Healthcare Realty Trust Incorporated

Good morning and welcome to the Healthcare Realty Trust second quarter financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Kara Smith. Please go ahead.

Thank you for joining us today for Healthcare Realty's second quarter 2021 earnings conference call. Joining me on the call today are Todd Meredith, Bethany Mancini, Rob Hull, and Chris Douglas. A reminder that except for the historical information contained within, the matters discussed on this call may contain forward-looking statements that involve estimates, assumptions, risks, and uncertainties. These risks are more specifically discussed in a Form 10-K filed with the SEC for the year ended December 31, 2020. These forward-looking statements represent the company's judgment as of the date of this call. The company disclaims any obligation to update this forward-looking material. The matters discussed in this call may also contain certain non-GAAP financial measures. such as funds from operations, FFO, normalized FFO, FFO per share, normalized FFO per share, funds available for distribution, FAD, net operating income, NOI, EBITDA, and adjusted EBITDA. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the second quarter ended June 30, 2021. The company's earnings press release, supplemental information, and forms 10Q and 10K are available on the company's website. I'll now turn the call over to our Chief Executive Officer, Todd Meredith.

Thank you, Kara. Good morning, everyone, and thank you for joining us for our second quarter earnings call. Today I'll discuss current healthcare utilization trends, our second quarter results, and our external growth momentum. Then I'll describe how our strategy delivers steady growth quarter after quarter. And I'll close by touching on a few of our internal initiatives. First, we're pleased to see that most providers are back to normal in terms of utilization. Healthcare providers have proven their ability to operate throughout the pandemic. Patients have returned to their doctors, and we're hearing from our tenants that outpatient procedures are back to or above pre-pandemic levels. Even more encouraging, physicians and health systems are telling us their businesses are growing and they need more space to meet demand. This underscores our view that healthcare utilization is poised to continue growing on a consistent annual basis, propelled by aging demographics. Turning to our results, we reported same-story NOI growth of 2.9% for the second quarter, which puts us back in line with our historical average of about 3%. Looking ahead, we're well positioned to sustain these steady levels of internal growth. We continue to see the benefits of operating in dense markets with high barriers to entry. This insulates us from new supply and facilitates steady rent growth. As rents rise, we're well positioned to benefit from shorter lease terms, which gives us the ability to increase rents more often. With respect to external growth, we're truly firing on all cylinders. Year to date, we've acquired 21 properties for over $400 million. We're well on our way to meet or exceed our 2020 acquisition volume, which was our best year ever. And we're confident in our ability to continue this momentum. Today, we're seeing aggregators sell portfolios comprised of lower quality, often isolated assets at premium cap rates. This is driving relative cap rate compression, especially on portfolios. What makes us different is that we're sourcing individual quality assets at attractive prices in better markets and building on our strategic clusters. Our ability to smoothly integrate properties into our existing operations reflects the value of our platform. Another source of value creation is our development pipeline, which includes over a billion dollars of embedded growth opportunities. As an example, here in Nashville, we're starting an on-campus redevelopment project involving a property we've owned for over 15 years. In place of the existing building, we're constructing a larger LEED-certified medical office building at the center of the Ascension St. Thomas Midtown Campus. This strengthens our relationship with St. Thomas and builds on our cluster of nearly a million square feet in Nashville. Our strategy is straightforward. We focus on markets with strong demographic trends and partner with leading health systems. In today's competitive environment, our local market knowledge and industry relationships help us source new investments and attract new tenants. Our cluster strategy amplifies these benefits. And we gain scale and efficiency as we lease and manage more and more properties in close proximity. In terms of location, we target properties on and adjacent to campus complemented with nearby off-campus facilities where we can drive incremental returns. We're able to further enhance our yields by engaging in targeted development projects and utilizing our joint venture partnership, which widens our opportunity set. This strategy has paid off. In contrast to many other REITs whose results were hard hit during the volatility of the last 18 months, we've delivered growth in FFO per share each quarter. Over the long term, our strategy creates value for shareholders through the steady compounding of cash flows. Before I hand the call over to Bethany, let me take a few moments to highlight some recent initiatives. We believe the depth and breadth of our team, as well as the long tenure of our leadership, is a driver of our success. I'm pleased to announce that we recently promoted Julie Wilson to Executive Vice President of Operations. Julie's been with us for over 20 years, and this promotion highlights her leadership and and the growth of our platform in that time period. Julie now has oversight of our portfolio operations, as well as marketing, technology, and ESG groups. And with respect to ESG, we continue to dedicate resources to this important effort. Our ESG program will now be led full-time by Carla Baca. This year, we completed our second GRES survey, and later this year, we'll release our third corporate responsibility report. And finally, as you may have heard in the introduction, we're pleased to welcome Kara Smith, who brings years of REIT investor relations experience and will lead these efforts for healthcare realty going forward. I'll turn the call over to Bethany now for an update on healthcare policy and recent trends.