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Analyst Blog

Healthcare Realty Trust Inc. (HR - Snapshot Report) – a real estate investment trust (REIT) – reported fourth-quarter 2013 normalized funds from operations (FFO) per share of 36 cents, beating the Zacks Consensus Estimate by 2 cents and the year-ago quarter figure by a nickel. The results were driven by a rise in revenue. Shares were up 1.65% during yesterday’s regular trading session on the NYSE.

Normalized funds available for distribution (FAD) in the reported quarter were 37 cents per share, up from 33 cents in the year-ago period.

Total revenue increased 15.2% year over year to $90.1 million in the reported quarter and exceeded the Zacks Consensus Estimate of $83 million.

Inside the Headlines

During the year, Healthcare Realty signed or renewed leases aggregating 1,242,000 square feet. The average retention rate was 80% and occupancy stood at 91% at year-end in its same store properties.

Same-store revenues nudged up 1.9% year over year to $66.3 million. On the other hand, same-store expenses rose 3.5% year over year to $23.3 million. Thus, same-store net operating income (NOI) increased 1.1% year over year to $43.0 million. At the year end, the 12 stabilizing properties (SIP) were 80% leased with occupancy rising to 63%.

Portfolio Activity

Healthcare Realty made acquisitions aggregating $212.6 million in 2013, with an average leased percentage of 93%. In particular, during the quarter under review, the company acquired five properties, spanning 374,000 square feet, for $102.6 million. Leased 94%, the buildings are positioned in Healthcare Realty’s existing footprint including Seattle, Denver, Charlotte and Austin.

On the other hand, the company accomplished $101.9 million of dispositions in 2013 and $20.5 million in the fourth quarter. Among the properties sold were 8 off-campus medical office buildings, 4 inpatient rehab facilities, and 1 land parcel.

Liquidity

As of Dec 31, 2013, Healthcare Realty had cash and cash equivalents worth approximately $8.7 million, up from $6.8 million at the prior year-end.

Dividend

On Feb 4, 2014, Healthcare Realty declared a quarterly dividend of 30 cents per share. This dividend is payable on Feb 28, 2014 to stockholders of record as of Feb 18. The dividend is equivalent to 81.1% of normalized FAD.

Healthcare Realty currently has a Zacks Rank #4 (Sell).

Key Picks from the Sector

Some other stocks worth considering in the REIT industry include Sabra Health Care REIT, Inc. (SBRA - Snapshot Report), Healthcare Trust of America, Inc. (HTA - Snapshot Report) and Omega Healthcare Investors Inc. (OHI - Snapshot Report). While Sabra Health Care holds a Zacks Rank #1 (Strong Buy), Healthcare Trust and Omega Healthcare carry a Zacks Rank #2 (Buy).

Note: 1. FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

2. FAD, a measure to ascertain the ability of REITs to generate cash, is derived by subtracting straight-line rent and non-recurring real estate expenses from funds from operations.

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