Healthcare Realty Trust Inc. (HR) – a real estate investment trust (REIT) – reported third-quarter 2014 normalized funds from operations (FFO) of 37 cents per share, which came in line with the Zacks Consensus Estimate and a nickel above the prior-year quarter figure of 32 cents. The year over year increase was driven by a rise in revenues.
Total revenue increased 13% year over year to $94.5 million in the reported quarter, exceeding the Zacks Consensus Estimate of $92 million.
Inside the Headlines
In the quarter, Healthcare Realty’s multi-tenant properties leases, aggregating 770,000 square feet of space, started or renewed. This included 572,000 square feet in the same-store portfolio where tenant retention was 86%.
Same-store revenues climbed 2% year over year to $69.0 million while same-store expenses fell 0.5% year over year to $24.8 million. Thus, same-store properties’ net operating income (NOI) increased 3.6% year over year to $44.2 million and occupancy remained stable at 91%. Moreover, occupancy at the 12 development conversion properties increased 8% in the third quarter to 78%.
During the third quarter, the company acquired 2 on-campus medical office buildings, aggregating 108,000 square feet and 95% leased on a collective basis, for $27.8 million. Further in Oct 2014, a 69,000 square foot, 97% leased, on-campus medical office building in Oklahoma was acquired for $17.4 million.
As of Sep 30, 2014, Healthcare Realty had cash and cash equivalents of $1.7 million, down from $17.5 million at the end of second-quarter 2014.
Dividend
On Nov 4, 2014, Healthcare Realty declared a quarterly dividend of 30 cents per share. This dividend is payable on Nov 28, 2014 to stockholders of record as of Nov 14. The dividend is equivalent to 81.1% of normalized FFO.
Our Take
For Healthcare Realty, we believe that a growing aged population, rising national healthcare expenditure and an expected rise in demand for medical office buildings will offer it ample opportunities to grow and enhance profitability.
Healthcare Realty currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider better-ranked stocks like Cousins Properties Incorporated (CUZ), Host Hotels & Resorts, Inc. (HST) and Public Storage (PSA). All these stocks carry a Zacks Rank #2 (Buy).
Note: 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.
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