Healthcare Realty Trust Incorporated

Hello everyone and welcome to Healthcare Realty Trust's first quarter earnings release and conference call. My name is Charlie and I'll be coordinating the call today. You'll have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypads. I'll now hand over to our host, Ron Hubbard, VP of Investor Relations to begin. Ron, please go ahead.

Thank you, Charlie. Thanks everyone for joining us today. for Healthcare Realty's first quarter 2023 earnings conference call. Joining me on the call today are Todd Meredith, Chris Douglas, and Rob Hull. A reminder that except for the historical information contained within, the matter discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks, and uncertainties. These risks are more specifically discussed in the company's form 10-K filed with the SEC for the year ended December 31, 2022, and to form 10-K filed with the SEC for the quarter ended March 31, 2023. 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, or FFO, normalized FFO, FFO per share, normalized FFO per share, funds available for distribution, or 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 quarter ended March 31, 2023. The company's earnings press release, supplemental information, and Form 10-Q are available on the company's website. I'll now turn the call over to Todd.

Thank you, Ron. And thank you everyone for joining us this morning for our first quarter 2023 earnings call. Healthcare Realty had a really solid first quarter. As expected, robust operating performance from our portfolio is the foundation of our steady results. We're building on this durable foundation with two strategic initiatives to accelerate FFO growth. First is our leasing team that's generating tremendous momentum. Converting this momentum to occupancy gains later this year and moving into 2024 will elevate our internal growth over a multi-year period. Second, we're focused on a return to external growth. We are working on several capital formation initiatives that will lower our cost of capital and drive accretive external growth. We expect the foundation of reliable performance from our portfolio combined with these two initiatives to boost and sustain our bottom line growth well beyond the pace investors expect from the low-risk MOV sector. We see a clear path to generating FFO per share growth of 5% to 7% in 2024. This potential is bolstered by long-term rising demand for healthcare services, and health systems are reporting that demand for outpatient services is accelerating. We also see near-term tailwinds that could strengthen our growth outlook, including market expectations for softening inflation and lower short-term interest rates, in the months ahead. These tailwinds align well with healthcare realty's post-merger strategic initiatives. For much of the last year, we've outlined the powerful benefits of the combination with HTA. First, we've increased safety through portfolio scale, diversification, and efficiency. And second, we're elevating growth through market scale, concentrated clusters, and expanded relationships that amplify our internal and external growth drivers. It's important to note that it takes three to five years to realize the full value of a significant combination like this. We are well on our way, and we have seen significant results in less than a year. Within the first six months of the merger, we successfully completed over a billion dollars of asset sales and JVs in a challenging market. We realized our full G&A synergies in half the time we expected, and we fully mobilized our leasing team to drive occupancy gains in the portfolio. In a few minutes, Rob will walk you through how we've organized our internal leasing team to leverage our external broker network and increase our deal flow. This will lead to significant occupancy gains. We expect multi-tenant absorption to double in 2024 to 100 to 200 basis points, And we expect this absorption to accelerate same-store NOI growth to a range of 4% to 6% in 2024. This could be even stronger looking at 2025 and beyond. Rob will also share the favorable trends we're seeing in the debt financing market for MOVs. In a couple of short months, we witnessed cap rates move lower by as much as 50 basis points. We are increasingly seeing cap rates move into the fives. Next, Chris will share with you how our portfolio performance is tracking extremely well. He will highlight the company's solid revenue drivers, including embedded escalators, cash leasing spreads, tenant retention, and steady occupancy gains. Chris will also walk you through our 2023 FFO guidance that serves as a baseline for our 2024 outlook. After remarks from Chris and Rob, I'll circle back to spend a few minutes on our capital formation initiatives that will reignite our external growth in 2024. With that, I'll turn it over to Chris.