,712 | | | | 349,798 | |
| | | | | | | | | | | | | | | | | | | | |
- Normalizing items primarily include restructuring, severance-related costs and other.
- Potential common shares are not included in the computation of diluted earnings per share when a loss exists (or when dividends paid are greater than income), as the effect would be an antidilutive per share amount. As a result, the outstanding limited partnership units in the Company's operating partnership ("OP"), totaling 4,229,701 units were not included.
| |
| |
| FFO, Normalized FFO and FAD |
| AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA |
| |
| | | | | | | | | | | |
| | | THIRD QUARTER ENDED | | YEAR TO DATE | | FULL YEAR |
| | | | 2026 | | | | 2025 | | | | 2026 | | | | 2025 | | | | 2025 | |
| Net loss attributable to common stockholders | | $ | (15,755 | ) | | $ | (57,738 | ) | | $ | (59,325 | ) | | $ | (260,462 | ) | | $ | (246,071 | ) |
| Net loss attributable to common stockholders per diluted share | | $ | (0.05 | ) | | $ | (0.17 | ) | | $ | (0.18 | ) | | $ | (0.75 | ) | | $ | (0.71 | ) |
| Gain on sales of real estate assets | | | (2,476 | ) | | | (76,771 | ) | | | (16,966 | ) | | | (99,678 | ) | | | (235,389 | ) |
| Impairments of real estate assets | | | 16,152 | | | | 104,362 | | | | 58,909 | | | | 255,384 | | | | 361,090 | |
| Real estate depreciation and amortization | | | 127,020 | | | | 143,187 | | | | 381,896 | | | | 451,411 | | | | 586,146 | |
| Non-controlling loss from operating partnership units | | | (194 | ) | | | (806 | ) | | | (741 | ) | | | (3,698 | ) | | | (3,497 | ) |
| Unconsolidated JV depreciation, amortization, gain and impairment | | | 6,919 | | | | 6,688 | | | | 17,733 | | | | 20,111 | | | | 27,769 | |
| NAREIT FFO | | $ | 131,666 | | | $ | 118,922 | | | $ | 381,506 | | | $ | 363,068 | | | $ | 490,048 | |
| NAREIT FFO per common share - diluted | | $ | 0.38 | | | $ | 0.34 | | | $ | 1.10 | | | $ | 1.02 | | | $ | 1.38 | |
| | | | | | | | | | | |
| Transaction costs | | | 1,693 | | | | 125 | | | | 4,102 | | | | 1,729 | | | | 2,029 | |
| Debt financing costs | | | 25 | | | | 3,493 | | | | 1,917 | | | | 3,493 | | | | 5,107 | |
| Restructuring and severance-related charges | | | 2,031 | | | | 12,046 | | | | 12,615 | | | | 22,849 | | | | 26,318 | |
| Merger-related fair value adjustment | | | 9,107 | | | | 10,715 | | | | 30,251 | | | | 31,741 | | | | 42,593 | |
| Other | | | 1,406 | | | | 39 | | | | 3,622 | | | | 3,918 | | | | 2,851 | |
| Normalized FFO | | $ | 145,928 | | | $ | 145,340 | | | $ | 434,013 | | | $ | 426,798 | | | $ | 568,946 | |
| Normalized FFO per common share - diluted | | $ | 0.42 | | | $ | 0.41 | | | $ | 1.25 | | | $ | 1.20 | | | $ | 1.61 | |
| | | | | | | | | | | |
| Non-real estate depreciation and amortization | | | 749 | | | | 1,139 | | | | 2,200 | | | | 3,592 | | | | 6,114 | |
| Non-cash interest amortization, net | | | 1,495 | | | | 1,384 | | | | 4,242 | | | | 3,731 | | | | 5,126 | |
| Straight-line amortization, net | | | (12,332 | ) | | | (6,924 | ) | | | (36,338 | ) | | | (22,837 | ) | | | (29,392 | ) |
| Stock-based compensation | | | 4,561 | | | | 3,386 | | | | 12,909 | | | | 10,301 | | | | 13,609 | |
| Unconsolidated JV non-cash items | | | (169 | ) | | | (463 | ) | | | (423 | ) | | | (1,073 | ) | | | (1,420 | ) |
| Other | | | — | | | | 146 | | | | — | | | | 370 | | | | 952 | |
| Maintenance capital and LCs | | | (30,058 | ) | | | (27,155 | ) | | | (84,211 | ) | | | (86,455 | ) | | | (115,633 | ) |
| FAD | | $ | 110,174 | | | $ | 116,853 | | | $ | 332,392 | | | $ | 334,427 | | | $ | 448,302 | |
| Quarterly dividends and OP distributions | | $ | 83,347 | | | $ | 85,536 | | | $ | 251,515 | | | $ | 305,862 | | | $ | 391,368 | |
| FFO wtd avg common shares outstanding - diluted 1 | | | 345,568 | | | | 354,690 | | | | 348,292 | | | | 354,294 | | | | 354,454 | |
| | | | | | | | | | | | | | | | | | | | | |
- The Company utilizes the treasury stock method, which includes the dilutive effect of nonvested share-based awards outstanding of 722,102 for the three months ended September 30, 2026. Also includes the diluted impact of 4,229,701 OP units outstanding.
Management considers funds from operations ("FFO"), FFO per share, normalized FFO, normalized FFO per share, and funds available for distribution ("FAD") to be useful non-GAAP measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure historical financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors.
The non-GAAP financial measures presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income (determined in accordance with GAAP), as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs.
FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as “net income (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.” The Company defines Normalized FFO as FFO excluding acquisition-related expenses and other normalizing items that are unusual and infrequent in nature. FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, deferred financing fees amortization, and share-based compensation expense; and subtracting maintenance capital expenditures, including second generation tenant improvements and leasing commissions paid and straight-line rent income, net of expense. The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts. FFO, Normalized FFO and FAD do not represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. FFO, Normalized FFO and FAD should not be considered an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flow as a measure of liquidity. FFO, Normalized FFO and FAD should be reviewed in connection with GAAP financial measures.
Management believes FFO, FFO per share, Normalized FFO, Normalized FFO per share, and FAD provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, including depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, gains or losses from sales of real estate, and other normalizing items that are unusual and infrequent, FFO, FFO per share, Normalized FFO, Normalized FFO per share and FAD can facilitate comparisons of operating performance between periods. The Company reports these measures because they have been observed by management to be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because these measures are consistently reported, discussed, and compared by research analysts in their notes and publications about REITs.
Cash NOI and Same Store Cash NOI are key performance indicators. Management considers these to be supplemental measures that allow investors, analysts and Company management to measure unlevered property-level operating results. The Company defines Cash NOI as rental income plus interest from financing receivables less property operating expenses. Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, lease termination fees, financing receivable amortization, tenant improvement amortization and leasing commission amortization. Cash NOI is historical and not necessarily indicative of future results.
Same Store Cash NOI compares Cash NOI for stabilized properties. Stabilized properties are properties that have been included in operations for the duration of the year-over-year comparison period presented. Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale, properties undergoing redevelopment, and newly redeveloped or developed properties.
The Company utilizes the redevelopment classification for properties where management has approved a change in strategic direction through the application of additional resources, including an amount of capital expenditures significantly above routine maintenance and capital improvement expenditures.
Any recently acquired property will be included in the same store pool once the Company has owned the property for five full quarters. Newly developed or redeveloped properties will be included in the same store pool five full quarters after substantial completion.
Source: Healthcare Realty Trust Incorporated