Healthcare Realty Trust Incorporated

Good afternoon and welcome to the Healthcare Realty Trust third 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, Investor Relations. Please go ahead.

Thank you for joining us today for Healthcare Realty's third 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 historical information contained within, The matters discussed in 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 31st, 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 , normalized FFO, FFO per share, normalized FFO per share, funds available for distribution , net operating income , 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 third quarter ended September 30th, 2021. The company's earnings press release, supplemental information, and forms 10-Q and 10-K 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 third quarter earnings call. Yesterday, we reported quarterly FFO per share growth of 6.4%. This growth was largely driven by over $800 million of acquisitions over the past 12 months. Just as important, we're seeing operational improvements across the portfolio. Healthcare providers in our buildings are incredibly busy as outpatient utilization normalizes. So not surprisingly, our leasing activity is up too, and momentum is building. In the near term, like everyone, we're working through supply chain issues. as build-out timeframes for new tenants stabilize and these tenants take occupancy, we expect our same-store NOI growth to return to our historical 3% range. The MOB sector's proven resiliency is attracting more capital. Like many real estate asset classes, MOB valuations are trending higher. Cap rates into the fours are now common for large portfolios and certain individual assets with bond-like characteristics. In contrast, so far this year, we've acquired 26 high-quality, mostly multi-tenant properties for $481 million at a 5.3% cap rate. We've been able to acquire these properties asset by asset at meaningfully higher initial returns through our direct sourcing model. Beyond initial pricing, our targeted acquisition approach and operational platform deliver superior same-store growth over time. We're buying these properties in clusters within our existing markets where population growth is meaningfully above the norm. These are dense supply-constrained markets, places like Los Angeles, Dallas, Denver, and San Diego. We continue to acquire stabilized properties that are on and adjacent to campus. As we build scale within a sub-market, our local knowledge and relationships lead to more investments and allow us to safely expand our strike zone. This extends our range to include ultra-core on-campus, value-add, and nearby off-campus properties. And we use our cluster strategy and our JV partnership to balance risk and return across these settings. Years of diligent refinement and execution allowed us to build the highest quality, growth-oriented MOB portfolio. Combined with our proven operating platform, this creates an attractive long-term return profile. and looking to the future, we're keeping our foot on the gas pedal. After achieving record acquisition volumes in 2019 and 2020, we're on pace to exceed these levels in 21. We've increased our guidance again due to the strength of our pipeline and see the ability to sustain annual investment volumes of more than 10% of enterprise value in the years ahead. With an aging population driving continued growth in healthcare utilization, Our strategy and ability to execute is poised to deliver strong FFO growth, like we're doing this year, consistently and on a long-term basis. The compounding effect of this level of growth and safety over many quarters and years is very compelling. Before I turn the call over, I want to mention we recently published our third annual corporate responsibility report, which is available on our website. We're proud of the numerous ESG goals and milestones we've achieved including our GREZ participation. I want to thank Carla Baca and our Sustainability Committee for leading these important initiatives, and we look forward to making further strides in the years ahead. I'll now turn the call over to Bethany for an update on healthcare trends.