Healthcare Realty Trust Incorporated

25 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press star one. Thank you. I would like to hand the call over to Rob Hubbard, Vice President Investor Relations. You may begin your conference.

Thank you for joining us today for Health Care Realty's second quarter 2025 earnings conference call. A reminder that except for the historical information contained within, the matters discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks, and uncertainties. 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. A discussion of risks and risk factors are included in our press release and detailed in our filings with the SEC. Certain non-GAAP financial measures will be discussed on this call. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings release for the quarter ended June 30, 2025. The company's earnings press release, earnings supplemental information, and Form 10-Q are available on the company's website. Now I'd like to turn the call over to our President and CEO, Pete Scott.

Thanks, Ron. Joining me on the call today are Rob Hull, our COO, and Austin Helfrich, our CFO. Also available for the Q&A portion of the call is Ryan Crowley, our CIO. We had a very busy quarter with excellent results and contributions across the organization. Fundamentals are quite strong in outpatient medical, and that was clear with our second quarter print. Normalized FFO was 41 cents per share, a two-penny sequential increase. FAD was 33 cents per share, a four-penny sequential increase. Same store occupancy was 90%, a 40 basis point sequential increase. Same store NOI growth was 5.1%, a 280 basis point sequential increase. And net debt to adjust the EBITDA fits at six times. In addition, it was the second highest new leasing quarter in the last three years. -to-date sales increased to 211 million at a blended .2% cap rate. We have over $700 million of additional assets under contract or LOI. We completed a very successful renewal of our revolver. We extended the tenor of our term loans, and we raised guidance. Rob and Austin will cover these items in more detail. A special thanks to the entire healthcare team for their extraordinary efforts this quarter. Moving on to our strategic plan, which we published on our website concurrent with our earnings release. I have now been at healthcare realty just over 100 days, and my time has largely been spent seeing the real estate, assessing the team, and receiving valuable feedback from our shareholders. During the quarter, the team and I toured ten core markets encompassing approximately 50% of our overall NOI, and more importantly, about two-thirds of our overall real estate value. In addition, I spent considerable time with our teams out in the field, including leasing and operations. Each and every one of these interactions has had an influence on the strategic plan, and I am confident now is the right time to disclose the vision for healthcare realty 2.0. Let me start with my overall assessment. The good news, we have the best in class outpatient medical portfolio. We have scale in the right markets, and we are aligned with the nation's leading healthcare system. In short, we have the essential ingredients of what is needed to be a successful real estate company. Great assets, desirable locations, solid tenants. That said, we have fallen short of expectations despite our solid foundation. Healthcare realty 1.0 was a transactions-oriented culture that relied almost exclusively on acquisitions and development to drive growth to the detriment of asset management. This strategy worked, too, and for many years, the company traded at a premium valuation. Unfortunately, this business model collapsed in 2022, and swift changes are necessary to reverse course and reestablish credibility. Healthcare realty 2.0 will be an operations-oriented culture where earnings growth is paramount, strong tenant relationships are essential, leasing decisions are made based on economic and capital allocation is initially prioritized towards a creative reinvestment into our existing portfolio. With that as the backdrop, let me elaborate on the five key action items of the strategic plan. First action item, improved corporate governance. As was previously disclosed, we reduced the size of our board from 12 to 7 directors. The go-forward board brings fresh perspectives and decades of industry experience to support our value creation initiative. Five of the seven directors have been appointed since 2024, and all directors have been appointed since 2020. In addition, five board members have REIT CEO experience. Second action item, a significant organizational restructuring. We have implemented a new operating model that will drive meaningful cost savings and promote incremental accountability at the property level between our operations and leasing personnel. This new asset management-oriented platform will create stronger and better aligned tenant relationships. Over the past few months, I have had the benefit of sitting down with leadership at some of our largest health system tenants to discuss expansion opportunities. These tenants include Baylor Scott White, HCA, and Banner Health. With our enhanced platform and renewed focus, we can and will do better. To advance our platform changes, during the second quarter, we hired Tony Acevedo and Glenn Preston to lead our asset management efforts. Tony and Glenn have extensive track records in the outpatient medical sector with 16 years and 25 years of experience respectively. They have been partners of mine in the past and they have hit the ground running. Another important restructuring initiative