NASHVILLE, Tenn., July 31, 2025 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the second quarter ended June 30, 2025.

SECOND QUARTER 2025 HIGHLIGHTS

  • GAAP Net loss of $(0.45) per share, NAREIT FFO of $0.34 per share, Normalized FFO of $0.41 per share, and FAD of $115.4 million (payout ratio of 96%).
  • Improved same store operating metrics including cash NOI growth of +5.1%, a 40 bps sequential increase in occupancy to 90%, margin of 64.3%, 83% tenant retention, and +3.3% cash leasing spreads.
  • Increased Normalized FFO per share guidance $0.01 at the midpoint to $1.57 - $1.61 and increased Same Store Cash NOI growth by +25 bps to 3.25% - 4.00%.
  • Second quarter new and renewal lease executions totaled 1.5 million square feet including 452,000 square feet of new lease executions.
  • During the second quarter and through July, completed sales of $182.4 million of assets through 9 separate transactions.
    • YTD sales total $210.5 million at a blended 6.2% cap rate
    • An additional $700 million of sales are under contract or LOI
  • Run-rate Net Debt to Adjusted EBITDA of 6.0x; anticipated to be between 5.4x and 5.7x by year end
  • Received strong support from our lender relationships to extend bank facilities:
    • Extended $1.5 billion revolver to mature in July 2030 (inclusive of extension options)
    • Added 1 to 2 years of additional extension options on outstanding term loans
  • Announced a series of leadership and corporate governance changes:
    • Peter Scott joined as President and CEO on April 15th and as a director on May 20th
    • Board reduced from 12 to 7 members
    • Commenced a platform restructuring to drive improved results
    • Julie Wilson, EVP - Chief Administrative Officer, to depart the organization by year-end
  • Published a Strategic Plan highlighting the decisive actions being taken by new leadership to maximize value for shareholders.
  • Board unanimously approved a common stock dividend in the amount of $0.24 per share.

SECOND QUARTER 2025 RESULTS

THREE MONTHS ENDED
JUNE 30, 2025 JUNE 30, 2024
(in thousands, except per share amounts) AMOUNT PER SHARE AMOUNT PER SHARE
GAAP Net loss $ (157,851 ) $ (0.45 ) $ (143,780 ) $ (0.39 )
NAREIT FFO, diluted $ 120,371 $ 0.34 $ 123,797 $ 0.33
Normalized FFO, diluted $ 143,736 $ 0.41 $ 143,500 $ 0.38

LEASING ACTIVITY

During the second quarter, the Company executed 341 new and renewal leases for 1.5 million square feet.

  • Weighted average lease term of 5.3 years with an average annual escalator of 3.2%.
  • Health system leasing made up approximately 33% of our signed lease volume in the quarter.

Key leasing highlights:

  • Houston, TX. 24,000 square foot new lease at our on-campus redevelopment in Houston with CLS Health, a premier multi-specialty group aligned with HCA's North Cypress hospital.
  • Orange County, CA. 23,000 square foot new lease with UC Irvine Health. UC Irvine Health recently purchased the adjacent hospital from Tenet and is investing in the growth of the campus.
  • Houston, TX. 42,000 square foot renewal in Houston with Texas Children's Pediatrics.

DISPOSITION PROGRESS

During the second quarter and through July, the Company completed asset sales of $182.4 million through nine separate transactions. A summary of the significant completed transactions is as follows:

  • Yakima, WA. Completed strategic market exit of the Yakima, WA MSA with the $31 million sale of two single-tenant MOBs to the affiliated health system. The sale achieved top of market pricing while avoiding costly tenant improvement allowances associated with a master lease renewal.
  • Houston, TX. Disposed of a land parcel for $10.5 million previously intended for future development. The property was sold to the affiliated health system and was in a submarket where the Company owns no other properties.
  • South Bend, IN. Completed its strategic market exit of the South Bend, IN MSA with the $43.1 million sale of a consistently under-occupied MOB to the affiliated health system.
  • Milwaukee, WI. Disposed of two single-tenant, off-campus MOBs to a private market purchaser for $42 million. The Company achieved attractive disposition economics while partially exiting this noncore market.
  • New York, NY. Targeted sale of an under-occupied property with a short ground lease term to the affiliated health system for $25 million. The Company was able to harvest maximum value for a noncore asset.
  • Naples, FL.   Disposed of its only asset in the Naples, FL MSA with the $19.3 million sale of this off-campus, unaffiliated property to a private market purchaser.

BALANCE SHEET

Debt paydown from asset sales has decreased run-rate Net Debt to Adjusted EBITDA to 6.0x. By year-end, Net Debt to Adjusted EBITDA is anticipated to be between 5.4x - 5.7x. Through July and inclusive of asset sales, the Company has approximately $1.2 billion of liquidity.

On July 25th, the Company entered into an extension of its $1.5 billion revolving credit facility, which extended the maturity to 2030 (inclusive of two 6-month extension options). As part of this process, the Company also received additional extension options on all its outstanding term loans. With these new extension options, the Company will have no term loan maturities in 2026 and has reduced its debt maturing through the end of 2026 from $1.5 billion to $600 million.

STRATEGIC PLAN PRESENTATION

A Strategic Plan presentation is posted to the Investor Relations section of the Company's website at www.healthcarerealty.com. Clear and purposeful changes are underway at the Company to improve operational performance, optimize the portfolio, and re-establish credibility. The successful implementation of the Strategic Plan will reposition the Company for accretive long-term growth and value creation to maximize shareholder value.

LEADERSHIP UPDATE

During the second quarter, the Company commenced a platform restructuring to drive meaningful cost savings and promote incremental accountability at the asset level between the operations and leasing teams. As part of this restructuring, the Company hired two proven industry veterans to spearhead the newly created asset management platform: Tony Acevedo (SVP – Asset Management) and Glenn Preston (SVP – Asset Management). Tony and Glenn have 16 years and 25 years of Outpatient Medical operating experience, respectively. They will each report up to our COO, Rob Hull.

After a 24-year career at Healthcare Realty, Julie Wilson (EVP – Chief Administrative Officer) will be departing the organization at year-end. In addition, there are various other senior leadership positions impacted by the restructuring that will result in additional departures during 2025.

“We have some exciting changes happening at Healthcare Realty aimed at improving performance. I look forward to working closely with Tony and Glenn as we shift towards an operations-centric model,” commented Peter Scott, President and CEO. “I would also like to express a heartfelt thanks to Julie and all the departing officers. They all played vital roles in the growth of the organization, and we wish them the best in their future endeavors.”

DIVIDEND

The Board unanimously approved a common stock dividend in the amount of $0.24 per share to be paid on August 28, 2025, to Class A common stockholders of record on August 14, 2025. 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.

The right-sized dividend is a 23% reduction from the prior level and immediately reduces the FAD payout ratio to approximately 80%. The key drivers of the right-sized dividend are: (i) mitigating refinancing risk on near-term bonds; (ii) achieving $100 million of annual incremental retained earnings to fund significant return-on-capital investments in the existing portfolio; and (iii) maximizing go-forward earnings potential.

GUIDANCE

  • The Company increased its Normalized FFO per share and Same Store Cash NOI growth guidance, as outlined below, as well as updated the guidance provided on page 30 of the Supplemental Information:
EXPECTED 2025
PRIOR CURRENT ACTUAL
LOW HIGH LOW
HIGH
2Q 2025
YTD
Earnings per share $ (0.28 ) $ (0.20 ) $ (0.78 ) $ (0.73 ) $ (0.45 ) $ (0.58 )
NAREIT FFO per share $ 1.44 $ 1.48 $ 1.42 $ 1.46 $ 0.34 $ 0.69
Normalized FFO per share $ 1.56 $ 1.60 $ 1.57 $ 1.61 $ 0.41 $ 0.80
Same Store Cash NOI growth 3.00 % 3.75 % 3.25 % 4.00 % 5.1 % 3.9 %

The 2025 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. There can be no assurance that the Company's actual results will not be materially higher or lower than these expectations. If actual results vary from these assumptions, the Company's expectations may change.

FINANCIAL REPORTING

In the second quarter, the Company began utilizing the Carrying Value of its debt in the calculation of Net Debt for purposes of reporting leverage metrics. For the second quarter, the result of this change was an approximate 0.25x reduction in Net Debt to Adjusted EBITDA.

The Company has also started excluding Leasing Commissions related to first generation leases from Maintenance Capital for its calculation of FAD. Prior to this change, first generation Leasing Commissions were included in Maintenance Capital. Based on historical data, the Company would expect this to be an approximate $5-10 million annual decrease in Maintenance Capital depending on leasing activity. The Company's 2Q 2025 payout ratio would still have been below 100% without this reporting change.

These changes are intended to conform the Company's reporting with market norms.

EARNINGS CALL

On Friday, August 1, 2025, 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: +1 800-715-9871 access code 4950066;
    • All Other Locations: +1 646-307-1963 access code 4950066.
  • Replay Information:
    • Domestic Dial-In Number: +1 800-770-2030 access code 4950066;
    • All Other Locations: +1 609-800-9909 access code 4950066.

ABOUT HEALTHCARE REALTY

Healthcare Realty Trust Incorporated (NYSE: HR) is the largest, pure-play owner, operator and developer of medical outpatient buildings in the United States.

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, 2024. 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, 2024.

Consolidated Balance Sheets
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA


ASSETS
2Q 2025
1Q 2025
4Q 2024
3Q 2024
2Q 2024
Real estate properties
Land $ 1,105,231 $ 1,134,635 $ 1,143,468 $ 1,195,116 $ 1,287,532
Buildings and improvements 9,199,089 9,729,912 9,707,066 10,074,504 10,436,218
Lease intangibles 567,244 631,864 664,867 718,343 764,730
Personal property 6,944 9,938 9,909 9,246 12,501
Investment in financing receivables, net 124,134 123,813 123,671 123,045 122,413
Financing lease right-of-use assets 76,574 76,958 77,343 77,728 81,401
Construction in progress 40,421 35,101 31,978 125,944 97,732
Land held for development 49,110 52,408 52,408 52,408 59,871
Total real estate investments 11,168,747 11,794,629 11,810,710 12,376,334 12,862,398
Less accumulated depreciation and amortization (2,494,169 ) (2,583,819 ) (2,483,656 ) (2,478,544 ) (2,427,709 )
Total real estate investments, net 8,674,578 9,210,810 9,327,054 9,897,790 10,434,689
Cash and cash equivalents 1 25,507 25,722 68,916 22,801 137,773
Assets held for sale, net 358,207 6,635 12,897 156,218 34,530
Operating lease right-of-use assets 243,910 259,764 261,438 259,013 261,976
Investments in unconsolidated joint ventures 463,430 470,418 473,122 417,084 374,841
Other assets, net and goodwill 469,940 522,920 507,496 491,679 559,818
Total assets $ 10,235,572 $ 10,496,269 $ 10,650,923 $ 11,244,585 $ 11,803,627
LIABILITIES AND STOCKHOLDERS' EQUITY
2Q 2025
1Q 2025
4Q 2024
3Q 2024
2Q 2024
Liabilities
Notes and bonds payable $ 4,694,391 $ 4,732,618 $ 4,662,771 $ 4,957,796 $ 5,148,153
Accounts payable and accrued liabilities 194,076 144,855 222,510 197,428 195,884
Liabilities of properties held for sale 30,278 422 1,283 7,919 1,805
Operating lease liabilities 203,678 224,117 224,499 229,925 230,601
Financing lease liabilities 73,019 72,585 72,346 71,887 75,199
Other liabilities 158,704 174,830 161,640 180,283 177,293
Total liabilities 5,354,146 5,349,427 5,345,049 5,645,238 5,828,935
Redeemable non-controlling interests 4,332 4,627 4,778 3,875 3,875
Stockholders' equity
Preferred stock, $0.01 par value; 200,000 shares authorized — — — — —
Common stock, $0.01 par value; 1,000,000 shares authorized 3,516 3,510 3,505 3,558 3,643
Additional paid-in capital 9,129,338 9,121,269 9,118,229 9,198,004 9,340,028
Accumulated other comprehensive (loss) income (9,185 ) (7,206 ) (1,168 ) (16,963 ) 6,986
Cumulative net income attributable to common stockholders 171,585 329,436 374,309 481,155 574,178
Cumulative dividends (4,477,940 ) (4,368,739 ) (4,260,014 ) (4,150,328 ) (4,037,693 )
Total stockholders' equity 4,817,314 5,078,270 5,234,861 5,515,426 5,887,142
Non-controlling interest 59,780 63,945 66,235 80,046 83,675
Total equity 4,877,094 5,142,215 5,301,096 5,595,472 5,970,817
Total liabilities and stockholders' equity $ 10,235,572 $ 10,496,269 $ 10,650,923 $ 11,244,585 $ 11,803,627
  1. 2Q 2024 cash and cash equivalents include $96.0 million of proceeds held in a cash escrow account from a portfolio disposition that closed on June 28, 2024, and was received by the Company on July 1, 2024.
Consolidated Statements of Income
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA


2Q 2025
1Q 2025
4Q 2024
3Q 2024
2Q 2024
Revenues
Rental income 1 $ 287,070 $ 288,857 $ 300,065 $ 306,499 $ 308,135
Interest income 3,449 3,731 4,076 3,904 3,865
Other operating 6,983 6,389 5,625 5,020 4,322
297,502 298,977 309,766 315,423 316,322
Expenses
Property operating 109,924 114,963 114,415 120,232 117,719
General and administrative 23,482 13,530 34,208 20,124 14,002
Normalizing items 2 (10,302 ) (502 ) (22,991 ) (6,861 ) —
Normalized general and administrative 13,180 13,028 11,217 13,263 14,002
Transaction costs 593 1,011 1,577 719 431
Depreciation and amortization 147,749 150,969 160,330 163,226 173,477
281,748 280,473 310,530 304,301 305,629
Other income (expense)
Interest expense before merger-related fair value (42,766 ) (44,366 ) (47,951 ) (50,465 ) (52,393 )
Merger-related fair value adjustment (10,580 ) (10,446 ) (10,314 ) (10,184 ) (10,064 )
Interest expense (53,346 ) (54,812 ) (58,265 ) (60,649 ) (62,457 )
Gain on sales of real estate properties and other assets 20,004 2,904 32,082 39,310 38,338
Loss on extinguishment of debt — — (237 ) — —
Impairment of real estate assets and credit loss reserves (142,348 ) (12,081 ) (81,098 ) (84,394 ) (132,118 )
Equity income (loss) from unconsolidated joint ventures 158 1 224 208 (146 )
Interest and other income (expense), net (366 ) 95 (154 ) (132 ) (248 )
(175,898 ) (63,893 ) (107,448 ) (105,657 ) (156,631 )
Net loss $ (160,144 ) $ (45,389 ) $ (108,212 ) $ (94,535 ) $ (145,938 )
Net loss attributable to non-controlling interests 2,293 516 1,366 1,512 2,158
Net loss attributable to common stockholders $ (157,851 ) $ (44,873 ) $ (106,846 ) $ (93,023 ) $ (143,780 )
Basic earnings per common share $ (0.45 ) $ (0.13 ) $ (0.31 ) $ (0.26 ) $ (0.39 )
Diluted earnings per common share $ (0.45 ) $ (0.13 ) $ (0.31 ) $ (0.26 ) $ (0.39 )
Weighted average common shares outstanding - basic 349,628 349,539 351,560 358,960 372,477
Weighted average common shares outstanding - diluted 3 349,628 349,539 351,560 358,960 372,477
  1. In 4Q 2024, rental income was reduced by $0.7 million for Prospect Medical revenue reserves. In 2Q 2024, rental income was reduced by $3.0 million for Steward Health revenue reserves.
  2. Normalizing items primarily include restructuring, severance-related costs and non-routine advisory fees associated with shareholder engagement.
  3. Potential common shares are not included in the computation of diluted earnings per share when a loss exists, 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 4,161,628 units were not included.
Reconciliation of FFO, Normalized FFO and FAD 1,2,3
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA


2Q 2025 1Q 2025 4Q 2024 3Q 2024 2Q 2024
Net loss attributable to common stockholders $ (157,851 ) $ (44,873 ) $ (106,846 ) $ (93,023 ) $ (143,780 )
Net loss attributable to common stockholders/diluted share 3 $ (0.45 ) $ (0.13 ) $ (0.31 ) $ (0.26 ) $ (0.39 )
Gain on sales of real estate assets (20,004 ) (2,904 ) (32,082 ) (39,148 ) (33,431 )
Impairments of real estate assets 140,877 10,145 75,423 37,632 120,917
Real estate depreciation and amortization 152,936 155,288 164,656 167,821 177,350
Non-controlling loss from operating partnership units (2,293 ) (599 ) (1,422 ) (1,372 ) (2,077 )
Unconsolidated JV depreciation and amortization 6,706 6,717 5,913 5,378 4,818
FFO adjustments $ 278,222 $ 168,647 $ 212,488 $ 170,311 $ 267,577
FFO adjustments per common share - diluted $ 0.79 $ 0.48 $ 0.60 $ 0.47 $ 0.71
FFO $ 120,371 $ 123,774 $ 105,642 $ 77,288 $ 123,797
FFO per common share - diluted $ 0.34 $ 0.35 $ 0.30 $ 0.21 $ 0.33
Transaction costs 593 1,011 1,577 719 431
Lease intangible amortization (222 ) (228 ) (2,348 ) (10 ) 129
Non-routine legal costs/forfeited earnest money received 478 77 306 306 465
Debt financing costs — — 237 — —
Restructuring and severance-related charges 10,302 502 22,991 6,861 —
Credit losses and gains (losses) on other assets, net 4 1,471 1,936 4,582 46,600 8,525
Merger-related fair value adjustment 10,580 10,446 10,314 10,184 10,064
Unconsolidated JV normalizing items 5 163 204 113 101 89
Normalized FFO adjustments $ 23,365 $ 13,948 $ 37,772 $ 64,761 $ 19,703
Normalized FFO adjustments per common share - diluted $ 0.07 $ 0.04 $ 0.11 $ 0.18 $ 0.05
Normalized FFO $ 143,736 $ 137,722 $ 143,414 $ 142,049 $ 143,500
Normalized FFO per common share - diluted $ 0.41 $ 0.39 $ 0.40 $ 0.39 $ 0.38
Non-real estate depreciation and amortization 207 222 404 276 313
Non-cash interest amortization, net 6 1,130 1,217 1,239 1,319 1,267
Rent reserves, net 7 130 94 (369 ) (27 ) 1,261
Straight-line rent income, net (7,045 ) (6,844 ) (7,051 ) (5,771 ) (6,799 )
Stock-based compensation 3,887 3,028 3,028 4,064 3,383
Unconsolidated JV non-cash items 8 (356 ) (253 ) (277 ) (376 ) (148 )
Normalized FFO adjusted for non-cash items $ 141,689 $ 135,186 $ 140,388 $ 141,534 $ 142,777
2nd generation TI (12,036 ) (14,885 ) (20,003 ) (16,951 ) (12,287 )
Leasing commissions paid (5,187 ) (11,394 ) (11,957 ) (10,266 ) (10,012 )
Building capital (9,112 ) (6,687 ) (8,347 ) (7,389 ) (12,835 )
Total maintenance capex $ (26,335 ) $ (32,966 ) $ (40,307 ) $ (34,606 ) $ (35,134 )
FAD $ 115,354 $ 102,220 $ 100,081 $ 106,928 $ 107,643
Quarterly dividends and OP distributions $ 110,486 $ 109,840 $ 110,808 $ 113,770 $ 118,627
FFO wtd avg common shares outstanding - diluted 9 354,078 353,522 355,874 363,370 376,556
  1. Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by 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.”
  2. FFO, Normalized FFO and Funds Available for Distribution ("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 alternatives to net income attributable to common stockholders as indicators of the Company's operating performance or as alternatives to cash flow as measures of liquidity.
  3. Potential common shares are not included in the computation of diluted earnings per share when a loss exists, as the effect would be an antidilutive per share amount.
  4. 2Q2025 represents $1.5 million of credit loss reserves. 1Q 2025 represents a $1.9 million loss on other assets. 4Q 2024 includes $1.6 million of credit loss reserves, net of recoveries and a $4.1 million loss on other assets. These amounts were partially offset by a $1.1 million recovery of prior-period Steward Health straight-line rent for leases assumed. 3Q 2024 includes $46.8 million of credit loss reserves and $0.2 million gain on other assets. 2Q 2024 includes $11.2 million of credit loss reserves and $2.2 million write-off of prior period Steward Health straight-line rent, offset by $4.9 million gain on other assets.
  5. Includes the Company's proportionate share of normalizing items related to unconsolidated joint ventures such as lease intangibles and acquisition and pursuit costs.
  6. Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.
  7. 2Q 2024 includes $0.8 million related to the Steward Health revenue reserve for March.
  8. Includes the Company's proportionate share of straight-line rent, net and rent reserves, net related to unconsolidated joint ventures.
  9. The Company utilizes the treasury stock method, which includes the dilutive effect of nonvested share-based awards outstanding of 287,797 for the three months ended June 30, 2025. Also includes the diluted impact of 4,161,628 OP units outstanding.
Reconciliation of Non-GAAP Measures
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED

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, lease intangible amortization 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, share-based compensation expense and rent reserves, net; 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.

Ron Hubbard
Vice President, Investor Relations
P: 615.269.8290